TaxTMI 
TaxTMI 
2017 (6) TMI 885
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....cording to the Department, these resins are classifiable under Heading 39.09 of the Tariff and hence are not covered directly by the area based Notification No.50/2003-CE, whereas as per the appellant, the same is classifiable under Chapter 35 of the CET Act. The unit of the appellant is located in the state of Uttarakhand and was availing duty exemption under Notification No.50/2003-CE, the finished products of the appellant were cleared at nil rate of duty due to area-based exemption. The Department was of the view that these resins would not be eligible for captive consumption exemption under Notification No.67/95-CE, and since the same are not covered by the Hill area exemption under Notification No.50/2003-CE, the same would be chargeable to duty. It is on this basis that show cause notice dated 31/01/2012 was issued invoking the extended period 2007-08 to 30/11/2011, demanding duty of Rs. 14,23,18,197/- including cess, leviable on 5,93,65,798 KG of different quantity of resins collectively valued at Rs. 128,82,35,112/- manufactured and used captively in the manufacture of final products, with interest and further proposal to levy penalty under Rule 25 of CER, 2002 read with S....
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....er stated that all the various types of resins, namely, Resin Solution 12005- (MF Resin), Resin 14001- (AR Resin), Resin 14201 - (MAR Resin), Resin Solution 13014 (CPF Resin), etc. have their shelf life of approximately 10 days or lesser in few cases. They try to consume or use such resins within a week time. The resins are manufactured in separate kettles and are transferred to respective sections through pipes or through drums. Further, Mr. Ravi Kant Singh, Assistant Manager of the appellant in his statement recorded under Section 14 of Central Excise Act, 1944, submitted that chart containing data of consumption of various chemicals in their resin plant for the manufacture of various resins for the period from 2006 to 2011. He also submitted the data of production of various resins produced by them for captive consumption for the manufacture of the final products. He further stated that the Data for the year 2006-07 contains the production of all variety of Resins made during February, 2007 and March 2007 only as they stated production since February, 2007 only. Further statement of Shri Ajay Tiwari, Authorised signatory and Senior DGM, (HR) of the appellant was recorded who is ....
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....r-alia stated that he is working as Production In-charge for the last four years and their manufacturing processes starts from the preparation of resins, namely Melamine Formaldehyde Resin, Cardanol Phenolic Formaldehyde Resin- CPF, in different chemical reaction vessels, which are produced out of chemicals namely, Melamine, Formaldehyde, Phenol, Cardanol, Sugar etc. They have a stock of 700 Kgs of CPF and 450 Kgs of MFR in the factory, which are two days old as their unit is closed due to problem in Boiler which they will use on commencement of production in about a week. He further stated that the said resin can be used up to 15-30 days and in case these are kept for a longer period, the same can still be used after adding some quantity of methanol to lower their viscosity. Further, the test report of other manufacturers including Punjab Laminates, manufacturing similar goods showed shelf life of such resins as 18 to 35 days for MFR. Further, to investigate marketability of the said resins, statement of one Parvesh Gupta, Proprietor of M/s Pooja Enterprises, Jalandhar, also a manufacturer of the resins was recorded on 13/06/2011, he inter-alia stated that his unit is engaged in m....
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....shelf life of the said resins which clearly indicates these goods/resins are marketable goods. It is further observed in the SCN that the resins manufactured by the appellant are being captively consumed by them for the manufacture of the finished products, hence the transaction value of the same is not available. Therefore, the valuation of the said resin is to be determined under Rule 8 of Central Excise Valuation Rules 2000, wherein Rule 8 provides - where the excisable goods are not sold by the assessee, but are used for consumption by him or on his behalf in the production or manufacture of other articles, the value shall be (110%) of the cost of production or manufacture of such products. Further CBEC Circular dated 13.02.2003, provides the cost of manufacture of intermediate goods shall be ascertained in accordance with CAS-4. Accordingly, relying on the data supplied by Shri Ravi Kant Singh during his statement on 19th December, 2011 regarding manufacture and consumption of various types of resins during the period February, 2007 to November 2011, the duty have been calibrated morefully in Annexure-1and 2of the SCN and accordingly the proposed demand made. 4. T....
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....ion of the product under Tariff Item 15A it was assessable to duty whether it was marketable or not was thus not well founded." 5. Further, discussing whether the intermediate product- resin is marketable or capable of being marketed or not. The learned Commissioner observed that market is a place where forces of demand and supply operate, and where buyers and sellers interact to create goods, services or contracts or instruments for money or barter. Further, in this age of computers and Internet such place of market can be easily accessed by browsing the Internet. The learned Commissioner browses the Internet and visited the site named as www.tradeindia.com/manufacturers/urea-formaldehyde-resins.html which says- "Below are the listings of manufacturers and exporters of Urea Formaldehyde Resins. The company details and their contacts are available. Further, in the said site the learned Commissioner noticed that the name of some manufacturers, and based on the same observed that the list shows that the manufacturer and supplier's deals in many types of raisins, including Urea Formaldehyde Resin, Melamine Formaldehyde Resin and Phenol Formaldehyde Resins. The learned Com....
