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TMI Blog1989 (10) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... istence: Phenol formaldehyde resin HV 20086; HV 7716; HR 7523. According to respondents in appeal No E/214/86-C HV 20086 and HV 7716 are highly reactive and unstable and therefore, not marketable whereas HR 7523 resin is less reactive and stable. Therefore, the respondents are not paying any duty on the two products. In respect of third product the respondents are clearing the same on payment of duty. 2. On 9-4-1985 a show cause notice was issued by the Superintendent of Central Excise as to why appropriate amount of duty should not be demanded from the assessee under Section 11A of the Act on the Phenol formaldehyde resins cleared for captive consumption and used in the manufacture of other articles without filing a classification list and price list, and penalty imposed on them. 3. In reply it was submitted amongst other submissions that Phenol formaldehyde stage A Resin is highly reactive and unstable and not marketable, and therefore, not excisable. 4. The Asstt. Collector rejected their plea. On appeal the Collector relying on the Test-reports and also on the orders of the Collectors of Bombay and Delhi held that Phenol formaldehyde A resins, namely HV 20086 HV 771 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excisable goods coming into existence at intermediate stage of the manufacturing process and used captively in the manufacture of other goods are chargeable to duty, therefore, he submitted that the orders of the Collector runs counter to all the decided cases. 6. The respondents, as against the above, submitted that the disputed formulations prepared by them can be stored in controlled conditions for 6 hrs. Despite the controlled conditions the shelf life of these formulations cannot last beyond 6 hrs. He submitted that the Asstt. Collector did not contradict the unstable nature of the formulations. The Collector gave a finding that there is no controversy about unstable nature of the formulations. No evidence is adduced even before this Tribunal, controverting the findings of the Collector that the formulations are unstable and not marketable, in the absence of which the finding of the Collector stands unrebutted. 6.1. In reply to the submission made by the SDR that Shri Ram Test House is not approved by the Govt. they relied upon two letters one dated 31st October, 1969 from the Indian Standard Institution to the Director, Shri Ram Institute for Industrial Research and anoth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . v. U.O.I. [1987 (30) E.L.T. 857] wherein they have distinguished the order in Jay Enterprises. He also distinguished Flexo Plast Abrasives India v. CCE [1988 (36) E.L.T. 119]. 7. In reply Shri Sunder Rajan submitted that A stage resin is known to Polymer Technology and known to the market. Referring to the judgment of the Supreme Court in Bhor Inds. Ltd. he submitted that there is a finding whether on concession or otherwise that the product is marketable. Secondly that the judgment of Bhor Inds.is per in-curiam as it is given in ignorance of the earlier decision of the Supreme Court in U.O.I. v. Hindu undivided family business known as Ramlall Mansukhrai, Rewari [1978 (2) E.L.T. (J 389)], according to which once goods are specified in the Tariff the marketability is irrelevant. He distinguished the authority relied upon by the respondents as not applicable to the facts of the case. 8. Two questions arise for consideration : (i) Whether mixture of Phenol formaldehyde bearing grade reference HV 20086; and Mixture of Phenol formaldehyde bearing grade reference HV 7716, are stable and marketable. (ii) If not, are they dutiable? 9. The main thrust of the argument of Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a definite character for a specific use and is technically recognised as resol. Nowhere we find in the Technical literature placed before us nor any evidence been produced by the respondents that the product resol is unstable and not capable of storage even for a short time ......... In fact it has been pleaded that the product has a short shelf life and has been conceded by the learned advocate for the respondents that it can be kept for as long as 15 days .................. Further in the Tariff Entry 15A(1) CET, the framers of the statute have used technical words and described the products covered under this by their chemical nomenclature. Once the product manufactured according to the chemical description of the product under this entry, these have to be assessed under this heading. We find that the goods under reference are recognised, technically as phenol formaldehyde or resol and considered as resin and it is because of the resinous properties of the same that these are used. The fact that the product in question is stable enough to have a shelf life, at best a short one, as set out above, clearly shows that these are goods for the purpose of levy of Central Excise duty.. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... results into formation of A Stage resin (resol) . It is apparent from the extracts from the handbook of Adhesive by Irving Skeist that what has been prepared by the appellants is nothing but resorcinol resin and it serves the same purpose as that of precondensed resorcinol resin available in the market. Based on this comparison the marketability of the product under consideration cannot also be doubted. 