Intermediate manufacturing stage and marketability test kept phenolic resin solution outside excise duty under the tariff item.

An aqueous solution of phenolic resin containing about 40% to 43% resin content was treated as an intermediate product, not resin in liquid form, for excise purposes under Tariff Item 15A. The Court noted that the manufacture of phenolic resin was incomplete until the resin was separated from the solution by further processing such as vacuum distillation, evaporation, spray drying or precipitation. Applying the requirements of tariff description, manufacture and marketability, it held that an intermediate stage product that is not complete as the final commodity and is not shown to be marketable as such does not attract excise duty.

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Issues: Whether the aqueous solution of phenolic resin, containing about 40% to 43% resin content, was an intermediate product and not resin in liquid form falling under Tariff Item 15A so as to attract excise duty.

Analysis: The product was shown by the test reports to be an aqueous solution of phenolic resin and not the final resin product. The manufacture of phenolic resin was held to be incomplete until the resin was separated from the solution by further processing such as vacuum distillation, evaporation, spray drying, or precipitation. The Court also applied the principle that goods must satisfy not only the tariff description but also the test of manufacture and marketability. Since the respondents' product remained an intermediate stage in the manufacturing process, it did not answer the description of resin in liquid form for levy purposes.

Conclusion: The aqueous solution of phenolic resin was not exigible to excise duty under Tariff Item 15A and the finding in favour of the assessee was upheld.

Final Conclusion: The appeal failed and the exemption from excise duty on the product in question was sustained.

Ratio Decidendi: A product remains outside excise levy where it is only an intermediate stage in manufacture and is neither complete as the final commodity nor shown to be marketable as such, even if it answers part of the tariff description.

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