TaxTMI 
TaxTMI 
2018 (10) TMI 1200
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....that the proceedings initiated against the appellant were adjudicated by the Additional Commissioner, dropping the demands, vacating the show cause notice and holding classification in favour of the assessee. The said order was appealed against by the revenue before Commissioner (Appeals), who reversed the same. Hence the present appeal. 2. As per facts on record, the appellant's factory was visited by the Central Excise officers on 10.01.2013 to conduct verification of the actual process of manufacture and the nature of the manufactured product. Shri Naveen Kumar Jain, Proprietor of the unit in his statement dated 11.01.2013, deposed as under:- (i) that they were manufacturing and selling their final product viz. 'waste scrap foam sheet' since April'08 for which they purchased waste and scrap of PU Foam mixed with cloth, cotton & plastic scrap; (ii) that these scraps after being shredded were put into the mixer and mixed and blended with Arandi oil, TDI and waste poly chemical; (iii) that after mixing, the material was put into chamber for pressing to manufacture Big Blocks; and (iv) that these blocks were then sliced into sheets of different sizes for sale purpose as....
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.... as also on time-bar. It was specifically contended by them that they have small factory which is engaged in the re-bonding of mix old and used waste of plastic, cotton and foam. The manufacturing process involve purchasing of waste in lot containing mix old and used waste of plastic, cotton, foam and mud etc., which is process in the factory by way of shredding, putting into mixer and mixing and blending with Arandi Oil, TDI and waste Poly Chemical. After mixing, the material is put into chamber for pressing the manufacture Big Block which are subsequently sliced into sheets of different sizes. Such sheets are called 'Mix Plastic Scrap Foam Sheet' which is classifiable under Heading 39911900 and is entitled to the benefit of notification. They also contended that during the course of visit to their factory, the officers have noted the above process and also verified the use of raw materials, installed machineries and the process of manufacture. They also submitted that they do not have the machineries to manufacture PU Foam and Articles of PU Foams and never purchased the requisite raw material for manufacture of PU Foam, which is Poly-ether Polyon, Toluene Dlisocyate, Sil....
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....yanate and a polyol. Polyurethanes can be produced in four different forms including elastomers, coatings, flexible foams, and cross-linked foams. At the start of "polyurethane Foam production (PU Foam in short)", the reacting raw materials are held as liquids in large, stainless steel tanks which are equipped with agitators to keep the materials fluid. A metering device is attached to the tanks so that the appropriate amount of reactive material can be pumped out. A typical ratio of polyol to diisocyanate is 1:2 Since the ratio of the component materials are passed through a heat exchanger as they are pumped into pipes. The exchangers adjusts the temperature to the reactive level. Inside the pipes, the polymerization reaction occurs. By the time the polymerizing liquid gets to the end of the pipe, the polyurethane is already formed. On one end of the pipe is a dispensing head for the polymer. The dispensing head is hooked up to the processing line. For the production of rigid polyurethane foam insulation, a roll of baking paper is conveyor and brought under the dispensing head. As the paper passes under, conveyor and brought under the dispensing head. As the paper passes under, po....
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....orm of boards or laminate. Laminates are used extensively in the Commercial roofing industry. Buildings are often sprayed with polyurethane foam, 8.8 As regards the manufacturing process involved in the instant case and the resultant product, as discussed in the show cause notice and also mentioned by the party in their defence submissions, I observe that the manufacturing process is simply shredding of old and used waste of plastic, cotton & foam etc; mixing of the same; blending of the mixture with bonding chemicals, and pressing of resultant mixture to make Big Blocks which on slicing are converted into sheets of different sizes. I have seen the report of the Chemical Examiner, CRCL, New Delhi which shows (i) the sample is in the form of rectangular cut piece of Sheet; and (ii) sample comprises of varying shapes and sizes of different colours of foam (made of polyurethane) to the tune of 91.3% along with plastic material to the tune of 4.9% bonded with adhesive material to the tune of 3.8%. 8.9 I find that there is nothing on record to show that the party has produced their product by reacting chemicals like Diisocyanate and a polyol which are necessarily required to manufa....
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....party is using old waste & scrap of PU Foam mixed cloth, cotton & plastic scrap etc. and chemically bonding the same to produce "Waste scrap Foam Sheet". The products being manufactured by the party are also being sold under the name & description of "Waste scrap Foam sheet" as apparent from the sales invoices. I do not find any merit in the substance of the SCN for classifying party's manufactured product under Chapter Sub-heading No.30211310 of CETA, 1985. The party's manufactured product is totally different in its process of manufacture, material content and other characteristics from "flexible PU Foam" classifiable under Chapter Sub-heading No.39211310 of CETA, 1985." Accordingly, he vacated the show cause notice by further observing as such:- "8.14 In my considered view as I have stated and discussed hereinabove, the combined factor that requires to be taken note of for the purpose of classification of the goods are the raw material composition, nature of manufacturing process, the product literature, the label, the character of the product and the user to which the product is put. In the instant case, I have already discussed in the foregoing paragraphs that undis....
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....and it comprises of varying shapes & sizes of different colours of foam (made of polyurethane) along with plastic material bonded with adhesive; (viii) that the products being manufactured by the party are being sold under the name & description of "Waste Scrap Foam Sheet" as apparent from the sales invoices. Such "Waste & Scrap Foam sheets being sold by the party, were for use in making of mattresses or its on the spot conversion into mattresses by using coir sheets & textile covering by the distributors/ dealers or similar use with a sole intent to reduce cost as such PU Foam waste & scrap sheets are much cheaper than virgin PU Foam Sheets." 6. The revenue challenged the said order before Commissioner (Appeals), who primarily went by the report of the Chemical Examiner and held in favour of revenue, by observing as under:- "From the fact on record, it is clear that both the respondent and adjudicating authority are of the view that the impugned goods fall under Chapter Sub-Heading 3921 and the only dispute is whether the goods were made of PU Foam (CSH 39211310)-flexible or of other plastic (CSH 39211900). Now, as the dominance of PU Foam (91.3%) in the goods manufactured ha....