Custom, Excise & Service Tax Tribunal
Samrat Plywood Ltd vs Shimla on 26 June, 2024
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHANDIGARH
REGIONAL BENCH - COURT NO. I
Excise Appeal No. 53540 of 2014
[Arising out of Order-in-Original No. CHD-CEX-001-COM-02-05-2014 dated
30.01.2014 passed by the Commissioner of Central Excise, Chandigarh]
M/s Samrat Plywood Ltd ......Appellant
Village Bir Plassi, Saini Majra, The Nalagarh Solan, HP
VERSUS
Commissioner of Central Excise-Shimla ......Respondent
Central Revenue Building, Sector 17-C Chandigarh- 160017 APPEARANCE:
Present for the Appellant: Shri Ajay Jain, Advocate Present for the Respondent: Shri Pawan Kumar and Shri Narinder Singh , Authorized Representatives CORAM: HON'BLE MR. S. S. GARG, MEMBER (JUDICIAL) HON'BLE MR. P. ANJANI KUMAR, MEMBER (TECHNICAL) FINAL ORDER NO. 60367/2024 DATE OF HEARING: 26.04.2024 DATE OF DECISION: 26.06.2024 PER S. S. GARG The present appeal is directed against the impugned order dated 30.01.2014 passed by the Commissioner whereby Commissioner has confirmed the following demands :
i. I confirm the demand of Rs. 1,90,29,215/- against the Noticee under Section 11A of the Act by invoking extended period of limitation in respect of Show Cause
2 E/53540 /2014 Notice F.No. DZU/INV/LRU/H/CE/127/201/89 dated 12.01.2012 mentioned at serial No.1 of the Table under Para 1 above after allowing the benefit of Cenvat credit of Rs. 1,40,36,379/-. The amount confirmed is recoverable along with interest under Section 11AB/11AA of the Act. I also impose penalty of Rs.1,90,29,215/ on the Noticee under Section 11 AC of the Act.
ii. I confirm the demand of Rs. 42,65,905/- against the Noticee under Section 11A of the Act in respect of Show Cause Notice C.No. V(48)15/CE/Adj/34/2012/2216-18 dated 27.03.2012 after allowing the benefit of Cenvat credit of Rs. 34,80,138/-. The amount confirmed is recoverable along with interest under Section 11AB/11AA of the Act. I also impose penalty of Rs. 42,65,905/- on the Noticee under Section 11 AC of the Act.
iii. I confirm the demand of Rs.4,43,253/- against the Noticee under Section 11A of the Act in respect of Show Cause Notice C.No. V(48)15/CE/Ad)/116/2012/6412-14 dated 22.10.2012 after allowing the benefit of Cenvat credit of Rs. 16,81,005/-. The amount confirmed is recoverable along with interest under Section 11AB/11AA of the 3 E/53540 /2014 Act. I also impose penalty of Rs. 4,43,253/- on the Noticee under Section 11 AC of the Act.
iv. I confirm the demand of Rs. 25,92,067/- against the Noticee under Section 11A of the Act in respect of Show Cause Notice C.No. V(48)15/CE/Ad)/15/2013/1441-43 dated 07.03.2013 after allowing the benefit of Cenvat credit of Rs.46,89,854/-. The amount confirmed is recoverable along with interest under Section 11AB/11AA of the Act. I also impose penalty of Rs. 25,92,067/- on the Notice under 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 4 E/53540 /2014 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 Tariff and are covered by the negative list of the exemption notification no. 50/03-CE and are accordingly not eligible for duty exemption under this notification. Since, the final product of the appellant was being cleared at nil rate of duty under notification no. 50/03CE., the captive consumption notification no. 67/95-CE is also of not applicable to the MFR and CPFR alleged to have been manufactured. It is on this basis that four show cause notices were issued for the period from 1/10/2007 to 31/3/2011, 1/4/2011 to 31/12/2011, 1/1/2012 to 16/3/2012 and 17/3/2012 to 30/09/201 for the duty demands of Rs. 3,30,65,594/-, 77,46,043/- , 21,24,258/- and 72,81,921/- respectively. Out of these four show cause notices, while the show cause notice for the period from 1/10/2007 to 31/3/2011 has been issued by invoking extended period, the remaining three show cause notices are within the normal limitation period.
