Product classification turns on true nature of goods, not isolated test results, for exemption eligibility.

Classification of the manufactured product depended on its true nature as shown by the raw materials, process, chemical examiner's report and market description. The authority found that the assessee used old and used waste plastic, cotton and foam, lacked the machinery and raw materials for virgin PU foam, and produced waste scrap foam sheets by shredding, mixing, bonding and pressing waste material. The contrary view, based only on the predominance of polyurethane in the sample, was not sufficient because the same report also showed mixed colours, plastic material and adhesive. On those facts, the product was not PU foam sheets but waste scrap foam sheets, and it qualified for small scale exemption.

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Issues: Whether the product manufactured by the assessee was classifiable as PU Foam sheets or as waste scrap foam sheets and, consequently, whether it was entitled to the small scale exemption.

Analysis: The dispute turned on the true nature of the goods as determined from the raw materials used, the manufacturing process, the chemical examiner's report, and the market description of the product. The appellate authority had relied only on the predominance of polyurethane in the sample, but had not considered that the report also showed mixed colours, plastic material and adhesive. The original authority had found that the assessee used old and used waste of plastic, cotton and foam, did not have the machinery or raw materials necessary to manufacture virgin PU foam, and was in fact producing waste scrap foam sheets by shredding, mixing, bonding and pressing the waste material. Those findings were not rebutted.

Conclusion: The product was not PU Foam sheets classifiable as articles of PU foam; it was waste scrap foam sheets eligible for the exemption, and the assessee succeeded.

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