Full Judgment
and rolling in drums.
2. Prior to the introduction of the new Tariff, the classification list was submitted under T.I. 68; however, when the new Tariff was introduced with effect from 1-3-1986, no classification list was submitted but the appellants continued to manufacture the product during 1986-87 but subsequently discontinued manufacture thereof. Show cause notices were issued for recovery of duty on the clearances effected during March-April 1986 and the demands were confirmed by the Assistant Collector by separate adjudication orders, dated 6-10-1988 (in the case of Ajay Metachem) and dated 10-10-1988 (in the case of United Metachem). Penalty of Rs. 250/- was imposed on M/s. Ajay Metachem and a penalty of Rs. 200/- was imposed on M/s. United Metachem. The Collector (Appeals) by a common order-in-appeal, upheld the orders of the Assistant Collector; hence these appeals before the Tribunal.
3. Since the appellants have asked for a decision on merits, we have heard the learned DR and perused the records. The main submisssion of the appellants is that Metacure Part A is nothing but Alkyd resin which is a thermo-setting reaction product of dihydric or polyhydric alcohol (Ethylene Glycol or Glycerol) and Polybasic acid (Phthalic Anhydride), in the presence of drying oil such as Ethylene oil which acts as a modifier. The appellants submit that the lower authorities have erred in classifying the product under sub-heading 3801.90 merely because the other two products manufactured by the appellants viz. Metacure Part B and Metacure Part C fall for classification under the above mentioned sub-heading because the end use of all the three products are for fluxes. They submit that fluxes is a general term used for products of different varieties and different properties having different chemical compositions and different mixtures which has the property of promoting the fusing of minerals or metals or of preventing the formation of oxides. They submit that they manufacture different types of chemicals required for foundries but all the chemicals are not fluxes and Metacure Part B and Metacure Part C are prepared binders for foundry moulds or cores while Metacure Part A, even though used in the preparation of cores along with the above two products, is a Alkyd resin classifiable under sub-heading 3907.50 during 1986-87 and onwards and attracted nil rate of duty under Notification 132/86.
4. We find that the above submissions have not been considered in their proper perspective by the lower authorities and we further find that the Collector (Appeals) has erred in holding that the appellants have not contested the finding of the Assistant Collector that Metacure Part A is not the same as Alkyd resin. The appellants have all along contested this stand of the department and have consistently claimed that Metacure Part A is nothing but Alkyd resin. Further the product has not been chemically examined in order to establish whether it remained Alkyd resin or became a misc. chemical product falling under Chapter 38. Since the material on record is not sufficient for the purpose of determination of the above vital point, we set aside the impugned order and remand the matters to the jurisdictional Assistant Commissioner who shall decide the matters afresh after getting the product chemically examined, if possible, and after extending a reasonable opportunity to the appellants of being heard in person and adducing such evidence as they consider necessary to support their case.
6. In their written submission received on 26-6-1997 the appellants have mentioned, inter alia, that this may be taken into consideration at the time of personal hearing in their absence and emphasised that - "(a) The show cause notice do not make a specific charge of misclassification of the product, neither there is a proposal in it to classify the product 'Metacure Part A' under Tariff Heading No. 3801.90.
(b) The only charge in the show cause notices is that the product is not declared in the classification list. For this, the appellants have already explained that it is only a technical omission.
(c) The show cause notices allege contravention of the provisions of Rules 9 (1), 173B, 173C, 173F & 173G of Central Excise Rules, 1944.
However these are not dealt with by the Asstt. Collector in his Order-in-Original.
Under the circumstances, the Asstt. Collector while adjudicating this case has travelled beyond the show cause notices." 7. Learned DR on the other hand emphasised that the assessee vide his letter No. AMPL/CE/86/CH/275, dated 15-1-1987 have given the names of the raw materials which is being used in the manufacture of Metacure Part A. They are - (1) Linseed Oil (2) Castor Oil (3) D.C.O. Oil (4) Phthalic Anhydride (5) Pentacryhtratol (6) Glycerine (7) Denatured Spirit (8) Kerosene (9) Xylene (10) Stand Oil (11) Alkyd Resin (12) Toluene (13) Mineral Turpentine.
It will be seen from the above list that the product Metacure Part-A contain so many other products in addition to Alkyd resin. The process is mixing process. Since the mixing process is involved, so many other raw materials are also used, it is clear that a new product is emerging. It is therefore treated as a new product Metacure Part-A is emerging from the process. The assessee's contention that it is only Alkyd Resin is not correct and therefore not acceptable.
It is seen that the assessee is also manufacturing Metacure Part B and Metacure Part C. The assessee himself had classified these products under 3801.90 attracting duty at 15%. The product Metacure Part A and Metacure Part B and Metacure Part C are used together and the end use is for fluxes. In view of this position the product will fall under 3801.90 and will attract duty at 15%.
8. I have considered the above submissions. I observe that prima facie there is some substance in the observation of the Assistant Collector and Collector (Appeals) and emphasised by the D.R. that Alkyd Resin is mixed with various other substances during the process of manufacture of the final product and apparently a different product was likely to emerge but its exact nature, composition and classification would be determined on the basis of chemical test, product literature and/or market enquiry. There is, however, no evidence on record to show that any such thing was done.
9. The Asstt. Collector has observed and the appellant has not contradicted that Metacure Part-A, Metacure Part-B and Metacure Part-C are used together and the end use is for fluxes and in the pamphlet filed by them the item Metacure is being advertised as a 'system' and it is indicated, inter alia, as follows: METACURE System is a Alkyd. No bake binder. It is an Alkyd resinisocyanate based organic process and it is used for moulding and coremaking. The system is recommended for the production and medium and heavy moulds or cores. It can also be used as the facing sand in making moulds." 10. Therefore, the authorities below were also required to see whether * Metacure Part-A, Metacure Part-B and Metacure Part-C are required to be treated separately as distinct items or the three together are required to be seen as one system and one product and classified accordingly and while doing so the way it is being treated commercially is also required to be kept in view. Thus the matter requires further examination both from chemical and commercial angle for the purpose of determining the correct classification under the Tariff and the question of exemption notification can be gone into more appropriately only after such a determination or along with it.
11. In view of the above position, the impugned orders are set aside and the matter is remanded for de novo consideration in accordance with law.