Appellate Tribunal: CNSL as Binder Not Excisable. Marketability Key.

The Appellate Tribunal upheld the Commissioner's decision that Cashew Nut Shell Liquid (CNSL) based binder, used captively for manufacturing friction materials, is not an excisable product. The Tribunal emphasized the non-marketability of CNSL due to its short shelf life and characteristics, aligning with legal precedents and factual evidence presented. The Revenue's argument that the CNSL was excisable for its utility in manufacturing was rejected, as the CNSL's storage conditions and limited shelf life rendered it non-marketable. The burden of proving marketability was placed on the Revenue, which they failed to do.

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Issues:
Whether Cashew Nut Shell Liquid (CNSL) based binder manufactured and used captively for the manufacturer of friction materials is an excisable product or not.

Comprehensive Analysis:

1. Nature of CNSL: The Commissioner (Appeals) held that CNSL, being a naturally occurring liquid obtained from the spongy layer between nut and outer shell of Cashew Nuts, is not a marketable product due to its short shelf life of 24 hours. The Commissioner relied on the Supreme Court's decision in Moti Laminates Pvt. Ltd. v. Collector of Central Excise, Ahmedabad, and a Board Circular to support this finding.

2. Manufacturing Process: The CNSL undergoes a standardization process involving heating with Hexamine and Sulphuric Acid to achieve a desired viscosity level for use in manufacturing brake linings. The standard CNSL, although stored at high temperatures, does not exhibit complete cross-linking typical of resins like phenol formaldehyde, making it soluble in solvents and classified as an intermediate form of resinoid.

3. Legal Precedents: The Commissioner's decision was influenced by the Supreme Court's ruling in Moti Laminates case, emphasizing that goods produced and used for captive consumption, if not marketable, are not liable to duty. The Board Circular also highlighted that intermediate products used internally with short shelf lives are not subject to excise duty if not commercially sold.

4. Revenue's Contention: The Revenue argued that the standardised CNSL, suitable for use in manufacturing brake liners, qualifies as an excisable product due to its utility in the factory. They contended that the Board Circular on short shelf life products did not apply as the CNSL was stored in a heated tank for internal use, not for commercial sale.

5. Final Decision: The Appellate Tribunal rejected the Revenue's appeal, affirming the Commissioner's findings. The Tribunal noted that the CNSL's storage in a heated tank and limited shelf life of 24 hours rendered it non-marketable. As the Revenue failed to provide evidence to counter the non-marketability of CNSL, the Tribunal upheld the Commissioner's decision, emphasizing the burden of proving marketability lies with the Revenue.

In conclusion, the judgment clarified that the CNSL based binder, due to its manufacturing process, characteristics, and short shelf life, was deemed non-marketable and hence not subject to excise duty, aligning with established legal precedents and factual evidence presented during the proceedings.

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