15. The passages extracted above would clearly show that the Jay-Enterprises is based on the concession made by the counsel that the product has shelf life of 15 days, Flexoplast is based on the admission that the product has shelf life of 4-5 days; Dunlop relied on the above two orders. As pointed out in earlier paragraph in the instant case the finding is that the product is unstable which is not controverted by the deptt. 16. Therefore, the orders in Jay Enterprises; Flexoplast; Dunlop India are not applicable to the facts of the present case. 17. The next question is whether the formulations are marketable"? In the instant case there is a clear finding by the lower authority, that the product is not marketable. The department did not choose to adduce any evidence to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the Excise Law. Whereas the respondents contended that the judgment of the Supreme Court in Bhor Industries concludes the issue. 22. At this juncture it is important to refer to the observations of the Supreme Court in BhorInudstries case. After reiterating the views expressed in DCM, South Bihar Mills Union Carbide it was observed by the Supreme Court that therefore it is necessary in case like this, to find out whether these are goods, that is to say, articles as known in the market as separate distinct identifiable commodities and whether the tariff duties levied would be as specified in the schedule. Simply because a certain article falls within the schedule it would not be dutiable under Excise Law if the said article is not goods known to the market. Marketability, therefore, is an essential ingredient in order to be dutiable under the schedule to Central Excise Tariff. 23. The above observation answers ths contention raised by Shri Sunder Rajan. Therefore, we hold that in the absence of the marketability of the product they cease to be goods, and therefore, not dutiable. 24. The submission of Shri Sunder Rajan that the judgment of the Supreme Court in Bhor I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concludes the issue in dispute. Appeal No. E/214/86-C is, therefore, dismissed. 27. The appeal No. E/1672/86-C filed by the respondents is not pursued as they are paying duty on the product. 28. [Contra per : P.C. Jain, Member (T)]. - I have carefully perused the order prepared by learned sister Ms. S.V. Maruthi and concurred in by learned brother Shri D.C. Mandal but I do not feel persuaded to agree to the conclusion reached therein. 29. The main question involved here in this appeal is whether the two grades of phenol formaldehyde resin namely HV 20086 and HV 7716 are marketable or not. If they are considered to be non-marketable then on the ratio laid down by the Supreme Court in its various judgments the two grades cannot be excisable. The following reasons have been given to conclude that the two grades of resin are marketable :- (i) The two products are unstable and highly reactive. (ii) The samples which were drawn by the deptt. in Aug. 85 were not got tested and no results thereof were communicated to the respondents herein. (iii) Sreeram Test House certificate dated 28th Oct. 1985 in respect of the tests carried out by that institution has been relied upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it can have economic significance. It will then have utility and exchangeability. In other words, it will have a meaning for the market. In economics market is not a place, but is the quality of goods which make them useful and exchangeable as saleable. Lastly, the use and exchange of goods is often regulated by law. Unless the relevant rules are complied with, an article may not be useful or exchangeable and that may be an additional reason why it may not be goods ." 31. Applying the above tests there is no doubt that the so-called unstable and reactive resins are in a form in which it has utility value or exchangeability. They are clearly in a usable form and thus have the economic significance. It is for only the resinous character of the products which in technical parlance is known as A stage resin or resol that the phenol formaldehyde reaction mixture is used for the manufacture of plastic laminates. Going by the tests, therefore, laid down by the Hon ble High Court of Delhi and two products under consideration are clearly goods and being listed in the Central Excise Tariff these are excisable goods. On somewhat similar lines, this Tribunal considering the excisabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not available before the original authority in adjudicating the case. In the normal course, therefore, the matter ought to have been remanded to the original authority for re-adjudication to examine this certificate and arrive at its findings. 33. Apart from the above, perusal of the remarks in the certificate are vague. It has not been spE.L.T. out as to in what way the two products under consideration are unstable and highly reactive. It is also to be observed that stability and reactivity have been determined on the basis of viscosity variation at 60 C. I am unable to comprehend as to what is the significance of 60 C for determination of stability and reactivity whereas the viscosity in the test results in the earlier portion of the certificate has been given at 32 C; whether it means that the two products would be relatively stable and less reactive at 32 C, is difficult for me to say in the absence of any expert opinion. 33.1 I further find that the test results of the samples drawn in August 1985 by the department were not conveyed simply because the samples were not tested at all. This is apparent from the Superintendent s letter dated. 17-10-85 (at page 59 of the paper ..... X X X X Extracts X X X X X X X X Extracts X X X X
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