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TMI Blog1984 (4) TMI 298X X X X Extracts X X X X X X X X Extracts X X X X ..... notifications issued by the Central Government under Rule 8(1) of the Central Excise Rule (hereinafter referred to as the Rules) :- (a) Notification No. 156/65, dated 23-9-1965 : "GSR. In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts artificial or synthetic resins specified in column (2) of the Table below, falling under Item No. 15A of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), from so much of the duty excise leviable thereon as is in excess of the amount specified in the corresponding entry in column (3) of the said Table : TABLE Sl. No. Description Amount 1. Alkyd Resin Nil 2. Maleic Resin Eighty paise per kilogram 3. Phenolic Resin Eighty paise per kilogram Provided that any manufacturer of maleic resin or phenolic resin availing himself of the benefit of exemption under this notification shall not be permitted to pay the duty leviable on such resin manufactured by him at the ad valorem rate." (b) Notification No. 122/71, dated 1-6-1971 : "GSR. In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the basic duty as special duty. On the issue of Notification No. 156/65 on 23-9-1965, these products were accorded full duty exemption on the declaration that they were alkyd resins. Samples were drawn on two occasions, on 19-10-1965 and again on 14-11-1967. On both the occasions, the Deputy Chief Chemist opined that the products were alkyd resins. The goods were allowed to be cleared duty-free. It, however, appears that, on 6-8-1968, during the course of audit, it was observed that the appellants were advertising these products as maleic resins in sales literature of their collaborators M/s. Chemische-Werke-Albert. Samples were again drawn on 25-8-1969. On test, the Deputy Chief Chemist opined that these products were "other than phthalic alkyds". Re-tests were conducted by the Chief Chemist, Delhi who opined that the resins in question were "condensation products of polybasic acid and polyhydric alcohol". It was further opined-taking into account technical data supplied by the appellants that Alresat 201C (Hindresat 2001) was a maleic resin and that Alresat 224C, Alresat 313C and Alresat 400C were fumaric resins, i.e. "Artificial or synthetic resins, other than Alkyd, Maleic o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellants drew our attention to the Department's communications dated 23-11-1965 and 6-1-1966, both confirming the classification of the products as Alkyd resins eligible for clearance without payment of duty. Even after the investigation consequent to audit inspection, the Deputy Chief Chemist had categorised the products as "other than phthalic alkyds". Shri Habbu submitted that this finding clearly showed that the products were alkyd resins but other than phthalic alkyds. He pointed out that the demand in DD2 No. 112886, dated 14-11-1969 did not show any ground for making the demand. 10. Referring to the three notifications (already adverted to), it was submitted that though the definition of the expression "Maleic resins" as introduced for the first time by Notification 122/71 - was modified by Notification 127/73 so to include within its ambit fumaric acid in addition to maleic acid/maleic anhydride as one of the reactants, the amendment really only clarified what the said expression along meant. Since 1973, all these products were being classified only as "maleic resins". The products were got tested by two Government laboratories the National Test House, Alipore, C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be relied upon : no affidavits had been filed before the lower authorities. The test report of the Alipore Test House did not clinch the issue since there is no indication whether presence of fumaric acid was tested for. The report of the Pune Laboratory was not based on any test: it was only an opinion. 13. On the subject of demands, while agreeing that a show cause notice should have been issued, Smt. Zutshi contended that proper opportunity was afforded to the appellants in the adjudication proceedings and there was no travesty of natural justice. 14. We have carefully considered the contentions of both sides. The issues for determination are : (1) Were the disputed products "alkyd resins" within the meaning of Notification 156/65, dated 23-9-1965 as originally accepted by the excise authorities and as claimed then and now by the appellants ? Were they "maleic resins" ? "other than alkyd, maleic or phenolic resins" ? (2) Whether the demand for the entire back period is sustainable ? 