1997 (11) TMI 304 - AT - Central Excise

Tribunal: Converting resin to solution not taxable under tariff entry.

The tribunal ruled that converting duty-paid 'Araldite' resin into a solution by dissolving it in solvents does not attract additional duty under tariff ... Modvat - Utilisation of credit - Penalty Issues:Whether converting duty-paid 'araldite' in cake-form into a solution by dissolving it in petroleum-based solvents makes it liable to duty again under the same tariff entry 15A(1).Analysis:Issue 1: Conversion of Araldite into a SolutionThe original authority held that converting 'Araldite' resin into a solution does not amount to the manufacture of a new commodity. This decision was supported by various court judgments. However, the Revenue argued that the process of converting Araldite into a resin solution constitutes manufacture under Section 2(f) of the Central Excises & Salt Act, 1944. The Revenue emphasized that the resulting resin solution is a new product with distinct commercial value and different characteristics from Araldite in cake form.Issue 2: Interpretation of Tariff Entry 15AThe tribunal analyzed the relevant tariff entry 15A and Explanation III, which specifies the forms of artificial or synthetic resins covered under the entry. It was noted that duty paid on resin under tariff item 15A is specific to the resin itself and not its form. Therefore, charging duty on the resin in a different form would amount to double taxation, which is impermissible. The tribunal highlighted that a mere change in form without altering the chemical properties typically does not constitute manufacture unless it results in a product with a different name, character, and use.Judicial Precedents and Legal InterpretationThe tribunal referenced the Apex Court's judgment in Hyderabad Industries Ltd. v. U.O.I., emphasizing that a change in form that does not create a new and commercially identifiable article may not attract excise duty. Additionally, the tribunal relied on the Madras High Court judgment in Coromandal Prodorite, which was deemed applicable to the case at hand. The tribunal critiqued the Revenue's reliance on certain judgments, noting that they were less relevant due to not being specific to products under the Central Excise Tariff.ConclusionAfter careful consideration of the arguments presented by both parties and the legal principles involved, the tribunal rejected the Revenue's appeal. The tribunal maintained that the conversion of Araldite into a resin solution did not amount to manufacture under the Central Excises & Salt Act, 1944. The decision was supported by legal precedents and a thorough interpretation of the relevant tariff entry and explanations.