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.... vide which it have been clarified that the goods in question fall under chapter 3506 of the first schedule to CETA. The contents of the said circular are reproduced herein for ready reference:- "2. The item Thermosetting Adhesives/Glue (PF, UF, MF, etc.) are used in various plywood/particle board/decorative laminates for providing bonding, strengthen, water-proofing and termite resistance properties. These are normally in the form of liquid having solid content ranging from 45% to 60%. The Thermosetting Adhesives/Glue are being manufactured in house by the various plywood/particle board/ decorative laminates manufacturers. These items will fall under ITC HS Code 3506. 3. The Thermosetting moulding Compounds consists of Thermosetting Resins (PF, UF, MF, etc.) and Cellulose fillers, wood flour and other chemicals and addetives etc. These Moulding Compounds are used for various applications in automotive electrical, house-wares, etc. These items will fall under ITC HS Code 3909 and are different from Thermosetting Adhesives/Glues. 4. Keeping in view, it is clarified that the prepared Adhesives/glues {based on Phenol Formaldehyde (PF), Urea Forma....
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....t reproduced at paragraph 5.1 of the SCN and paragraph 5 of the impugned OIO. It is also admitted that such Glue is based on Phenol Formaldehyde (PF), Urea Formaldehyde (UF) and Melamine Formaldehyde (MF). (ii) Once the aforesaid facts are admitted, then as per HSN Explanatory Notes to Chapter 39, glue manufactured by Appellant for use as adhesive, is outside the purview of Chapter 39. Relevant part of HSN Explanatory Notes to Chapter 39 is reproduced hereunder:- In addition to the exclusions mentioned in Note 2, the Chapter excludes (a) ....................... (b) 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 this chapter (fillers, plasticisers, solvents, pigments etc.) contain other added substances not falling in this chapter (e.g., waxes) and products of heading 39.01 to 39.13 put up for retail sale as glues or adhesives, not exceeding a net weight of 1 k.g (heading 35.06) (iii) To the same effect is HSN Explanatory Notes to Chapter 35, which specifically includes preparation sp....
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.... glue manufactured by Appellant is also not covered by clause (a) to Note 6 of Chapter 39. Such glue is also not in the form of block, lump or powder, hence it is also not covered by clause (b) to Note 6 of Chapter 39. Thus, such glue is not a liquid and pastes, nor in a primary form and consequently cannot fall under Chapter 39. 8.4. Decision of this Tribunal in the case of Balaji Action Buildwell vs. CCE, Meerut 2016 (332) ELT 367 (Tri-Del), squarely applicable to the present case- (i) Identical dispute regarding glue/resin manufactured and consumed captively has been considered by this Tribunal in the case of Balaji Action Buildwell case (supra) wherein after considering scope of heading 3909 with Chapter Note 6 to Chapter 39 and HSN, it has been held that the glue is not in primary form and is therefore not classifiable under heading 39.09. (ii) Since the assessee in Balaji Action Buildwell case (supra) was also manufacturing the same final product as that of Appellant, hence the manufacturing process and the product considered in Balaji Action Buildwell case (supra) is identical to that of the Appellant. (iii) &n....
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....t's case. Further, such evidences were in the form of information obtained from internet, which in view of the aforesaid judgments cannot be relied upon. (ii) Reliance in this regard is placed on the Apex Court judgment in the case of Hindustan Zinc Ltd. vs. CCE, Jaipur 2005 (181) ELT 170, wherein market enquiry revealed silver chloride of 75% silver content but no enquiry was made to ascertain silver chloride emerging from assessee's factory having 50%-53% silver content, it was held that department has failed to prove the test of marketability. 8.8. Mere mention of item in BIS does not prove marketability - In the present case, O-I-O holds marketability on the basis that standards has been laid down in Bureau of Indian Standards in respect of resin/glue. However, the Apex Court in the case of Tata Iron & Steel Co. Ltd. vs. Union of India 2004 (164) ELT 372 has held that marketability is a question of fact and does not follow from the mere mention of item in ISI. 8.9. Findings recorded in the impugned Order-in-Original are perverse, presumptive and based on no material- (i) Finding recorded in paragraph 66....
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....earned 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 license 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 website 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 ....