P.C. Jain, Member (T)

1. For the sake of convenience, facts as involved in the case of the first appellant would be given in the order below.

2. Since a common question is involved in both these appeals a common order is being passed.

3. Short question involved in both these appeals is whether a mixture of formaldehyde and caustic soda and resorcinol is resol resin and as such is liable to duty under Tariff Item 15-A of the CET as it stood during the period 5-9-1980 to 20-5-1983. From 21-5-1983 by Notification No. 158/83 the said solution has been exempted.

4. The process of manufacture as described in the order-in-original which in turn was narrated by the appellant herein M/s. Dunlop India Ltd. is as follows:-

"3(i) Mix resorcinol, formaldehyde, caustic soda and water with the solution in continuous agitation and with temperatures strictly within 15.5°C-26.5°C use as soon as possible after 15 hours for final mixing with 'B' stock.

(ii) 'B' stock comprising rubber latex, caustic soda and water prepared. Simultaneous with above and kept as 15.5°C-26.5°C under continuous agitation."

4.1. The department contends that the first mixture consisting of resorcinol, for-maldehyde, caustic soda and water results into A stage resin known as resol and therefore, falls under Tariff Item 15-A. This contention of the department is based on chemical examiner's report dated nil March 1977 which reads as follows : -

"Report: The sample is an aqueous solution of resorcinol formaldehyde (Phenolic resin)

Please see note below.

Note: The sample as received is a phenolic resin (in resol stage) and would be covered by Tariff Item 15A l(i) as a condensation product whether or not modified or polymerised.

Sd/-

(S. Krishnamurthy)

Chemical Examiner"

5. In the first instance a show cause notice dated 5-2-1981 was issued to the first appellant. Relevant extracts from the said show cause notice are given below: -

"SHOW CAUSE NOTICE

Sub: - Central Excise - Resorcinol formaldehyde solution - Classification of regarding -

. . . .

Messrs. Dunlop India Ltd., Madras-53 are manufacturing a solution using Resorcinol, formaldehyde and V.P. Latex. This solution is a resin classifiable under Tariff Item No. 15A. The Chemical Examiner, Madras to whom samples of the product was sent has also opened that the product is resin falling under Tariff Item 15A, of the Central Excise Tariff. Messrs. Dunlop India Limited had been instructed to take out a licence as early as 10-12-1976, but the assessee had so far been contending that the product was not liable to Central Excise duty. As the Assessee's contention was not acceptable, the assessee had again been instructed to take out a license by the Range Officer in his letter OC. No. 739/79 dated 20-7-1979. In reply to that letter the assessee requested the Department to keep the matter in abeyance as the matter had already been taken up by Automotive Tyre Manufacturer Association to the Central Board of Excise and Customs. Now it is held by the Department that 'Resorcinol Formaldehyde' would be classifiable under Item No. 15A(1) of Central Excise Tariff vide a Trade Notice No. 224/80, dated 3-12-1980. The assessee has been instructed on 9-12-1980 by the Range Officer to take out a licence and pay appropriate duty immediately. The assessee has also been instructed to furnish the value of solution per litre and quantity of the solution produced so far. The assessee has neither take out a licence nor furnished the required particulars. The assessee has finally been instructed on 30-12-1980 to take out a licence within 10 days from the date of receipt of the letter failing which action will be taken for seizure of the goods for which also the assessee has not taken care of even after the lapse of 10 days. Therefore, the quantity of resorcinol formaldehyde solution manufactured by M/s. Madras Dunlop India Ltd., Madras has to be construed as having been manufactured without a Central Excise licence, contravening Rule 174 read with Section 6 of