2.1 The appellant filed preliminary reply dated 25.11.2013 and requested the department to provide him to the copy of the report of the chemical examiner as referred in para 7.2 of the show cause notice and also requested for cross examination of the persons relied upon by the Revenue in the show cause notices.
5 E/53540 /2014 2.2. Further, during the personal hearing on 27.11.2013, the Ld. Counsel for the appellant again prayed for cross examination of the persons whose statements were relied upon in the show cause notices and also requested to provide them the copy of the report of the chemical examiner but the same was not given and the matter was adjudicated by the Commissioner vide Order-in-Original dated 30.01.2014 of which the above mentioned four duty demands totaling Rs. 2,63,30,440/- were confirmed along with interest, and penalty of equal amount under Section 11AC was also imposed on them. Aggrieved by the said order, the appellant has filed the present appeal.
3. Heard both the parties and perused the relevant material on record.
4. Ld. Counsel appearing on behalf of the appellant submits that impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law and the binding judicial precedents on identical issue. He further submits that the main dispute in the instant case is as to whether mixture of Melamine & Formaldehyde and Phenol and Formaldehyde used as Adhesive/Glue in the manufacture of final product-laminates 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 6 E/53540 /2014 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 against the aforesaid judgments has been filed by the Revenue before any higher court. Hence, the issue has attained finality. Ld. Counsel further made the following submissions in their written submissions:
7 E/53540 /2014 That the impugned order is non-speaking/bad in law, violative of the principles of Natural Justice being passed on the basis of Preliminary Hearing.
That the impugned order is bad in law / violative of the principles of Natural Justice being the adjudicating authority even failed to provide test Reports as relied upon in the SCN.
That the order is bad in law/violative of the principles of natural justice as the adjudicating authority failed to follow the principles of Natural Justice being failed to allow the cross examination of the witnesses whose statements have been referred & relied upon in the SCN. That the impugned order has been passed which is contrary to CBEC Circular No. 464/30/99-CX., dated 30-6-1999.
That the impugned order is contrary to the law laid down by the Hon'ble Supreme Court in the case of Moti Laminates (P) Ltd V/s CCE reported as 1995(76)ELT 241 (SC). -2013(291) ELT 91 also referred.
That the adj. authority has even ignored the test and report obtained by the appellant of the same 8 E/53540 /2014 product from Indian Plywood Industries Research and Training Institute.
That otherwise also the mixture of Melamine and Formaldehyde which is in liquid form, by no stretch of imagination can be treated to be either Plastic or article of plastic‟.
That the mixture of Melamine and Formaldehyde is not complete product rather the same remains as incomplete / semi-finished product specially that the same does not contain any additives / retarder such as Hydrochloric Acid (HCL), DEG, Caprolactam, Sulphonic Acid / other hardeners, The product attains the finality only after adding these additives.
That the mixture of Melamine & Formaldehyde is undertaken as per the requirement for use in mfre of laminates. No chemical preservatives/ retarder is added.
That the additives/ retarders are not required being the mixture is used immediately in the manufacture of laminate sheets.
That the mixture is unstable and that they have not been using/ adding any additives/stabilizer so as to make it as complete product specially that 9 E/53540 /2014 they never intended to sell it in the market as their final product is laminated sheets only. That the addition of additives/ retarders add to 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 10 E/53540 /2014 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 following decisions:
- 1989(40)ELT 280(SC), -2008(225)ELT 403(SC), 1989(43)ELT 214, -1986(24)ELT 169 (SC), 1978(2)ELT J336(SC), 2007(208)ELT 408 That the mixture of Melamine and Formaldehyde which is in the nature of glue/ adhesive appropriately falls under Chapter 35-06 and is duly entitled for exemption as held in the aforesaid judgments.
