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2016 (4) TMI 59 - CESTAT NEW DELHI

2016 (4) TMI 59 - CESTAT NEW DELHI - 2016 (332) E.L.T. 367 (Tri. - Del.) - Eligibility of exemption under Notification No.50/2003-CE dated 10.06.2006 in respect of glue/resin made by the appellant denied - Held that:- 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 preparatio .....

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al by setting aside the impugned order with consequential relief. - Decided in favour of assessee - Excise Appeal No.E/54336/2014-EX(DB) - Final Order No.53675/2015 - Dated:- 17-11-2015 - SHRI ASHOK JINDAL, MEMBER (JUDICIAL) AND SHRI B. RAVICHANDRAN, MEMBER (TECHNICAL) For the Petitioner : Shri Naveen Mullick, Advocate For the Respondent : Shri S. Nanthuck, Joint CDR ORDER PER B. RAVICHANDRAN: This appeal is against Order-in-Original dated 17.04.2014 passed by the Commissioner of Central Excise, .....

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respect of glue/resin made by the appellant. Plastics and articles thereof falling under Tariff Heading 3909 to 3915 are in the negative list for exemption. Investigations were conducted by the officers; proceedings initiated which resulted in the impugned order. The ld. Commissioner confirmed a demand for ₹ 6,13,49,586/- on Urea Formaldehyde Resin, Phenol Formaldehyde Resin and Melanine Formaldehyde Resin manufactured by the appellant deciding classification under Tariff Heading 3909. Equ .....

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d of the officer, who conducted the test, iii) The methodology of sample drawal, testing parameters and communication of test results are not as per norms. b) The reliance placed on Purchase Order dated 4.8.2008 for supply of process equipments by M/s.Alex Engineering Works is misplaced. The actual supplies are after consultations and correct description of equipments used in glue manufacture is indicated in supplier s invoices. c) Comparison of their products - Code G-10, G-11, G-12, G-20, G-21 .....

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rm the finished material. After the hardener is added the product cannot be classified under 39.09. They make glue in one stage process at the reactor/kettle which includes addition of ammonium chloride as hardener. e) The glue Product Code G-10, G-11, G-12. G-20, G-21. G-30 produced in reactor / kettle is used for bonding by the appellant. The glue from Shed-B sent to glue kitchen area Shed-D is used for bonding. Ammonium chloride, Wax Emulsion and Water are used in the glue kitchen area along .....

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by limitation. 4. Ld. Counsel for the appellant, Shri Naveen Mullick elaborated each one of the above points in his arguments. He mainly emphasized on the classification dispute and pleaded that the correct classification of glue made by the appellant is under CETH 3506. 5. Ld. AR, Shri S. Nanthuk reiterated the findings in the impugned order. 6. We have heard both the sides and examined case records. The appellants entitlement to exemption on the captively consumed resin/glue depends on the cor .....

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h comparisons will not be justifiable if processes and chemicals used by various manufacturers and resultant products are not similar. In the present case, we are concerned first with the processes carried out by the appellant in the reactor/kettle in Shed-B. The appellants submitted detailed step by step process, additions of chemicals till the emergence of impugned goods. Processes involved in one of the typical product - G-10 are as below:- Process (a) Charge Formaldehyde in Reactor by openin .....

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Check flow time and pH, pH should not go less than 4.5 (m) When tolerance (Water solubility) start add Salt when adhesion properties reached increase pH to 6.5 to 7.5 (n) Check reaction, adhesion properties and flow time when flow time reaches at 20 to 21 sec add caustic soda to increase pH 7.5 (o) Add Melamine and continue reaction for 15 to 20 min. (p) Add Ammonium Chloride and adjust pH 7.5 to 8.0. (q) Start cooling when temperature reaches to room temperature. (r) The water is added to compe .....

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ction. The role of this chemical is, admittedly, to advance the curing effect of the resin. It is a hardening agent. The resultant glue is transferred to glue kitchen area in Shed-D. It is noted that this glue at the reactor in Shed-B is the only product which acts as binder that binds the wood fibers to make MDF. 9. In the glue kitchen area, the glue received from reactor/kettle in Shed-B is used along with wax emulsion, water and further ammonium chloride. The role of these products in the ove .....

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curing agent (NH4 CL) has not been examined by the original authority. The correctness of comparison very much depends on this. 11. Examining the scope of CETH 3909, we find Note-6 of Chapter 39 states as below:- In Heading 3901 to 3914, the expression primary forms applies only to the following forms: (a) Liquids and pastes, including dispersions (emulsions and suspensions) and solutions; (b) Blocks of irregular shape, lumps, powders (including moulding powders), granules, flakes and similar bu .....

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quids and Pastes. These may be the basic polymer which requires curring by heat or otherwise to form the finished material, or may be dispersions (emulsions and suspensions) or solutions of the uncured or partly cured materials. In addition to substances necessary for curing (such as hardeners (cross-linking agents) or other co-reactants and accelerators), these liquids or pastes may contain other materials such as plasticisers, stabilizers, fillers and colouring matter, chiefly intended to .....

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, the case with : (a) ………….. (b) Prepared additives for mineral oils (heading 38.11). In addition to the exclusion mentioned in Note 2, the Chapter excludes: (a) …………... (b) Preparations specially formulated for use as adhesives, consisting of polymers of blends thereof of headings 39.01 to 39.13 which apart from any permitted additions to the products of this Chapter (fillers, plasticisers, solvents, pigments, etc.), contain other added su .....

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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 4CL 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, NHCL and water for final binding. Chapter 35 covers glues. CETH covers Prepared .....

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is sent directly to glue kitchen for 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 mention the pH value wh .....

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examination. The appellants 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 thei .....

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not 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 prepared 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 .....

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