1989 (1) TMI 255 - AT - Central Excise

Summary

Issues Involved:
1. Classification of the mixture of formaldehyde, caustic soda, and resorcinol as resol resin under Tariff Item 15-A.
2. Marketability and excisability of the resorcinol formaldehyde solution.
3. Validity of the show cause notices and the plea of limitation.

Issue-wise Detailed Analysis:

1. Classification of the Mixture:
The central issue was whether the mixture of formaldehyde, caustic soda, and resorcinol constituted a resol resin and thus fell under Tariff Item 15-A of the Central Excise Tariff during the period from 5-9-1980 to 20-5-1983. The department contended, based on the chemical examiner's report, that the mixture resulted in an "A stage resin known as resol," which should be classified under Tariff Item 15-A. The appellants argued that the mixture was highly unstable, not marketable, and distinct from resol resin. They cited technical literature and previous judgments to support their claim that their product did not meet the criteria for resol resin.

2. Marketability and Excisability:
The appellants contended that the mixture was not marketable due to its instability and short shelf life, thus it should not be considered excisable. They referenced the Supreme Court's judgment in Union Carbide Ltd. v. Union of India, which emphasized the necessity of marketability for a product to be excisable. However, the department argued that the product served the same purpose as precondensed resorcinol resin available in the market and thus should be considered excisable. The Tribunal concluded that the product was indeed a resorcinol resin, as evidenced by authoritative literature and previous Tribunal decisions, and its marketability was not in doubt.

3. Validity of Show Cause Notices and Plea of Limitation:
The appellants challenged the validity of the show cause notices, arguing that the second notice dated 2-11-1981 introduced a new subject matter and thus the limitation period should be counted from this date. The department maintained that both notices addressed the same issue of excisability of the resorcinol formaldehyde solution. The Tribunal found that the earlier notice dated 5-2-1981 clearly related to the resorcinol formaldehyde solution, and the subsequent notice merely rectified a descriptive mistake. Therefore, the plea of limitation was rejected, and the show cause notices were deemed valid.

Conclusion:
The Tribunal upheld the classification of the mixture as resol resin under Tariff Item 15-A, affirmed its marketability and excisability, and validated the show cause notices. Consequently, the appeals were rejected, and the adjudicating authority's order demanding duty and imposing penalties was sustained.