Union of India vs Punjab Rubber & Allied Industries

1. The respondent-industries filed a writ petition in the High Court of Punjab & Haryana, Civil Writ No. 4459 of 1980 reported in 1983 (12) E.L.T. 54 (P & H), seeking an appropriate writ for declaring that friction cloth and intermediate products produced by them in the process of manufacture of T.R. Beltings/V. Belts and Conveyor Belts were not liable to excise duty under Item 19-I(b) of the Central Excise Tariff and for certain other incidental and consequential reliefs. Entry 19(I) came to be amended by the Central Excises and Salt (Amendment) Act, 1980 (Act 6 of 1980) whereby the said entry was amended and rubberised cotton fabrics were specifically included as a product exigible to excise duty under Item 19-I(b) of the Excise Tariff. After the amendment to this entry, notice were issued by the Excise Department requiring them to take out L-4 licence for the said intermediate product. On receipt of those notices the writ petition aforementioned came to be filed. The said writ petition was heard and disposed of by a Division Bench of the High Court by the impugned judgment dated 2-9-1981.

2. It may here be mentioned that the learned Counsel appearing for the Department conceded before the Division Bench that no duty would be leviable on the intermediary product if the process of manufacture of the end product is composite, integrated and uninterrupted. At the same time he also contended that the intermediary product manufactured by the industries concerned, namely, friction cloth was a marketable commodity and hence it attracted excise duty. The Division Bench of the High Court in Paragraph 7 of the impugned judgment recorded a finding to the effect: "There is no manner of doubt that the process of manufacture of transmission of T.R. Beltings/V- shaped Belts and Conveyor Belts, produced by the petitioners, is a composite, integrated and uninterrupted process and even if some article styled as 'Friction Cloth' comes into existence at an intermediary stage, the Department is not justified in demanding excise duty on the said product, especially when it is nobody's case that this intermediary product is used or sold by the petitioners in the market." It is obvious from the aforequoted finding recorded by the Division Bench of the High Court that it overlooked the fact that it was the Department's contention that the intermediary product was a marketable commodity meaning thereby that it was sold in the market or was having a market. It is, there fore, obvious that the Division Bench of the High Court proceeded on an erroneous assumption that it was nobody's case that this intermediary product was used or sold in the market. When it was contended by the Department that the product was a marketable commodity it was intended to convey that it had a market and was capable of being sold in the market. Unless there was a clear finding recorded on this aspect we do not think that the Division Bench was justified in allowing the petition and preventing the Department from requiring the industries to take out an L-4 licence.

3. In the result, we allow this appeal, set aside the impugned order of the Division Bench of the High Court and direct that the writ petition will stand dismissed with no order as to costs.