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TMI Blog2017 (6) TMI 885X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in holding that the appellant's goods are also capable of being bought and sold without any chemical composition comparison along with competitive shelf life study. Whether the resins in question are classifiable under heading 3909 or 3506? - Held that: - Once it is established that paper is quoted with certain resols which have the essential characteristics of meriting classification under chapter 39 and which according to Note-01 of chapter 39 are to be called plastics. We find that learned Commissioner erred in relying on the said ruling in absence of comparison of chemical composition - as per HSN explanatory notes to chapter 39, glue manufactured by appellant for use as adhesive is outside the preview of chapter 39. Admittedly, the glue in question is curried glue to which hardner and other substances are added and therefore, glue manufactured by the appellant is not covered by clause 1 to note 6 of chapter 39, such glue being not in the form of block, lump or powder - the impugned order is bad and fit to be set aside. Extended period of limitation - penalty - Held that: - Since the matter is highly debatable and the Clarification issued by Ministry is in Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 AC of the Act. 3. Further case of revenue, as per the SCN is that the goods manufactured in the state of Uttarakhand, are exempt from duty, except those specified in Annexure-1 (Negative list), to the said notification. Further the goods falling under Heading 3909 to 3915 of Central Excise Tariff Act, are specified under Sl. No.20 of the said Annexure-I and therefore fall under the negative list. The chapter heading 3909 covers Amino-Resins, Phenolic Resins among others, and Urea Formaldehyde Resin (UFR), Melamine Formaldehyde Resin (MFR) and Phenol Formaldehyde Resins (PFR) fall under subheading 39091010, 39092010 and 39094020 respectively of the CETA. According to revenue, as aforementioned resins were classifiable under chapter heading 3909, the area-wise exemption was not available. Since the appellant was availing duty exemption under the said notification for their final products, the intermediate goods falling in the negative list of the said notification, becomes dutiable and chargeable to duty. The factory premises of appellant was visited by officers of D.G.C.E.I. on 01st February, 2011 and during the visit, the plant and equipment such as Reactor and Storage tanks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise matters and all other matters relating to Government Department. He submitted copy of declaration filed by them for claiming exemption under Notification No.50/2003-CE. He stated that they did not mention the production of resin in the list of goods manufactured or in the list of inputs used by them, while filing declaration for claiming exemption under the notification, as they were not aware of this fact that various types of resins manufactured and consumed by them for production of the finished goods is chargeable to duty. The samples of resin brought by the Department were sent for chemical examination to Indian Plywood Industries Research and Training Institute, Bangalore for testing the chemical properties of the resin as well as their shelf life on 07th February, 2011. The result of the Chemical Analysis was received vide letter from IPIRTI dated 21st of March 2011, wherein the test result for sample marked as 1 was tested with Chemical Composition as (a) Melamine (b) Formaldehyde. This sample which was drawn on 01st February, 2011 was shown gelled on the date of receipt of Sample at IPI RTI. The report of Sample marked as 2 was given for chemical composition as (a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resin (FR) and Melamine Formaldehyde Resin (MFR), that the said resins are manufactured in kettles in their factory by heating the raw materials such as Milamine, Formaldehyde, Water and Caustic at a particular temperature and stirring it. The whole process takes 4 to 5 Hours, that once the material cools down the same is stored in drums for further supply, that average shelf life of said resins manufactured by them is 15 to 20 days. That on being asked about the other manufacturers of resins in Punjab, he stated that BR chemicals, Ludhiana, Royal chemicals, Ludhiana and NN Industry Jalandhar are some of the manufacturers of resins in Punjab. It further appeared to revenue from the website the Saba Chemicals and Wood Products , Yamuna Nagar, Haryana, a manufacturer-exporter and supplier of Phenol Formaldehyde Resin, Urea Formaldehyde Resin, Melamine Formaldehyde Resin, Urea Melamine Resin. etc. have advertised their manufacturing of these specified resins usable as binder in Wood Panel Products like Plywood, Particle Board, MDF etc. Their product is sold in plastic drums of 100 KG, 200 KG and bulk in tanks. This shows that the product is marketable and various manufacturers are p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide Order-in-Original dated 29th March 2013, passed by the respondent Commissioner confirming the proposed demand with interest and also equal amount of penalty under Rule 25 of CER read with Section 11 AC of the Act. The learned Commissioner observed that the two moot issues to be decided are- whether the resins used captively by the appellant are marketable or not because of its shelf life. The issue of dutiable and marketability of the said intermediate products was considered by Hon ble Supreme Court in the case of Moti Laminates Pvt. Ltd. Vs Collector of Central excise reported at 1995 (76) ELT 241 (SC), wherein the Hon ble Supreme Court held as under:- 11 . It cannot thus be disputed that even if the resin produced by the appellants are resols as mentioned in Item 15A it could not be subjected to duty. The purpose of specifying the goods in the Schedule is twofold, one, the rate on which the duty would be charged and other that if the goods satisfy the description and are covered in the Entry then they are liable to pay excise duty. But even in respect of specified goods it could be established that it was not marketable or capable of being marketed, therefore, no duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the same website for Phenol-Formaldehyde Resin and also for Melamine Formaldehyde. The learned Commissioner further observed that the appellant may contend that some or more of the listed products may differ from the product manufactured by the appellant in respect of quality and specification. But this contention will not change the picture otherwise, because the product is known in the market. The characteristics of which are same and use or degree of quality of product may differ, but the product is known by the same and unique name in the market and has a commercial identity. Further, learned Commissioner relied on the ruling of the Apex Court in the case of Medley Pharmaceuticals Ltd Vs CCE, Daman, reported at 2011 (263) ELT 641 (SC), wherein the Apex Court observed that for the purpose of levy of excise duty, and article must satisfy two requirements to be Goods that is (a) it must be removable and (b) it must be marketable. In the said case the Apex Court was concerned with physician samples of patent and proprietary medicines intended for distribution to the medical practitioner as free samples. The test of marketability is that the product which is made liable to duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain and pre-laminated particle board, Plain and pre-laminated MDF board, Decorative laminates, Plywood/Doors etc. when produced for captive consumption will fall under Tariff 3506. The matter may accordingly be clarified to the jurisdictional Excise Authorities. 