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2016 (4) TMI 59 - AT - Central ExciseEligibility of exemption under Notification No.50/2003-CE dated 10.06.2006 in respect of glue/resin made by the appellant denied - Held that - The appellant have categorically submitted that the impugned goods are prepared for specific need and requirement of bonding of wood fibers /wood particles/coating of papers during the manufacture of final product like MDF Board, Particle Board, etc. The fact is that the preparation of impugned goods is in one stage process under controlled temperature and pH and addition of Ammonium Cloride Formic Acid in the processes, the emerging product being transferred to glue kitchen area for final use in bonding. We find that the classification of the product as primary resin is not sustainable. This is supported by Note-6 of Chapter 39 and HSN Explanation of such note. As such denial of exemption is not sustainable. Considering the above discussion and finding, we allow the appeal by setting aside the impugned order with consequential relief. - Decided in favour of assessee
Issues Involved:
1. Eligibility for exemption under Notification No.50/2003-CE. 2. Correct classification of the product (glue/resin). 3. Validity of the test report. 4. Marketability of the product. 5. Invocation of the extended period for demand of duty. Detailed Analysis: 1. Eligibility for Exemption under Notification No.50/2003-CE: The appellants are engaged in the manufacture of various products including Plywood, MDF Board, and Laminates and are availing area-based exemption under Notification No.50/2003-CE dated 10.06.2006. The dispute arose regarding the eligibility for exemption in respect of glue/resin manufactured by the appellant. The Revenue doubted the eligibility of this exemption for resin/glue, which falls under Tariff Heading 3909 to 3915, listed in the negative list for exemption. 2. Correct Classification of the Product (Glue/Resin): The central issue revolves around the classification of the product manufactured by the appellants. The appellants argue that their product, a cured glue, should be classified under CETH 3506, not under 3909. They emphasize that the product is a prepared glue used for bonding, which undergoes a one-stage process in the reactor/kettle with the addition of ammonium chloride as a hardener. The Tribunal examined the processes and chemicals used, concluding that the product is not in the "primary form" as described in Note-6 of Chapter 39 and HSN explanations. Consequently, the product should be classified under CETH 3506 as prepared glue, making the denial of exemption unsustainable. 3. Validity of the Test Report: The appellants contested the reliance on the test report dated 19.03.2012 from IPRITI, arguing it was made available after 89 days, depriving them of the right to re-test. They also pointed out that no cross-examination of the officer who conducted the test was allowed, and the methodology did not comply with norms. The Tribunal agreed with the appellants, noting that the test report lacked essential details like pH value and was not legally tenable without cross-examination. 4. Marketability of the Product: The appellants claimed that the glue produced has a very short shelf life and is not marketable as an excisable good under Section 2(d). The Tribunal acknowledged this point, noting that the product is prepared for specific needs and used immediately in the bonding process, supporting the classification under CETH 3506 rather than 3909. 5. Invocation of the Extended Period for Demand of Duty: The appellants argued that the extended period for demand of duty could not be invoked as the samples were drawn in August 2010, but no report was given, and no dispute was raised until the present demand dated 8.5.2012, covering the period from November 2009 to November 2011. The Tribunal found merit in this argument, noting that the demand is substantially barred by limitation. Conclusion: The Tribunal concluded that the correct classification of the product is under CETH 3506 as prepared glue, not under 3909. The reliance on the test report was found to be legally untenable. The product's short shelf life and specific use further supported the classification under CETH 3506. Consequently, the appeal was allowed, setting aside the impugned order with consequential relief.
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