Prepared glues and adhesives, not Chapter 39 resins, qualified for area-based exemption in laminate manufacture.

Intermediate products from the reactor/kettle used in laminate and board manufacture were classified as prepared glues or adhesives under heading 3506, not as primary resins under Chapter 39. The Tribunal relied on earlier decisions on identical facts, the manufacturing process showing direct use as glue after addition of hardener and other inputs, and the HSN exclusion note supporting exclusion from Chapter 39. Revenue's test reports were rejected because of noted deficiencies and their failure to properly analyse the process. As the goods were not Chapter 39 resins, denial of the area-based exemption was unsustainable and the demand was set aside.

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Issues: Whether the intermediate products emerging in the manufacture of laminates and boards were classifiable as primary resins under Chapter 39 and therefore outside the area-based exemption, or as prepared glues and adhesives under heading 3506 and eligible for exemption.

Analysis: The Tribunal followed its earlier decisions on identical facts and held that the products emerging from the reactor/kettle were not primary resins in the sense contemplated by Chapter 39. The processes showed that the material was prepared for direct use as glue in the bonding section, with hardener and other inputs added to obtain quick bonding properties and reduced shelf life. Reliance placed by the Revenue on test reports was not accepted in view of the deficiencies noted in those reports and the absence of proper analysis of the manufacturing process. The HSN exclusion note also supported classification outside Chapter 39. Since the goods were prepared glues or adhesives, denial of the area-based exemption was unsustainable.

Conclusion: The goods were not liable to duty as Chapter 39 resins and were eligible for the claimed exemption; the demand was set aside in favour of the assessee.

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