1. The dispute is regarding the assessment of the .product "Catalyst for Zinc Rich Primer" manufactured by M/s. India Paints the appellants, who claim that the product is a catalyst used in conjuction with an expoxy primer. The two are mixed together immediately before use as "Zinc rich epoxy primer". The two, i.e. the primer base and the catalyst are cleared together in a two pack system for use as primer and should be assessed together as paint under Item 14-1(5). They are m fact Paying duty on the total value of base and catalyst at rates applicable to Item 15-I(5) CET. However, the Central Excise authorities have assessed the catalyst as a resin under Item 15-A(l)(i).
2. M/s. India Paints say, and it has not been disputed by the department, that the catalyst contains duty paid polyamide synthetic resin dissolved in volatile organic solvent. The solid polyamide is bought in the market and is duty paid. The appellants claim that they clear the epoxy base and the polyamide resin together in separate packs as the two constituents must be mixed immediately before application because upon such mixture the catalysis sets in and causes the paint to gel. The gel has a pot life of about 4 hours. Hence it is not practicable to clear premixed paints of this type of composition.
3. The fact of the polyamide/amino resins being duty paid has not been questioned by the Department. But the assessing authorities have he d that the solution of the (duty paid) resins in volatile solvents creates a new resin in solution. The Appellate Collector in his order dated 29-2-80 held that there has been a change in the form of the resin from solid to liquid, thus bringing into existence a new resin (in liquid state). He draws his inspiration for this from the words in Tariff Item 15-A(i) "...artificial or synthetic resins and...in any form, whether solid, liquid or pasty...". He clearly holds that every change in form of a resin from solid to liquid or from solid to pasty or from pasty to liquid must be visited by fresh imposts.
4. The lower authorities' interpretation is not sustainable because the words in Tariff Item 15A(i) refer not to change of a duty paid resin from one form to another but to the form in which they are excised.
Thus, a resin may be solid or liquid or pasty or any other form, but whatever the form, it must be charged to duty under the Tariff. The form does not matter as far as the question of chargeability to duty (when it has not paid the duty) is concerned. But this is not the same thing as saying that a duty paid resin must pay duty afresh if its form is changed from the form in which it suffered duty. The law merely recognises that resins can be made in various forms, some being solid, while others are not removed and sold except as powder or paste. The excise authorities must levy and collect duty when duty has not been collected, regardless of the form in which the resin is cleared. To charge duty on a duty paid resin is not what the law envisages. And if we are to take the department's reasoning to its logical conclusion, all resins must be pursued wherever they go to see if their form is changed during use and application. This might be possible where the resin goes to a licensee but is clearly beyond the resources of the Department when the resin is in turn sold to users who buy and use only small quantities. We cannot agree that the catalyst solution which contains duty paid polyamide/amino resin is a new product for the purpose of Item 15A and needs to be charged to duty. There is no evidence that the resin polyamide underwent a change in character such as might happen by co-polymerisation or some such chemical modification when it entered into solutions in the organic solvent e.g. isopropyl alcohol or toluene; nor have the Central Excise authorities made such a finding. Furthermore, the Excise authorities have not challenged the assessees claim that the two substances epoxy and the catalyst, in separate packs, are used together to make zinc rich epoxy primer. There is good reason for saying that the two should, for assessment, form one common substance meant to be used as one and actually used so (a primer/paint).
5. We accordingly allow the appeal and direct that the two-pack paint be assessed under Item No. 14-I (5)-Central Exise Tariff.