1987 (1) TMI 254 - AT - Central Excise

Issues Involved:
1. Marketability and excisability of phenol formaldehyde resin at the 'A' stage.
2. Classification under Tariff Item 15A(1) CET.
3. Stability and shelf life of the resin.
4. Applicability of case law regarding intermediate products and excise duty.

Detailed Analysis:

1. Marketability and Excisability of Phenol Formaldehyde Resin at the 'A' Stage:
The primary issue revolves around whether the phenol formaldehyde resin at the 'A' stage, which is an intermediate product, is marketable and thus excisable. The respondents argued that the resin mixture, being unstable and having no shelf life, could not be considered as "goods" for the purpose of excise duty. They contended that the resin mixture is not a fully manufactured product and that the chemical reaction is complete only when the laminated sheets are formed. The Assistant Collector, however, held that the resin could be marketable if stabilizers were added, and thus it should be considered excisable. The Collector (Appeals) supported this view, stating that an intermediate product must be known to the market or commercial community to be excisable.

2. Classification Under Tariff Item 15A(1) CET:
The Department argued that the product in question, being a resin, falls under Tariff Item 15A(1) CET, which corresponds to entry 39.01/06 of the Customs Tariff Act (CTA). The Tribunal referenced the case of Collector of Customs, Cochin v. M/s. Premier Tyres Limited, which held that resols and polyisobutylene are recognized as resins or substances that have polymerized to a stage and are covered under the said tariff entry. The Department maintained that the synthesized product is resin and should be classified accordingly.

3. Stability and Shelf Life of the Resin:
The respondents argued that the resin mixture is not stable and has no shelf life, making it non-marketable. However, it was conceded that the product could be stored for about 15 days, indicating some degree of stability. The Tribunal noted that the product, despite having a short shelf life, could still be sold to a consumer or buyer within that period. The Tribunal emphasized that the resin mixture, even in its 'A' stage, has acquired a definite character for a specific use and is technically recognized as resol.

4. Applicability of Case Law Regarding Intermediate Products and Excise Duty:
The respondents cited several case laws to argue that the intermediate product should not be subject to excise duty. However, the Tribunal referred to the case of MRF Limited v. Union of India and Others, where it was held that excise duty is on the manufacture of goods and not on their sale. The Tribunal also referenced the case of ILAC Limited, Bombay v. Collector of Central Excise, which supported the view that intermediate products, even if not marketed, are excisable if they fall under a specific tariff entry. The Tribunal concluded that the phenol formaldehyde resin at the 'A' stage is a recognizable product and thus subject to excise duty under Tariff Item 15A(1) CET.

Conclusion:
The Tribunal held that the phenol formaldehyde resin at the 'A' stage is a distinct product with a definite character and use, making it excisable under Tariff Item 15A(1) CET. The fact that the product has a short shelf life does not exempt it from excise duty. The appeal by the Collector of Central Excise, Ahmedabad, was allowed, and the order of the Collector (Appeals) was set aside.

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