That the parties as referred in the SCN are the Mfrs. of Resins for sale in the market to various customers. Therefore, their product is of different specifications and the same cannot be compared with that of the appellant specially that they have been using the mixture for use at intermediate stage only.
11 E/53540 /2014 The Negative items Notfn. No. 50/2003-CE does not specifically contain the products melamine formaldehyde resin rather contains the items as 'Plastics and articles thereof.
That it is only the Plastic and articles thereof falling under Heading 39- 09 to 39-15 which falls under the negative list.
That mere mention of tariff Heading 39-09 to 39-15 does not mean that all goods falling under these headings are covered therein.
The objection would have been justified only if the description in the Negative list contains all goods falling under Heading 39.09 to 39.15 That the duty of Excise is payable only on removal of goods from the factory and the same cannot be demanded at the intermediate stage. There is no provision in CE Act/ Rules to consider the goods used in the same factory for further manufacture to be removal from the factory. The provisions of Rule 4 of the CE Rules as well as 8 are being referred which provides that the duty of Excise is payable at the time of removal only whereas in this case there is no removal rather removal is of laminates which is duly 12 E/53540 /2014 covered under the exemption as provided under Notfn. 50/2003-CE.
That when the mixture of Melamine and Formaldehyde does not fall under the negative list then there is no question of either denying the benefit of Notin. 50/2003-CE or demanding any duty on the same.
5. As regards the limitation, Ld. Counsel for the appellant made the following submissions:
That the major part of the demand (upto December 2010) is hit by the bar of limitation specially that the fact of use of Melamine and Formaldehyde was already in the knowledge of the deptt. on 24-11-2006.
That the Suppression of facts/mis-statement with an intent to evade paymen of duty is essential ingredient 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 13 E/53540 /2014 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:
14 E/53540 /2014
1. Tamil Nadu Housing Board V/s CCE, Madras 1994(74) ELT 9 (SC)
2. M/s Cosmo Dye Chemical V/s CCE, Bombay 1995(75) ELT 721 (SC
3. Pushpam Pharmaceutical Co. V/s CCE, 1995(78) ELT 401(SC
4. CCE V/s Chemphar Drugs & Liniments 1989(40) ELT 276 (SC)
5. CCE V/s HMM Ltd 1995(76) ELT 497 (SC),
36. There is no justification for imposition of any penalty when the issue involved is of purely technical nature and it is well settled law that no penalty is imposable.
6. On the other hand, Ld. DR reiterated the findings of the impugned order and filed the written submissions. Ld. DR has also place on record the report of the Chemical examiner of Evaluation of Wood Composites, Indian Plywood Industries Research And Training Institute, Bangalore and he has also referred to the statement of the Director of the appellant‟s company. He further submits that the mixture of Melamine Formaldehyde Resin and Cardanol Phenolic Formaldehyde Resin which has been used captively to manufacture laminates fall substantially under Chapter 3909 which is specified in the Annexure of Negative List at S.No. 20 of the Notification No. 50/2003-CE and hence the same is not entitled to the exemption and accordingly demanded the duty of the same by invoking the extended period of limitation. 6.2 He further submits that the decisions of the Tribunal relied upon by the appellant have not adequately discussed the issue of classification and has wrongly relied upon the office memorandum 15 E/53540 /2014 dated 01.06.2012 issued by the Ministry of Chemical and Fertilizers, Department of Chemical, Government of India which has wrongly described the main product to fall under ITC HS COD 3506 rather than ITC HS COD 3909. He further submits that this issue may be referred to Larger Bench for its final decision. He further submits that all the decisions relied upon by the appellant has relied upon the office memorandum issued by the under- secretary of the Government of India, Ministry of Chemicals and Fertilizers which is in respect of Adhesive/glue based on Phenol formaldehyde (PF) urea formaldehyde (UF), Melamine formaldehyde (MF) and it is in respect of the products in question i.e. Melamine Formaldehyde Resin and Cardanol Phenolic Formaldehyde Resin which is classifiable under chapter 3909 based on chapter note of Central Excise Tariff Act and case laws. 6.3 Ld. DR justified the test report which affirmed the samples as MFR & PFR and 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) 16 E/53540 /2014 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).
