2001 (7) TMI 166 - AT - Central Excise

Summary

Issues:
Classification of Latex Based Adhesives under CETA Heading 3506 for duty exemption.

Analysis:
The case involved the classification of Latex Based Adhesives with brand names 'Superset (LC)' and 'Super Set (LB)' under CETA Heading 3506 for duty exemption. The Respondents argued that the products are only "rubber latex" and thus should be classified under heading 40.01, entitling them to exemption under Notification 18/95. The Commissioner supported this argument based on Rubber Board Test reports, stating that the processing does not change the classification. The Revenue, however, contended that the products should be classified as "prepared adhesives" under Chapter Heading 3506 due to their end use as adhesives in footwear manufacturing, market recognition, and chemical processing altering the properties of latex.

The Revenue's appeal was based on several grounds. Firstly, they argued that the products are recognized and sold as adhesives, supported by the customers' confirmation and sales tax records. Secondly, they claimed that the addition of substances during processing altered the properties of latex, making it unsuitable for classification under heading 40.01. Additionally, they cited the Harmonized System of Nomenclature (HSN) under Chapter Heading 4005 and Chapter Notes 3 and 9 of Chapter 40 to support their classification under 3506 as prepared adhesives.

Upon hearing both sides, the Tribunal made critical observations. They noted that the mere sale of goods as adhesives does not automatically warrant classification under heading 3506. The Tribunal emphasized the need to prove the increase in bonding strength due to processing, which was not demonstrated in this case. They also analyzed Chapter Note 5 of CETA Chapter 40, highlighting that the products did not fall under the exclusions listed in the note, thereby supporting the classification under heading 40.01.

Ultimately, the Tribunal found no flaw in the Commissioner's orders and dismissed the Revenue's appeal, upholding the classification of the Latex Based Adhesives under heading 40.01 for duty exemption.