1989 (10) TMI 125 - AT - Central Excise

Issues Involved:
1. Marketability of Phenol formaldehyde resins HV 20086 and HV 7716.
2. Excisability of the resins if they are not marketable.

Detailed Analysis:

Issue 1: Marketability of Phenol formaldehyde resins HV 20086 and HV 7716

The respondents, M/s. Bakelite Hylam Ltd., manufacture decorative and industrial laminated sheets using Phenol formaldehyde chemical. The dispute revolves around whether the resins HV 20086 and HV 7716 are marketable, as they are claimed to be highly reactive and unstable.

1. Show Cause Notice and Initial Response:
- A show cause notice was issued on 9-4-1985 demanding duty on the Phenol formaldehyde resins used for captive consumption without filing a classification list and price list.
- The respondents argued that the resins are not marketable due to their instability and high reactivity, thus not excisable.

2. Assistant Collector and Collector's Findings:
- The Assistant Collector rejected the respondents' plea.
- The Collector, relying on test reports and other orders, held that the resins HV 20086 and HV 7716 are unstable and not excisable.

3. Department's Appeal and Submissions:
- The department argued that the Collector's order violated natural justice principles and relied on a non-approved test report.
- They contended that the marketability of the product is irrelevant for excisability as long as the product falls within the tariff schedule.

4. Respondents' Counter-Arguments:
- The respondents maintained that the resins have a shelf life of only 6 hours under controlled conditions, making them non-marketable.
- They provided evidence that the test house used is approved and highlighted the lack of contrary evidence from the department.

5. Tribunal's Analysis:
- The Tribunal examined previous cases like Jay Enterprises and Flexoplast, which dealt with similar issues of marketability and shelf life.
- It was found that the previous cases were based on concessions regarding the shelf life of the products, which was not applicable in the current case as the resins in question had a shelf life of only 6 hours.

6. Conclusion on Marketability:
- The Tribunal concluded that the resins HV 20086 and HV 7716 are unstable and not marketable, as the department did not provide evidence to rebut the findings of instability.

Issue 2: Excisability of the resins if they are not marketable

1. Department's Argument:
- The department argued that marketability is irrelevant for excisability as long as the product falls within the tariff schedule.

2. Respondents' Argument:
- The respondents relied on the Supreme Court judgment in Bhor Industries, which emphasized that marketability is an essential ingredient for a product to be dutiable under the Central Excise Tariff.

3. Tribunal's Analysis:
- The Tribunal referred to the Supreme Court's observations in Bhor Industries, which stated that an article must be known in the market as a separate, distinct, identifiable commodity to be dutiable.
- The Tribunal held that in the absence of marketability, the products cease to be goods and are not dutiable.

4. Majority Decision:
- The majority decision dismissed the department's appeal, agreeing with the Collector's finding that the resins are unstable and not marketable, and therefore not excisable.

5. Contrary Opinion:
- One member disagreed, suggesting that the case should be remanded for fresh adjudication and testing by the departmental Chemical Examiner.

Final Judgment:
- Appeal No. E/214/86-C is dismissed.
- Appeal No. E/1672/86-C is dismissed as not pursued.

This comprehensive analysis maintains the legal terminology and significant phrases from the original text while providing a detailed issue-wise summary of the judgment.

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