TaxTMI 
TaxTMI 
1984 (4) TMI 298
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.... set out relevant portions of certain notifications issued by the Central Government under Rule 8(1) of the Central Excise Rule (hereinafter referred to as the Rules) :- (a) Notification No. 156/65, dated 23-9-1965 : "GSR. In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts artificial or synthetic resins specified in column (2) of the Table below, falling under Item No. 15A of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), from so much of the duty excise leviable thereon as is in excess of the amount specified in the corresponding entry in column (3) of the said Table : TABLE Sl. No. Description Amount 1. Alkyd Resin Nil 2. Maleic Resin Eighty paise per kilogram 3. Phenolic Resin Eighty paise per kilogram Provided that any manufacturer of maleic resin or phenolic resin availing himself of the benefit of exemption under this notification shall not be permitted to pay the duty leviable on such resin manufactured by him at the ad valorem rate." (b) Notification No. 122/71, da....
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....c resins (viz. Alresat 201C, 224C, 313C and 400C, later termed Hindresat 2001, 2024, 3013 and 4000) since long. In 1964, these resins were brought under excise control and charged to duty at 20% ad valorem +%, of the basic duty as special duty. On the issue of Notification No. 156/65 on 23-9-1965, these products were accorded full duty exemption on the declaration that they were alkyd resins. Samples were drawn on two occasions, on 19-10-1965 and again on 14-11-1967. On both the occasions, the Deputy Chief Chemist opined that the products were alkyd resins. The goods were allowed to be cleared duty-free. It, however, appears that, on 6-8-1968, during the course of audit, it was observed that the appellants were advertising these products as maleic resins in sales literature of their collaborators M/s. Chemische-Werke-Albert. Samples were again drawn on 25-8-1969. On test, the Deputy Chief Chemist opined that these products were "other than phthalic alkyds". Re-tests were conducted by the Chief Chemist, Delhi who opined that the resins in question were "condensation products of polybasic acid and polyhydric alcohol". It was further opined-taking into account technical data supplied ....
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.... the dispute before us is from 14-11-1968 to 31-5-1971 when there was no definition of the expressions "Alkyd resin" and "Maleic resin" occurring in Notification No. 156/65. The appellants' claim is that their products in dispute were alkyd resins eligible for duty exemption. The learned Counsel for the appellants drew our attention to the Department's communications dated 23-11-1965 and 6-1-1966, both confirming the classification of the products as Alkyd resins eligible for clearance without payment of duty. Even after the investigation consequent to audit inspection, the Deputy Chief Chemist had categorised the products as "other than phthalic alkyds". Shri Habbu submitted that this finding clearly showed that the products were alkyd resins but other than phthalic alkyds. He pointed out that the demand in DD2 No. 112886, dated 14-11-1969 did not show any ground for making the demand. 10. Referring to the three notifications (already adverted to), it was submitted that though the definition of the expression "Maleic resins" as introduced for the first time by Notification 122/71 - was modified by Notification 127/73 so to include within its ambit fumaric acid in addition ....
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....Relying on extracts from the "Condensed Chemical Dictionary" by G. Hawley and "Encyclopaedia of Chemistry" by Hampel and Hawley, it was submitted that alkyd, maleic and fumaric resins had different connotations. The affidavits filed with the revision application - a belated stage in the proceedings - should not be relied upon : no affidavits had been filed before the lower authorities. The test report of the Alipore Test House did not clinch the issue since there is no indication whether presence of fumaric acid was tested for. The report of the Pune Laboratory was not based on any test: it was only an opinion. 13. On the subject of demands, while agreeing that a show cause notice should have been issued, Smt. Zutshi contended that proper opportunity was afforded to the appellants in the adjudication proceedings and there was no travesty of natural justice. 14. We have carefully considered the contentions of both sides. The issues for determination are : (1) Were the disputed products "alkyd resins" within the meaning of Notification 156/65, dated 23-9-1965 as originally accepted by the excise authorities and as claimed then and now by the appellants ? Were th....
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....e of Alresat 201C, is Maleic Resin. It will also be seen from the party's printed pamphlet on HINDRESAT 2001, which according to the party is the same as Alresat 201C, that the party has advertised this as "Maleic Resin." In the manufacture of Alresat 224C, Alresat 313C and Alresat 400C fumaric acid has been used instead of Malic Anhydride and as fumaric resins are known to the Trade as distinct from Maleic resins, the Chief Chemist, Delhi, is of the opinion that the above three products are fumaric resins, that is to say, each as an "Artificial or synthetic resin, other than that of Alkyd Maleic or Phenolic" although the party has advertised identical products as Maleic Resins in their printed Pamphlet." 16. It appears from the record (the Supdt's order of 18-5-1971) that the appellants had shown the composition and ingredients of the 4 products as below : "Composition and ingredients per tonne yield : Alresat 201C 224C 313C 400C Hindresat 2001 2024 3013 4000 Kgs. Kgs. Kgs. Kgs. Resin 875 935 925 822 Clacium - 1.9 - - ....
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....that the Chief Chemist's report, besides being more detailed, was a contemporaneous document unlike the Alipore Test House reports which are of the year 1980. These reports say "the sample shows the presence of unsaturated dibsaic acid and considered to be a maleic resin". Though the samples were "tested for the presence of maleic or fumaric acid", the reports are not specific no the presence or absence of one or the other of these acids. It simply testifies to the presence of unsaturated dibasic acid without spelling out which acid. How it is "considered to be a maleic resin" has not been indicated. The National Chemical Laboratory report - again of the year 1977, long after the disputed period - on the other hand, is an opinion based on the composition data furnished by the appellants. Apparently, no test was performed : the opinion does not speak of a test. It goes on to say that "as per your definitions given in your letter of 1-9-1977, Hindresat 2001, 2024, 3013 and 4000 will qualify for the description of 'maleic resins'. The appellants' letter of 1-9-1977 to the National Chemical Laboratory has not been produced before us. The National Chemical Laboratory's opinion is also, ....
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....ion of the terms : "alkyd", "maleic" and "phenolic" resins. If the aforementioned 3 products were not maleic - nor, were they phenolic-they should have been classified as "alkyd" resins for, this term, as we have seen, is a generic and broad description and the earlier test reports did show the samples to be "alkyd" resins. It is also well to remember that it was only with effect from 9-6-1973 (Notification 127/73) that "alkyd" resins came to exclude resins obtained by interaction of fumaric acid with polyhydric alcohols, etc. 22. We have also perused the definition of alkyd resin in certain standards works of reference. Chambers Dictionary of Science and Technology gives the following meaning to the expression "alkyd resins" : "Alkyd resins. Formerly known as glyptal resins, i.e., condensation products derived from glycerol and phthalic anhydride. Now the term also covers diallyl esters and various polyesters used as resin binders in alkyd moulding materials." Again, according to the Concise Chemical and Technical Dictionary by H. Bennett : "Alkyd resin. Any condensation product involving a polybasic acid, like phthalic, maleic and succinic, and a polyhydric alcoh....
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.... in the adjudication proceedings and, therefore, there was no breach of the principles of natural justice. 24. In the decision reported in 1980 E.L.T. 693 (Bom.), the Bombay High Court has clearly held that in the absence of a show cause notice when the Rule required issue of a notice, the demand raised under Rule 10 was illegal and void. Following the ratio of this decision, it must be held that the demand dated 14-11-1969 was void and, therefore, cannot be enforced. It is hereby set aside. 25. The question remains of the 2nd demand dated 1-9-1971. It would appear that the appellants were told by the Supdt. by his letter dated 19-8-1969 that the products would be assessed provisionally under Rule 9B till further orders. On 19-5-1970 he again wrote to say that the products would be assessed at the rate applicable to maleic resins under Notification 156/65 till further orders, He followed this up by a letter dated 15-3-1971 by which he said that one of the products would be assessed as maleic resins and the other as other than alkyd maleic or phenolic. The appellants were called upon to file revised classification lists and price lists. The appellants, by their lette....