The Chandigarh Bench of Customs Excise & Service Tax Appellate Tribunal ( CESTAT ) ruled that glue mixtures in laminated sheet manufacturing are classified as “Prepared Glues and Other Adhesives” under the Central Excise Tariff, 1985.
Girivar Decor, the appellant had set up units for manufacturing paper-based decorative laminates and laminated sheets. They opted for an area-based exemption under Notification 50/2003-CE which exempted goods from excise duty except those listed in the Negative List.
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After three years, the Department issued show-cause notices, alleging that the mixture of Melamine & formaldehyde and Phenol & formaldehyde, which the appellants used as adhesives/glue fell under Chapter 3909 of the Central Excise Tariff in the Negative List and was thus ineligible for the exemption.
The appellant filed a reply stating that these items were classifiable under Chapter 3909 and thus not entitled to area-based exemption under Notification 50/2003-CE. After due process of law, the adjudicating authority (AA) confirmed the demand for excise duty, rejecting all of the appellants’ arguments except one. The AA allowed the appellant to avail the Cenvat credit on inputs, thereby reducing the overall demand for duty.
The aggrieved appellant challenged the AA’s order before the Chandigarh Bench of CESTAT arguing that the issue had already been settled in favor of the assessees in several Tribunal judgments, which classified the mixture under Chapter 35.06 and upheld the exemption.
The appellant’s counsel argued that they had disclosed the use of these chemicals from the outset and there was no suppression of facts. The appellant’s counsel further cited a CBEC circular that supported their argument that such mixtures are not liable for duty if they are not marketable when used for captive consumption.
After perusal of materials, the two-member bench comprising S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) noted that similar cases involving the classification of Melamine & Formaldehyde mixtures used as adhesives had already been adjudicated, and the products were classified under Chapter Heading 35.06 in several precedents.
The tribunal emphasized that the Department had accepted this classification in earlier cases without appeal, which indicated that the issue had attained finality.
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The tribunal cited a relevant extract from the case of Samrat Plywood Ltd. where it was held that mixtures of Melamine Formaldehyde and Phenol-Formaldehyde used as adhesives were classifiable under Chapter 35.06 as “Prepared Glues and Other Prepared Adhesives,” and therefore, the company was eligible for exemption under Notification 50/2003-CE.
In light of the above observation, the tribunal set aside the impugned orders against the appellant. The appellant’s appeal was allowed with consequential relief as per law.
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