15. We have to commence our discussion of the first issue by noting that samples were drawn on 19-10-1965 for test and the Deputy Chief Chemist opined that these products w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Malic Anhydride and as fumaric resins are known to the Trade as distinct from Maleic resins, the Chief Chemist, Delhi, is of the opinion that the above three products are fumaric resins, that is to say, each as an "Artificial or synthetic resin, other than that of Alkyd Maleic or Phenolic" although the party has advertised identical products as Maleic Resins in their printed Pamphlet." 16. It appears from the record (the Supdt's order of 18-5-1971) that the appellants had shown the composition and ingredients of the 4 products as below : "Composition and ingredients per tonne yield : Alresat 201C 224C 313C 400C Hindresat 2001 2024 3013 4000 Kgs. Kgs. Kgs. Kgs. Resin 875 935 925 822 Clacium -- 1.9 -- -- Acetate Glycerine 150 -- 148 -- Pentaerythritol -- 143 -- 156 Maleic 104 -- -- -- Anhydride Fumaric Acid -- 59 86 131 Percentage of 10.4% 4.8% 8.6% 13.1% Polybasic acid Maleic Fumaric Fumaric Fumaric." 17. Now, "alkyd resins" is a broad generic description applied to a group of synthetic resins the reaction products derived from polyhydrine alcohols, polybasic acids and fatty monomasic acids (Page 52 of " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod - on the other hand, is an opinion based on the composition data furnished by the appellants. Apparently, no test was performed : the opinion does not speak of a test. It goes on to say that "as per your definitions given in your letter of 1-9-1977, Hindresat 2001, 2024, 3013 and 4000 will qualify for the description of 'maleic resins'. The appellants' letter of 1-9-1977 to the National Chemical Laboratory has not been produced before us. The National Chemical Laboratory's opinion is also, therefore, of not much help. Even if the Chief Chemist's report - which was partly based on the data furnished by the appellants - is ignored, there is no reason to discard the write-up furnished by the appellants themselves and adverted to by the Superintendent in his order dated 18-5-1971. (A copy of the write-up is not available on the record before us but this is not material since the write-up has been reproduced in the Supdt's order). This Write-up clearly indicates Maleic anhydride as one of the ingredients in the composition of Alresat 201C and Fumaric acids in the other 3 products. Therefore, there can be no doubt that Alresat 201C (Hindresat 2001) was a maleic resin and the other th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the expression "alkyd resins" : "Alkyd resins. Formerly known as glyptal resins, i.e., condensation products derived from glycerol and phthalic anhydride. Now the term also covers diallyl esters and various polyesters used as resin binders in alkyd moulding materials." Again, according to the Concise Chemical and Technical Dictionary by H. Bennett : "Alkyd resin. Any condensation product involving a polybasic acid, like phthalic, maleic and succinic, and a polyhydric alcohol, like glycerin and the glycols, almost always with addition of modifying agents such as higher fatty acids; used in paints, varnishes and lacquers." From the above extracts it is clear that the terms "alkyd resin" is wide enough to take in maleic and fumaric resins. The relevant Notification 156/65 exempts alkyd resins from the payment of excise duty but prescribes a concessional rate of duty in respect of maleic and phenolic resins. Since the 3 products, Alresat 224C, 313C and 400C (corresponding to Hindresat 2024, 3013 and 4000) are neither maleic resins nor phenolic resins they would be eligible to be classified as alkyd resins. In the circumstances, we are of the view that these 3 resins were eli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Rule 9B till further orders. On 19-5-1970 he again wrote to say that the products would be assessed at the rate applicable to maleic resins under Notification 156/65 till further orders, He followed this up by a letter dated 15-3-1971 by which he said that one of the products would be assessed as maleic resins and the other as other than alkyd maleic or phenolic. The appellants were called upon to file revised classification lists and price lists. The appellants, by their letter dated 1-4-1971 asked for an appealable order which the Supdt. made on 18-5-1971. Following this order, a communication dated 1-9-1971 was sent by the Superintendent to the appellants modifying the earlier demand. We have already set aside the demand of 14-11-1969. However, this need not necessarily invalidate the whole of the demand dated 1-9-1971 except to the extent of the amount covered by the demand dated 14-11-1969. 26. From the Assistant Collector's adjudication Order No. V(15)2-5/74/4046 (dated 1-3-1975), against which the 2nd appeal is before us, says that provisional assessments were commenced from 1-8-1969 and were continued during the period ending 30-5-1971. He has stated that in term ..... X X X X Extracts X X X X X X X X Extracts X X X X
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