Classification of prepared glue as primary resin rejected, making exemption denial, duty demand and penalty unsustainable.

Goods emerging after addition of hardener and used directly as bonding material were treated as prepared glue, not primary resin in Chapter 39, because Chapter Note 6 and the HSN Explanatory Notes support classification in prepared adhesive form rather than resin in primary form. As the primary-resin classification failed, the basis for denying exemption also failed, and the resulting duty demand and penalty were unsustainable. The dispute was decided in favour of the assessee, with consequential relief.

---

---

Issues: Whether the goods manufactured by the assessee were classifiable as primary resins under Chapter 39 and, if not, whether denial of exemption and consequent duty demand and penalty were sustainable.

Analysis: The goods emerged after addition of hardener and were used directly in bonding as prepared glue. On the test of Chapter Note 6 of Chapter 39 and the HSN Explanatory Notes, such goods were not in the primary form contemplated by Chapter 39. The reasoning adopted in earlier Tribunal decisions was followed, and the product was treated as prepared glue falling outside the classification adopted by the Revenue. Once the classification as primary resin failed, the basis for denying the exemption also failed.

Conclusion: The goods were not classifiable as primary resins under Chapter 39, and the demand of duty and penalty based on denial of exemption was unsustainable. The issue is decided in favour of the assessee.

Final Conclusion: The appeal succeeds and the impugned order is set aside with consequential relief.

Ratio Decidendi: Goods used directly as prepared glue after processing and hardening are not classifiable as primary resins under Chapter 39 when the Chapter Note and HSN support treatment as prepared adhesives rather than resin in primary form.

---