8. After considering the submissions, we find that the appellant were manufacturing paper based decorative laminates and opted for area based exemption under Notification No. 50/03-CE dated 10.06.2006 giving details of finished goods as well as raw material including Melamine Formaldehyde Resin (MFR) and Cardanol Phenolic Formaldehyde etc and the jurisdictional authorities after 17 E/53540 /2014 thorough scrutiny and verification of the unit as well as the declaration allowed the exemption. After the expiry of four years, the department raised the objection that the mixture of Melamine Formaldehyde Resin and Cardanol Phenolic Formaldehyde which are used captively for manufacture of laminates falls under Chapter 3909 which is specified in the Annexure of Negative List at S.No. 20 of the Notification No. 50/2003-CE and hence the appellant is not entitled for exemption and accordingly issued the show cause notice and confirmed the demand by invoking the extended period of limitation.
9. Further, we find that the only issue involved in the present case is as to whether the mixture of Melamine Formaldehyde Resin and Cardanol Phenolic Formaldehyde used as Adhesive/Glue/Resin for the manufacture of final product, namely, laminates are classifiable under Chapter 35-06 as claimed by the appellant or under Chapter 39-09 as alleged by the Department. Further, we find that this issue has been examined and considered in various decisions relied upon by the appellant cited (Supra) wherein the identical issue was involved and 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. In this regard, it is pertinent to mention the decisions in the case of Virgo Industries Vs. Commissioner of Central Excise, Chandigarh reported in 2020 (371) E.L.T. 781 (Tri.-Chan.) wherein the identical issue was involved and the Tribunal after considering the submissions of both the parties has held as under:
18 E/53540 /2014
6. On hearing both the sides, we find that of Controversy is that whether the resins captively consumed by the appellants namely Phenol Formaldehyde (PF), Urea Formaldehyde (UF), Melamine Formaldehyde (MF) used to manufac ture plain and pre-
laminated particle boards or laminates are classifiable under Tariff Heading 3909 or 3506 of the Central Excise Tariff Act or not?
7. As it has been clarified 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 appel- lants 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 appel- lants to manufacture laminates, plywood, boards etc. Therefore, no duty is paya-ble 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 sides and perused the appeal record.
We note that the Tribunal, Allahabad Bench have dealt with the very same issue for the earlier period in the appellant's own case.
19 E/53540 /2014 Vide the Final Order dated 19-5-2017, the Tribunal recorded the following findings :-
10. Having considered the rival contentions and on perusal of the records, we find that the impugned order is vitiated on the issue of marketability. The learned Commissioner has relied on unsubstantiated Data from the website, which is also vague in its nature. There is no evidence brought on record that the products and the Companies/Manufacturers listed by the learned Commissioner for reliance in the impugned order, are same or similar to the product manufactured by the appellant in respect of quality and specifications. The learned Commissioner has erred in observing that the characteristics of the product of the appellant are same with that of the various manufacturers from the website without any evidence. Similarly, referring to the manufacturer M/s.
