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TMI Blog2024 (7) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal has held that the mixture of aforesaid items used as Glue/Resin/Adhesive in the manufacture of laminates are classifiable under chapter heading 35-06. It is found that no market inquiry was conducted with reference to the goods in question in order to establish as to whether the mixture is capable of being bought and sold. Further, the Revenue has not been able to establish in the case that the appellant has been either purchasing or selling the main items in the market. The Marketability of the product is an essential ingredients and criteria to hold that a product is dutiable/excisable and thus onus is on the Revenue to prove that the product is marketable or captatively being consumed. Time Limitation - HELD THAT:- Thus, substantial demand upto December, 2010 is beyond limitation specially the fact of used of Melamine Formaldehyde was already in the knowledge or Department on 24.11.2006 the show cause notice was issued after the expiry of normal period of limitation when all the facts were in the knowledge of Department in 2006, the declaration was filed on 24.011.2006 containing the details of finished goods as well as raw materials including Melamine Formaldehyde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 11 AC of the Act. 2. Briefly the facts of the present case are that the appellant has set up a new unit for the manufacture of paper based decorative laminates failing under chapter heading 48239019 of Central Excise Tariff. The period of dispute in this case is from 01.10.2007 to 30.09.2012. During this period, the appellants were availing of full duty exemption under Notification No. 50/03-CE dated 10.06.2003 which provides exemption of all goods except those specified in Annexure-I ( Negative List‟) for the manufacture of paper based decorative laminates, they required melamine Formaldehyde resins (MFR) and Phenol Cardanol Phenol Formaldehyde Resins (CPFR). For the purpose of manufacturing. The appellants were purchasing Fomaldehyde, Phenol, Melamine etc in terms of the aforesaid notification and the appellant filed declaration on 24.11.2006 with their jurisdictional Asstt. Commissioner duly containing the details of finished goods as well as raw materials including Melamine Formaldehyde Phenol etc. The Department entertained a view that the appellants are also manufacturing (MFR) and (CPFR) which are plastic resins falling under Chapter 39 of the Central Excise Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aminates are classifiable under chapter 35-06 as claimed by the appellants or under Chapter 39-09 as alleged by the Department. He further submits that the Department raised the issue confirmed demands against the whole of industry who set up the units for the manufacture of Laminates located in the state of Himachal Pradesh and Uttrakhand availing the exemption under Notification No. 50/2003-CE. 4.1 He further submits that this issue is no more res integra and has been settled by various decisions of the Tribunal wherein the Tribunal has consistently held that the mixture of aforesaid items used as adhesive/glue/resins for the manufacture of laminates is held to be classifiable under Chapter heading 35-06. In support of this submissions, he relied upon the following decisions: i) 2020(371) ELT 781 (Tri. Chan.) (Virgo Industries v/s CCE). ii) 2018(359)ELT 513 (Tri-Del.) (Shirdi Industries Ltd v/s CCE). iii) Final order No. 62026/2017 dt. 24-07-2017 (Greenlam Inds. v/s CCE) iv) 2016(332)ELT 367 (Tri-Del.) (Balaji Action Buildwell v/s CCE). 4.2 He further submits that even the Department has also accepted the classification of the aforesaid items under Chapter 35-06 as no appeal agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cost of the product and is not economically viable, Even remain unpacked- Remains in 25000 Its tanks only. Not marketable as such. That no market enquiry was conducted with reference to the goods in question to establish as to whether the mixture is capable of being bought and sold. That merely shelf life of the product to be of 5-7 (which is actually is just 2- 3 days) does not mean that the same is marketable. The basic issue is that the product got marketable only after the addition of some additives / retarders. That all the mfrs, of laminated sheets are undertaking the solution for their own/in-house use. That if the said mixture is marketable then some of the parties would have sold it in the market which is not so and is sufficient to establish that the said mixture is incomplete and not marketable. There is not even single instance where the mixture has been sold by the appellant or any other party engaged in the same industry. 18. That the marketability is an essential ingredient and criterion to hold that a product to be dutiable/ excisable and that the onus is upon the Revenue to prove that the product is marketable or capable of being marketed. He relied upon the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edient for invoking the extended period of limitation under Section 11A of the CE Act which are totally absent as the issue involved is of purely technical nature. That if the fact of installation of machines/ equipment for resin plant and use of the mixture can be noticed in 2011 then the same ought to have been noticed and verified in the year 2007 while verifying the unit and allowing the exemption under Notfn. 50/2003-CE. That non-submission of any document which is not required by law cannot be taken as a basis for invoking the extended period of limitation. That the deptt. itself is not clear about the leviability of the duty on the subject product specially that the issue remained under controversy since long back even prior to 1990. The CBEC also clarified vide its Circular dt. 30-06- 1999 that the intermediate products binder/resin/glues used captively are not chargeable to excise duty. That the issue involved is of purely technical nature. That there is no question of any suppression when the activity has been duly reflected in the statutory/ private records and the activity has been done after duly intimating the department. He relied upon the following decisions: 1. Tam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd their chemical composition as Melamine, Formaldehyde, NaOH (in MFR) Phenol, Formaldehyde, NaOH (in PFR) and the shelf life as 7 days 35 days respectively. He further submits that as per the details of sample of CPF taken from Batch no.8 on 7.4.2011, the ratio of formaldehyde (1230 kg) to phenol (1020 kg) ratio of greater than one and catalyst used is NaOH which is base. In support of his submissions, Ld. DR also relied upon the following decisions : CHEMIPOL-2010 (255) E.L.T. 478 (Tri. - Mumbai) BLUE BELL POLYMER P. LTD.