2024 (10) TMI 322 - AT - Central Excise

Melamine Formaldehyde and Phenol Formaldehyde mixtures for laminate glue classified under Chapter 35.06 not 3909

CESTAT Chandigarh held that mixtures of Melamine Formaldehyde and Phenol Formaldehyde used as glue/adhesive in laminate manufacturing are classifiable ... Classification of goods - mixtures of Melamine & Formaldehyde and Phenol & Formaldehyde - these products fall under Chapter 3909 or not - Applicability of area-based exemption under N/N. 50/2003-CE - HELD THAT:- This issue is no more res integra and this Bench of the Tribunal in the case of Samrat Plywood Ltd. cited [2024 (7) TMI 103 - CESTAT CHANDIGARH] decided the same issue involved in the present appeal, this Bench of the Tribunal in the case of Samrat Plywood Ltd. has considered this issue in detail and after considering the various judgments of the Tribunal has held that the mixture of aforesaid items used as glue/adhesive in the manufacture of laminates is classifiable under Chapter Heading 35.06 and not under Chapter 3909 and hence the exemption cannot be denied to them. The impugned orders are not sustainable in law and therefore set aside - appeal allowed. Issues Involved:1. Classification of mixtures of Melamine & Formaldehyde and Phenol & Formaldehyde.2. Applicability of area-based exemption under Notification 50/2003-CE.3. Marketability and excisability of the mixtures.4. Limitation period for raising demand.Issue-wise Detailed Analysis:1. Classification of Mixtures:The central issue was whether the mixtures of Melamine & Formaldehyde and Phenol & Formaldehyde, used as glue/adhesive in the manufacture of laminates, should be classified under Chapter Heading 35.06 or Chapter 3909 of the Central Excise Tariff Act. The appellant argued that these mixtures fall under Chapter 35.06, which would entitle them to an exemption under Notification 50/2003-CE. The Tribunal referred to several precedents, including Samrat Plywood Ltd. and Virgo Industries, where it was held that such mixtures are classifiable under Chapter 35.06. The Tribunal found that the Department had accepted this classification in previous cases and had not filed appeals against those decisions, thereby establishing a precedent.2. Applicability of Area-based Exemption:The appellant had opted for an area-based exemption under Notification 50/2003-CE, which exempts certain goods from duty except those listed in the Negative List. The Department contended that the mixtures fell under the Negative List, thus not qualifying for exemption. However, the Tribunal, referencing past judgments, concluded that the mixtures were not part of the Negative List under Chapter 3909, thus allowing the exemption.3. Marketability and Excisability:The Tribunal examined whether the mixtures were marketable and thus subject to excise duty. It was noted that these mixtures were captively consumed and had a short shelf life, making them non-marketable. The Tribunal cited the CBEC Circular No. 464/30/99-CX, which clarified that such intermediate products, if not marketed, are not chargeable to excise duty. The Tribunal also referenced the Supreme Court's decision in Moti Laminates Pvt. Ltd., which emphasized that excisability depends on marketability.4. Limitation Period for Raising Demand:The issue of limitation was critical, as the Department issued a show cause notice after the normal limitation period. The appellant argued that all relevant facts were disclosed to the Department as early as 2010, with no suppression of facts. The Tribunal agreed, noting that substantial demand was time-barred since the Department had knowledge of the facts well before the notice was issued. The Tribunal held that the demand up to December 2010 was barred by limitation, referencing consistent judicial precedents that no suppression exists when activities are duly recorded and communicated to the Department.Conclusion:The Tribunal concluded that the issue was no longer res integra, as established by previous decisions. It set aside the impugned orders, allowing the appeals with consequential relief. The Tribunal emphasized the importance of consistency in legal interpretations, particularly when the Department had accepted similar classifications in past cases without appeal. The ruling underscored the significance of adhering to established legal principles and the necessity of timely action by the Department within statutory limits.