Akolite Synthetic Resins, Mangalore, the learned Commissioner have erred in observing that in view of this li cense granted to them by BIS who are manufacturers and sellers of various resins in the market. Accordingly, the resins manufactured by the appellant are also marketable. We also find that the learned Commissioner have erred in observing that as similar goods have been advertised on the web- site by various manufacturers, then market must exist there. As the goods have been advertised then they are capable of being bought and sold. We find that learned Commissioner have 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. Further, reliance placed by the learned Commissioner on the Ruling of GM Laminates Pot. Lid. v. CCE reported in 1996 (87) E.LT. 197, wherein this Tribunal had observed we also find that under the new Central Excise Tariff, the product can merit classification under sub-heading 3909, in view of note 3(e) of Chapter 39. Once it is established that paper is quoted with certain resoles which have the essential characteristics of meriting classification under Chapter 39 and which according to Note-1 of Chapter 39 are to be called 20 E/53540 /2014 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. 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 Com- missioner. 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 Balaji Action Viltwell v. CCE, Merrut reported in 2016 (332) ELT. 367 (Tri-Delhi) is squarely applicable in the facts of the present case. Similar issue was considered by this Tribunal and after con- sidering the scope of heading 3909 with Chapter Note 6 to Chapter 39 and HSN, it have been held that glue is not in primary form and therefore not classifiable under Heading 39.09. We further find that the assessee in Balaji Action Vilwell (supra) was also manufacturing the same final product as that of the appellant, hence the manufacturing process and the product consid- ered in the said case is identical to that of the appellant. We also find that in the said case, Department had relied upon the information obtained from website of one Akolite Synthetic Resins, Mangalore, and some other manu facturers. This Tribunal observed that the process undertaken by such manufacturers have not been examined and therefore the 21 E/53540 /2014 correctness of comparison cannot be upheld. Accordingly, we find that the impugned or- der is bad and fit to be set aside".
5. Following the above decision of the Coordinate Bench in the appellant's own case, we set aside the impugned order and allow the appeal. The miscellaneous applications connected to this appeal are also disposed of.
11. Further, in the case of Greenlam Industries Vs. CCE & S.T. Chandigarh I in appeal No. E/52016/2014 vide Final Order No. 62026/2017 dated 24.07.2017 considered the identical issue and relied upon the ratio in the case of Shirdi Industries Ltd. Vs. Commissioner of C.Ex. Meerut and by following the judgments of the Coordinate Bench held that the main goods are outside the purview of Chapter 39. Further, in the case of Balalji Action Buildwell Vs. Commissioner of C.Ex. Meerut-II reported in 2016 (332) E.L.T. 367 (Tri.-Del.), the Tribunal has observed as under:
"14. On examining scope of CETH 3909 read with Chapter Note 6 and HSN explanation the product in dispute being not in Primary Form of such na- hure mentioned therein (requiring curing, etc.) is not to be classified under such heading. The exclusion note made in HSN adds support to the same. The Reve- nue's assertion that addition of hardening agent does not take away the basic property of the product being a resin is not sustainable in the present dispute. Addition of NH,CL. as hardening agent in the reactor/kettle before the resultant product is sent to glue kitchen 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 co- vers 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 22 E/53540 /2014 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 not men thon the pH value which is very relevant to arrive at the correct report. The appellant produced copies of different test reports done in 2011 as well as 2012 by the same Institute where pH values were indicated whereas in respect of their samples, no pli value has been indicated. They have also contested the findings in the test as they were not allowed cross-examination by the Original Authority The denial was on the reason that the test report is a document and it is not required to be accepted only after cross-examination. The appellant's plea, that in such circumstances, the reliance placed on the test report is not legally tenable. merits consideration. We are in agreement on such plea on the reasons cited above.
17. Regarding purchase of resin reactor from Alex Engineering Works, it is seen that Revenue placed reliance on purchase order which mentioned the product as "MF Resin Reactor". The appellants have contended that there are various types of equipments and machineries available for use in their type of industry. The suppliers of machinery made visits and had detailed discussions. thereafter the decision was to supply equipments of description 23 E/53540 /2014 appearing in their invoices of March, April, August and September, 2009. The details of description in these invoices were also relied upon in the show cause notice and it is apparent that the description of equipments supplied by Alex Engineering Works were different in name and nomenclature from the purchase order. We find that the support cannot be drawn by the Revenue on the basis of description in the purchase order when the supply invoices indicate the nature of goods supplied.
18. We find that the appellant have been consistently taking the plea that they are engaged in the manufacture of Prepared Glue containing Ammonium Cloride/Formic Acid, etc., in the Kettle installed in Shed-B and the glue pre- pared is transferred to other Sheds-C, D and E where it is used for bonding of their final products. Preparation of glue in Shed-B is a one stage process. They have also contended that the show cause notice itself admits that addition of hardener to the resin reduces the shelf life and brings into existence the glue with reduced shelf life. It is also admitted that use of hardener brings the quick bonding properties to serve as a glue.
