Skip to content


Indian Plastics Ltd. Vs. Collector of C. Ex. - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1989)(43)ELT771TriDel
AppellantIndian Plastics Ltd.
RespondentCollector of C. Ex.
Excerpt:
.....collector of central excise, bombay decided in his order-in-appeal no. 1096/79 (no date) that phenolic resin grade pr/707 was not eligible to the concession under notification no. 122/71-c.e.because on test the chemical examiner found that the sample contained phenol formaldehyde synthetic resin and inorganic filler and that it was not pure phenolic resin. the appellate collector reasoned that the condition in the notification was clear and that it restricted the definition of phenolic resins to only chemically modified phenolic resins and liquid phenolic resins but did not include blends of phenolic resin with other materials. as far as phenolic resin was concerned, the concession under the notification would be available even if it was chemically modified; but where anything else.....
Judgment:
1. The question here is whether phenolic resin lamp capping cement Grade PR/707 manufactured by M/s. Indian Plastics Limited, Bombay should be classified at the concessional rate of 18% ad valorem under Notification No. 122/71-C.E., dated 1-6-1971. The raw materials used in the manufacture of this cement are phenol, formaldehyde, acid catalyst, hexamine and marble dust. Accordingly to the process of manufacture given by the manufacturer, predetermined quantities of phenol and formaldehyde are taken in a reaction vessel and the acid catalyst is then added. The contents of the vessel are stirred and heat is supplied and the boiling reaction starts. After the reaction is complete the water is removed and the desired melting point is achieved. The contents of the kettle are then dischaged and cooled. The material so obtained is ground and mixed with hexamine and further grinding is done to a desired particle size. Predetermined quantities of marble dust are added and the mix is then ready for packing.

2. The Appellate Collector of Central Excise, Bombay decided in his order-in-appeal No. 1096/79 (no date) that phenolic resin Grade PR/707 was not eligible to the concession under Notification No. 122/71-C.E.because on test the Chemical Examiner found that the sample contained phenol formaldehyde synthetic resin and inorganic filler and that it was not pure phenolic resin. The Appellate Collector reasoned that the condition in the notification was clear and that it restricted the definition of phenolic resins to only chemically modified phenolic resins and liquid phenolic resins but did not include blends of phenolic resin with other materials. As far as phenolic resin was concerned, the concession under the notification would be available even if it was chemically modified; but where anything else was "added to blend this product" (sic), the concession would not be available. It appears that the presence of the inorganic filler was the deciding factor when the Appellate Collector reached his conclusion.

3. It was argued before the Tribunal on behalf of Indian Plastics Limited that no show cause notice was issued by the Assistant Collector before he passed his orders on 12th December, 1977. This kind of decision should be preceded by regular proceedings and the affected assessee should be given a chance to present his side of the case as in matters like this there are always two sides to the dispute. The order of the Assistant Collector does not even give any reasons for the re-classification except the findings of the test report of the Deputy Chief Chemist.

4. The notification explains a phenolic resin as synthetic resin manufactured by reacting any of the phenols with an aldehyde and includes chemically modified phenolic resins and liquid phenolic resins but does not include blends of the phenolic resins with other artificial and synthetic resins. In his test, the Chemical Examiner does not say that there has been any blend with another artificial or synthetic resin. The counsel also quoted judgments in 1982 E.L.T. 782 in respect of M/s. Western Bengal Coal Fields order-in-revision No. 270 of 1982 dated 26-4-1982 in which the Government of India decided in revision that phenol formaldehyde moulding powder obtained by chemical reaction of phenolic resin with fillers and other additives for making them fit for a particular use did not cease to be a phenolic resin. He also quoted 1982 E.L.T. 425, Industrial Plastic Corporation v. Union of India miscellaneous petition No. 413 of 1975 in which the High Court of Bombay decided similarly and held that phenolic moulding powder was covered by the definition of phenolic resin in the notification dated 1-6-1971. In Plastic Powders Limited, Calcutta v. Collector of Central Excise, Calcutta order No. 266/83-C dated 30th August, 1983,1983 E.L.T.2049 (Cegat), this Tribunal came to the same conclusion that though it contains fillers and other additives phenol formaldehyde moulding powder was a phenolic resin defined in Notification No. 122/71-C.E.5. The learned Counsel for the department Mrs. V. Zutshi said that all the past decisions quoted by the appellant's counsel in support of this claim were on moulding powder. This product is not a moulding powder but a lamp capping cement. It has a different name, character and use.

Therefore, the past judgments will not help the appellants. It will be seen, argued the learned Counsel, that the Chemical Examiner found the resin was not a pure phenolic resin and that it contained foreign non-resinous inorganic matter. It has no claim to be a phenolic resin contemplated by the notification which defines what a phenolic resin is. Though this product contained phenolic resin and though it had not been blended with other resin, it contained marble dust, and therefore, was disqualified from the terminology "phenolic resin". The appeal should therefore be rejected.

6. It is true that the past judgments and decisions quoted by the appellants were in respect of phenol formaldehyde moulding powder and that this product phenolic resin Grade PR/707 capping cement produced by M/s. Indian Plastics Limited is not a phenol formaldehyde moulding powder. The point to be decided by us is whether the presence of the filler marble dust is a disqualification that excludes the capping cement from the definition of phenolic resin given in the Notification 122/71-C.E. This is how the definition of phenolic resin runs - "Synthetic resins manufactured by reacting any of the phenols with an aldehyde and includes chemically modified phenolic resins and liquid phenolic resins out does not include blends of the phenolic resins with other artificial and synthetic resins." 7. The Chemical Examiner said in his test that the sample contained phenol formaldehyde synthetic resin and inorganic filler and that it was not pure phenolic resin. The inorganic filler, we are told, was marble dust. It appears that the Appellate Collector took the presence of the inorganic filler, that is, marble dust, as meaning that the substance was added to blend with the resin, and the concession was thereby lost to the product. This is the only reason given by the Appellate Collector for his conclusion in respect of phenolic resin Grade PR/707. [The Assistant Collector gives no reason beyond saying that he was passing his order of re-classification in view of the findings in the test reports received from the Deputy Chief Chemist, Bombay. We should record here that this is a highly unsatisfactory way of proceeding in such a matter. The Assistant Collector did not apply his mind and took little or no trouble to ascertain and determine for himself the nature of the goods. Nor, as the learned Counsel for M/s.

Indian Plastics told us at the hearing, did he even issue a show cause notice which, we think, he ought to have done as what he ordered was contrary to the claim made by the factory]. The Appellate Collector himself does not say clearly what is it that was added to the product to make it a blend : adding the marble dust filler would not produce a blend of resins and if he thought that the filler was a resin, he was completely off the track. The blend that disqualified is only a blend of the phenolic resin with other synthetic resins. There was no other artificial resin mixed or blended with this phenolic resin; the test report does not say so. As this is the reason for the rejection by the Appellate Collector of the claim to concessional assessment under Notification No. 122/71-C.E., we set his order aside as it is wrong and contrary to the facts and to technology. We direct that the phenolic resin Grade PR/707 produced by M/s. Indian Plastics Limited should be assessed as a phenolic resin under Notification No. 122/71-C.E. If this order results in any refund, that refund should be paid within three months.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //