TaxTMI 
TaxTMI 
2016 (4) TMI 59
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....and articles thereof falling under Tariff Heading 3909 to 3915 are in the negative list for exemption. Investigations were conducted by the officers; proceedings initiated which resulted in the impugned order. The ld. Commissioner confirmed a demand for Rs. 6,13,49,586/- on Urea Formaldehyde Resin, Phenol Formaldehyde Resin and Melanine Formaldehyde Resin manufactured by the appellant deciding classification under Tariff Heading 3909. Equal penalty was also imposed on the appellants. Cenvat credit of Rs. 2,30,43,200/- is found to be eligible to the appellant in discharging this demand. 3. In the appeal, the appellants strongly contested the findings in the impugned order. Their submission can be summarized as below:- a) Reliance placed on test report dated 19.03.2012 of IPRITI is not sustainable on various grounds viz : i) Report was made available after 89 days depriving the right of re-test. ii) No cross examination allowed of the officer, who conducted the test, iii) The methodology of sample drawal, testing parameters and communication of test results are not as per norms. b) The reliance placed on Purchase Order dated 4.8.2008 fo....
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....unsel for the appellant also mainly insisted on this point though other points regarding validity of test report, marketability of the product and limitation were also stated in their appeal. We find that correct classification of the product is central issue of the dispute. 7. First, it is necessary to examine the processes carried out by the appellant which result in the impugned goods. We find that the comparisons and conclusions based on such comparisons will not be justifiable if processes and chemicals used by various manufacturers and resultant products are not similar. In the present case, we are concerned first with the processes carried out by the appellant in the reactor/kettle in Shed-B. The appellants submitted detailed step by step process, additions of chemicals till the emergence of impugned goods. Processes involved in one of the typical product - G-10 are as below:- "Process (a) Charge Formaldehyde in Reactor by opening the discharge valve of the measuring tank mounted on load cell. (b) Adjust pH to 8.5 by caustic soda solution which is alkaline nature. (c) Add Ammonia. (d) Add Poly vinyl Alcohol ....
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....duct as resin, its marketability and classification under CETH 3909. The processes undertaken by the other manufacturers, especially addition of hardener or curing agent (NH4 CL) has not been examined by the original authority. The correctness of comparison very much depends on this. 11. Examining the scope of CETH 3909, we find Note-6 of Chapter 39 states as below:- "In Heading 3901 to 3914, the expression "primary forms" applies only to the following forms: (a) Liquids and pastes, including dispersions (emulsions and suspensions) and solutions; (b) Blocks of irregular shape, lumps, powders (including moulding powders), granules, flakes and similar bulk forms." 12. The Original Authority classified the product under CETH 3909 - "Amino Resins, Phenolic Resins and Polyurethane in Primary Forms". The meaning of expression " Primary Forms" is given in the above Note-6. 13. The scope of "Primary Forms" is further elaborated in HSN with reference to above Chapter Note. "Primary Forms Heading 39.01 to 39.14 cover goods in primary forms only. The expression primary forms is defined in Note 6 to this Chapter. It applies on....
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....he issue. Prepared glue as it emerges is put into use in the binding section along with other inputs like wax, NHCL and water for final binding. Chapter 35 covers glues. CETH covers Prepared glues and other prepared adhesives, not elsewhere specified or included. CETH sub-heading no.3506 9991 covers synthetic glue with phenol urea or cresol (with formaldehyde) as the main component - Prepared glues and other Prepared adhesives. 15. Based on the above criteria for classification, we find that the appellant had made out strong case for classifying the product "as prepared glue". This is based on the facts like, the processes adopted and emerging product from the reactors/kettles, which is sent directly to glue kitchen for direct use in bonding of final product along with inputs. 16. The reliance placed by the Revenue on the test reports has been strongly contested by the appellants on various grounds. The test report was given to them after almost 3 months which deprived the chance for them to go for re-test. Further, the methodology followed by testing is not as per IS Standards relevant for synthetic resin additives. The test report of IPIRTI did not mention the pH value whic....