-2000 (115) E.L.T. 638 (T) CONVERTOR ADHE. CHEMICALS (P) LTD. 2006 (199) E.L.T. 194 (S.C) SYNTHETICS POLYMER INDUSTRIES-1998 (104) E.L.T. 659 (T) BAKELITE HYLAM LTD-1997 (91) E.L.T. 13 (S.C.) Thermax Ltd. 2022(382) ELT.442 (SC) MAURI YEAST INDIA PVT. LTD. SC. Classification PESTICIDES MFG. FORMULATORS ASSOCIATION OF INDIA- classification.SC Nicholas Piramal India Ltd. 2010 (260) E.L.T. 338 (S.C) TN State Transport Corpn. Ltd. 2004 (166) E.L.T. 433 (S.C) Amit Polymers Composites Ltd.-1989 (39) E.L.T. 674 7. We have carefully considered the submissions made by both the parties and have gone through the various judgments relied upon by both the parties cited (Supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Ministry of Chemicals Fertilizers, the Ad resins do qualify under Tariff Heading 3506 of the Central Excise Tariff Act; therefore, we hold that the resins in question, which are captively manufactured by the appellants having merit classification under Tariff Heading 3506. The items classified under Tariff Heading 3506 are entitled for benefit of exemption Notification No. 50/2003-C.E., dated 10-6-2003; therefore, we hold that the appellants are entitled to exemption under Notification No. 50/2003-C.E., dated 10-6- 2003 for the items in question which have been captively consumed by the appellants to manufacture laminates, plywood, boards etc. Therefore, no duty is payable by the appellants. 8. In view of the above, we do not find any merit in the impugned orders, the same are set aside. 10. Further, we find that the Delhi Tribunal in the case of Shirdi Industries Ltd. Vs. Commissioner of C.Ex. Meerut reported in 2018 (359) E.L.T. 513 (Tri.-Del.) wherein the same issue was involved and the Tribunal relied upon the earlier decisions in the case of Shirdi Industries vide Final Order No. 70520/2017 dated 19.05.2017 CESTAT, Allahabad and held as under : 4. We have heard both the sid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence 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. 56016/41/2012/PC-II, dated Ist 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 admit- ted 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 question is curried glue to which hardener 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. We further find that the preceding decision of this Tribunal in the case of Bala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en for use in binding purpose has relevance to decide the issue. Prepared glue as it emerges is put into use in the binding section along with other inputs like wax, NH,CL and water for final binding. Chapter 35 covers glues. CETH covers Prepared glues and other prepared adhesives, not elsewhere specified or included. CETH Item No. 3506 99 91 covers synthetic glue with phenol urea or cresol (with formaldehyde) as the main component - Pre- pared glues and other prepared adhesives. 15. Based on the above criteria for classification, we find that the appellant had made out strong case for classifying the product as prepared glue . This is based on the which is the processes adopted and emerging product from the reactors/kettles, sent directly to kitchen nor direct use in bonding of final product along with inputs. 16. The reliance placed by the Revenue on the test reports has been strongly contested by the appellants on various grounds. The test report was given to them after almost 3 months which deprived the chance for them to go for re-test Further, the methodology followed by testing is not as per IS Standards relevant for synthetic resin additives. The test report of IPIRTI did n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the product of other manufacturers and also before applying case laws to the present facts, it is necessary that Original Authority should have examined the processes undertaken and the comparability of the goods in chemical nature. No such analysis or finding to that effect is available in the impugned order. 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 Gloride Formic Acid in the processes, the enderging 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 relief. 12. Further, We find that the Department has accepted the cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC)) wherein it was held that intermediate goods produced and used for captive consumption were not liable to duty, if not marketable, notwithstanding the fact of their being specified in Tariff Schedule. 4. The matter has been examined. In view of the above judgment it appears that these intermediate products viz, binder/resin/glues which are captively consumed, are not chargeable to excise duty, owing to their short shelf life provided that they are not marketed or sold commercially as such. 5. All pending disputes/assessments on the issue may be settled in the light of these guidelines. 6. Field formations and Trade may suitably be informed 7. Receipt of this Circular may please be acknowledged. 8. Hindi version will follow. 14. We also find that the impugned order is bad in law being violative of the principle of natural justice as the same has been passed on the basis of preliminary hearing wherein the Ld. Counsel for the appellant has requested the Department to provide them the copy of test report and also allowed them to cross examine the witnesses whose statements have been relied upon in the show cause notices but the same was not done and even the copy of the test report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s filed on 24.011.2006 containing the details of finished goods as well as raw materials including Melamine Formaldehyde Phenol etc., as well as verification of units in the year 2006 itself. Further, the Department duly accepted the said declaration and never raised any objection till January, 2012, rather allowed the appellant to avail the exemption under Notification No. 50/03-CE. Further, it has been consistently held by various High Courts and Supreme Court, there is no question of suppression when the activity has been duly reflected in the statutory/provide records and the activity has been done after duly intimating the Department. In this regard, the decisions relied upon by the appellant cited (Supra) are squarely applicable and hence we hold that substantial part of the demand upto December, 2010 is barred by limitation. 18. Keeping in view of our discussion above, we are of the considered view that the issue involved is no more res integra as held in the decisions relied upon by the appellant cited (Supra) and by following the ratio of the said decisions, we are of the considered opinion that the impugned order is not sustainable in law and therefore we set aside the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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