7. The learned Commissioner did not agree with the clarifications, given by the aforementioned circular observing that the circular forgot to consider that an intermediate product emerges in between, before reaching of the goods up to the stage of adhesives or glues. The intermediate product - UF Resin, PF Resin or MF Resin are classifiable under chapter heading 3909, as they are marketable and so they are excisable and thus are exigible to duty. The learned Commissioner also relied on the Ruling of Apex Court in CCE Vs carrier Aircon Ltd 2006 (199) ELT 577 (SC), wherein it was held that - End used to which product is put to by itself cannot be determinative of the classification of the product. There are a number of factors which have to be taken into consideration for determining the classification of a product. For the purposes of classification the relevant factors, inter-alia are statutory fiscal entry, the basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also other substances (wax). Relevant part of HSN Explanatory Notes to Chapter 34 is reproduced hereunder:- This heading covers: (A) .. (B) Prepared Glues and other prepared adhesives, not covered by a more specific heading in the Nomenclature, for example: (4) Preparations specially formulated for use as adhesives, consisting of polymers or blends thereof of heading 39.01 to 39.13 which, apart from any permitted additions to the products of Chapter 39 (fillers, plasticisers, solvents, pigments etc.) contain other added substances not falling in that chapter (e.g., waxes) 8.2. HSN Explanatory Notes to be referred in case of dispute over classification:- In absence of any contrary intention indicated by Central Excise Tariff Act, the dispute relating to classification must be resolved with reference to nomenclature found in HSN as held by Apex Court in the case of CCE, Shillong vs. Wood Craft Products Ltd. 1995 (77) ELT 23. 8.3. Heading 3909 only covers products in primary forms, whereas glue is not in primary form:- (i) Heading 3909 covers Amino-resins, Phenolic resins and Polyurethanes, in primary forms . Thus, the product has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he correctness of comparison cannot be upheld. In the present case also, the O-I-O relies on the information obtained from website of one M/s Akolite Synthetic Resins, Mangalore and some other manufacturers, without examining the manufacturing process of such manufacturers and without any chemical comparison of their products with that of Appellant. 8.5. Clarification dated 1.6.2012 issued by Government of India, Ministry of Chemicals Fertilizers- (i) On a clarification sought by Sidcul Entrepreneur Welfare Society Chapter Pantnagar, Ministry of Chemicals Fertilizers issued Office Memorandum dated 1.6.2012 clarifying that prepared adhesives/glues based on Phenol Formaldehyde (PF), Urea Formaldehyde (UF), Melamine Formaldehyde (MF) used to manufacture Plain and pre-laminated particle board, plain and pre-laminated MDF Board, Decorative Laminates etc., when produced for captive consumption will fall under heading 3506. It was further directed that the matter may be clarified to the jurisdictional excise authorities. (ii) The aforesaid Office Memorandum, which is in the nature of Circular issued by Government of India, is binding on the department and they cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of the Apex Court judgment in the case of Tata Iron Steel Co. Ltd. (supra). (iii) Reliance placed in paragraphs 69-72 on the information obtained from website of M/s Akolite is misplaced, as similar information was unsuccessfully relied by department in Balaji Action Buildwell case (supra). (iv) Finding recorded in paragraph 74 that resin/glue manufactured by Appellant are identifiable in market and is sold in market, is presumptive and not based on any evidence. In absence of any chemical comparison between Appellants product with those of others, it cannot be presumed that Appellants product is identifiable in market and is sold in market. (v) Finding recorded in paragraphs 80 81 that at the time of clearance for captive consumption, the product was not glue, is completely wrong and perverse, as it ignores the use of hardener and wax for manufacturing of glue, which has not been disputed by department. 8.10. Extended period of Limitation and Penalty not imposable - Since the matter is highly debatable and the Clarification issued by Ministry as well as the judgment of this Hon ble Court in the case of Balaji Action Buildwell case (supra) is in Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e) of Chapter 39. Once it is established that paper is quoted with certain resols which have the essential characteristics of meriting classification under chapter 39 and which according to Note-01 of chapter 39 are to be called plastics. We find that learned Commissioner erred in relying on the said ruling in absence of comparison of chemical composition. We further find that the learned Commissioner have erred in ignoring the clarification given by the Government of India in OM No.46016/41/2012/PC-II dated 1st June 2012, issued by the Ministry of Chemicals and Fertilizers as noticed hereinabove. We further observe that the said clarificatory circular is binding on the officers of the government, including the respondent Commissioner. We further find that admittedly wax is used by the appellant in manufacturing of glue, which is clear from the chart reproduced at para 5.1 of the SCN and para-5 of the impugned Order-in-Original. Admittedly, such glue is based on PF, UF and MF. Thus, in view of the aforesaid admitted facts, as per HSN explanatory notes to chapter 39, glue manufactured by appellant for use as adhesive is outside the preview of chapter 39. Admittedly, the glue in ques ..... X X X X Extracts X X X X X X X X Extracts X X X X
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