Customs, Excise and Gold Tribunal - Bangalore
The Commissioner Of Central Excise ... vs M/S Chirakkadavu Rubber Latex Works, ... on 17 July, 2001
Equivalent citations: 2002(140)ELT87(TRI-BANG)
ORDER
Shri S.S. Sekhon
1. The respondent are manufacturing "Latex Based Adhesives" with brand name 'CARLAW' AND 'COATOLEX' and were issued a Show-Cause Notice, proposing to deny duty exemption by classifying them as Prepared Adhesives under CETA Heading 3506. The Commissioner decided that 'COATOLEX' is 'Creamed Latex' and CARLAW is an adhesive, relying on the Report of Rubber Bond and dropped the entire demand as 'COATOLEX' was exempt from duty under Notification 18/95 dated 16.3.95 and once that is so, the value turnover of 'CARLAW' would be within the exemption limits of Notification 1/93.
2. The Revenue has filed the appeal on the grounds-
"1. M/s CRLW have themselves accepted in their statements that both the products are adhesive used in the manufacture of footwear and that they are sold as adhesive.
2. The Classification is to be decided based on the "end use" of the product and "Coatolex" is used solely as adhesives, which fact has been confirmed by one of their customers. M/s CRLW have declared that the products as "adhesives" in their sale tax records and it is obvious that it is known only as "adhesives" in the market.
3. Further, M/s CRLW have claimed that as regards "Coatolex" the substance added to latex during the process of manufacture are only in the nature of preservatives. It is a well-known fact that a preservative should retain the original property of a product. The substances added while centrifuging the latex do not appear to be preservatives and it is clear that the treatment yields a product which as the property of adhesive. It can further be noted the latex as it was before the process cannot have such a property so as to give a stronger bonding quality as required in the manufacture of footwear. Hence it is explicit that the item added cannot be preservatives in as much as they change the nature of the original products i.e. "Latex" to a great extent. Therefore M/s CRLW cannot rely on chapter note 5(b) under chapter 40 to classify "Coatolex" as "Creamed Latex".
4. Harmonised System of Nomenclature (HSN), under chapter heading 4005 states that "this heading covers computed rubber which is unvulcanised and is in primary form in plates, sheets or strip". The vary fact that the impugned product is not in the primary form excludes it from the Chapter. Moreover, Chapter Notes 3 and 9 of Chapter 40 clearly indicate that the Chapter deals with rubber and articles thereof and not with glue or adhesive with rubber base.
5. Considering the process of manufacture, presence of the chemical contents, differences in property of latex before and after processing, market name, name of the impugned product in sales tax records and the Chapter notes as mentioned above, the product "Coatolex" appears to be classifiable under Chapter Heading 3506 as 'PREPARED ADHESIVES',So it fall out of the ambit of exemption Notification No. 189/93 dt.8.7.93 as amended by Notification 18/95 dt.16.3.95. In as much as the products 'Coatolex' also becomes dutiable the value of the same should be taken into consideration while computing the aggregate value of clearances as stipulated under Notification No. 175/86 dt. 1.3.86 as amended by Notification No. 1/93 dt. 28.2.93."
3. We have heard both sides and considered the matter and find-
(a) Mere fact that the goods are sold as Adhesives is no reason to call for classification under heading 3506. Latex also has 'bonding' quality and the 'stronger Bonding' quality as urged in ground No 3 of Revenue's appeal have to be proved. It was fairly conceded, by both sides, at the hearing before use, that there is no material to conclude that the processing undertaken on Latex, at the respondent premises result in any 'increase of bonding strength' of the product. In absence of such evidence, we find no validity to conclude that 'Stronger Bonding' is induced in the product to call for classification as proposed in the notice.
(b) Examining the notes, we find note 5 to Chapter 40 of CETA reads-
"5(a) Heading No 40.01 & 40.02 do not apply to any rubber or mixture of rubber which has been compounded, before or after coagulation with i. XXXXX ii XXXXX iii XXXXX
(b) The presence of the following substances in any rubber or mixture of rubber shall not affect the classification in Heading 40.01 or 40.02....."
There is no evidence that the product 'COATOLEX' is excluded by (i), (ii),(iii), of note 5(a)from heading 40.01, nor can we find any conflict with the Commissioner having ignored percentages of substance found on tests, as per Note 5(b), to hold the product as latex, and classifying 'COATALEX' under 40.01.
(c) We therefore, do not find any material, in grounds to find a flaw in Commissioner's Orders and to uphold the Revenue's appeal
4. In view of our findings, the appeal is dismissed.