19. As stated earlier before comparing the impugned product 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 24 E/53540 /2014 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 classification of the main items under Chapter 3506 as no appeal against any of the four judgments cited (Supra) has been filed by the Department before any Higher Court which means that the issue has attained finality. Further, we note that in the instant case, identical question arises for consideration as was involved in the above decisions cited (Supra). We cannot permit the Revenue to take a different stand in this case. Once, the Department has accepted the classification of the main item under Chapter 3506 and no appeal has been filed against the aforesaid judgments before any higher Court. In this regard, we may refer to the decision of the Hon‟ble Apex court in the case of Birla Corporation Limitation Vs. Commissioner of Central Excise, reported in 2005 (186) E.L.T. 266 (S.C.) wherein the Hon‟ble Apex Court has observed in para 5 as under :
"5. In the instant case the same question arises for consideration and the facts are almost identical. We cannot permit the Revenue to take a different stand in this case. The earlier appeal involving identical issue was not pressed and was therefore, dismissed. The respondent having taken a conscious decision to accept the principles laid down in Pepsico India Holdings Ltd.
25 E/53540 /2014 (supra) cannot be permitted to take the opposite stand in this case.
If we were to permit them to do so, the law will be in a state of confusion and will place the authorities as well as the assessees in a quandary."
13. Further, we find that the impugned order is contrary to CBEC Circular No. 464/30/99-CX., dated 30-6-1999 and the said circular is reproduced herein below:
"This is with reference to manufacture of particle boards (plain and prelaminated) made from sugar cane bagasse and other agricultural wastes. During the process of manufacture specially developed binders and mixed with the agricultural residues like dried sugar cane bagasse. These binder/resin/glues are specifically developed and made by the industry only for captive consumption and not for external sale. These binders have a very short self life of a few hours only and can neither be bottled nor transported nor stored for long.
2. A doubt has been raised regarding excisability of such binder/resin/glues.
3. In this context your attention is drawn to the Supreme Court judgment in the case of Moti Laminates Pvt. Ltd. v. Collector of Central Excise, Ahmedabad (1995 (76) ELT 241 (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.
26 E/53540 /2014
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 was not given to the appellant and was produced before the Bench only at the time of arguments by the Department.
15. Further, we find 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, we find that 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. In this regard, we may refer to the decisions of the Supreme court in the 27 E/53540 /2014 case of Moti Laminates Pvt. Ltd. Vs. Collector of Central Ex. Ahmedabad reported in 1995 (76) E.L.T. 241 (S.C.) wherein the Hon‟ble Apex Court in para 7 has held as under :
"7. The duty of excise being on production and manufacture which means bringing out a new commodity, it is implicit that such goods must be useable, moveable, saleable and marketable. The duty is on manufacture or production but the production or manufacture is carried on for taking such goods to the market for sale. The obvious rationale for levying excise duty linking it with production or manufacture is that the goods so produced must be a distinct commodity known as such in common parlance or to the commercial community for purposes of buying and selling. Since the solution that was produced could not be used as such without any further processing or application of heat or pressure, it could not be considered as goods on which any excise duty could be levied."
16. Further, we find that the decision relied upon by the Ld. DR cited (Supra) are not directly applicable in the facts and circumstances of the present case and the decisions relied upon by the Ld. Counsel for the appellant cited (Supra) are squarely applicable in the facts and circumstances of the present case.
17. As regards the issue of limitation, we find that substantial demand upto December, 2010 is beyond limitation specially the fact of 28 E/53540 /2014 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 & 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 29 E/53540 /2014 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 same by allowing the appeal of the appellant, with consequential relief, if any, as per law.
(Order pronounced in the open court on 26.06.2024) (S. S. GARG) MEMBER (JUDICIAL) (P. ANJANI KUMAR) MEMBER (TECHNICAL) Kailash