1999 (8) TMI 442 - AT - Central Excise

Summary

Issues Involved:
1. Classification of polyester or polyethylene resins and polyisocyanate when cleared together.
2. Applicability of Note 2 to Section VI of the tariff and Heading 35.06.
3. Alleged misclassification for export purposes under Chapter 39.
4. Invocation of the extended period of limitation under Section 11A.
5. Imposition of penalty and proposed confiscation of land, building, and machinery.

Detailed Analysis:

1. Classification of Polyester or Polyethylene Resins and Polyisocyanate:
The primary issue in the appeal is the classification of polyester or polyethylene resins and polyisocyanate when cleared together. The appellant claimed classification under Heading 35.06, which pertains to "prepared glue and other prepared adhesives not elsewhere specified or included." The department, however, argued that these products should be classified under Chapter 39, based on the classification lists filed by the appellant in 1992 and 1993 for export purposes. The Commissioner confirmed the department's view and imposed a penalty.

2. Applicability of Note 2 to Section VI of the Tariff and Heading 35.06:
The dispute revolves around the scope and applicability of Note 2 to Section VI of the tariff and Heading 35.06. Note 2 specifies that goods put up in sets consisting of two or more separate constituents, intended to be mixed together to obtain a product of Section VI or VII, should be classified in the heading appropriate to that product. The Commissioner and the show cause notice did not dispute that the resin and polyisocyanate are complementary and required to be mixed before use. However, they argued that the resultant adhesive does not satisfy the definition of plastic-based adhesives as given in the tariff, particularly since it does not contain only resins or other substances not falling in Chapter 39.

3. Alleged Misclassification for Export Purposes under Chapter 39:
The department noted that the appellant had classified the products under Chapter 39 for export purposes. The Commissioner relied on this fact to support the classification under Chapter 39 for domestic clearances as well. However, the Tribunal found that the classification for export purposes was irrelevant to the classification for home consumption. The goods were exported as individual components, not as a set intended to be mixed together.

4. Invocation of the Extended Period of Limitation under Section 11A:
The first show cause notice invoked the extended period of limitation under the proviso to Section 11A, alleging suppression of facts by the appellant. The Tribunal found that the appellant had consistently sold the resin and polyisocyanate in sets, intended to be mixed together to obtain an adhesive. The Tribunal did not find any suppression of facts that would justify the invocation of the extended period of limitation.

5. Imposition of Penalty and Proposed Confiscation of Land, Building, and Machinery:
The Commissioner imposed a penalty and proposed the confiscation of land, building, and machinery. The Tribunal, however, set aside the impugned order, finding that the classification claimed by the appellant under Heading 35.06 was correct. The Tribunal referred to previous decisions in Din Chemicals & Coatings (P) Ltd. v. C.C.E. and Cibatul v. C.C.E., which confirmed the classification under Heading 35.06 of goods cleared in sets, intended to be mixed together before use as adhesives.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order and confirming the classification claimed by the appellant under Heading 35.06. The Tribunal found that the goods were correctly classified as prepared adhesives, intended to be mixed together before use, and that the extended period of limitation and penalties were not justified.