Circular No. 434 dated 1^st December 1998

The Hon'ble Supreme Court in its order dated 5th November, 1996 in case of UOI vs. Punjab Rubber & Allied Industries and Other in CA No. 4348/1984 set aside the order of Punjab and Haryana High Court in Civil Writ No. 4459 of 1980 filed by the Respondents i.e. M/s Punjab Rubber and Allied Industries & Ors [1983 ELT 54 (P & H)] on the ground that there is no clear finding against the contention of the department that the friction cloth coming into existence at intermediary stage of the process of the manufacture of transmission of TR Beltings/ V Belts and Conveyer Belts is a marketable commodity. The Department considers the said friction cloth as marketable and excisable product. A copy of the judgement of the Hon'ble Supreme Court is enclosed and this may be scrupulously followed where there is different practice of assessment of friction cloth in the field formations.

In the Supreme Court of India

Civil Appellate Jurisdiction Civil Appeal No. 348 of 1984

(Appeal by Special Leave from the Judgement and Order dated the 2nd September, 1981 of the High Court of Punjab and Haryana at Chandigarh in Civil Writ No. 4459 of 1980).

 (For full cause title please see Schedule 'A' Attached herewith).

5th November 1996

For the Appellants: M/s. A. Subha Rao, P. Narasimhan and V.K. Verma, Advocates.

The Appeal above-mentioned being called on for hearing before this Court on the 5th day on November, 1996; UPON perusing the record and hearing counsel for the appellants herein, the respondents not appearing though served and the appeal being set down for hearing ex-prate as against the said respondents, THIS COURT DOTH in allowing the appeal ORDER:

1.     THAT the Judgement and Order dated the 2nd September, 1981 of the Division Bench of the High Court of Punjab and Haryana at Chandigarh in Civil Writ No. 4459 of 1980 be and is hereby set aside and Civil Writ No. 4459 of 1980 filed by the Respondents herein before the aforesaid High Court be and is hereby dismissed;

2.     THAT there shall be no order as to costs of this appeal in this Court;

AND THIS COURT FURTHER ORDER this ORDER be punctually observed and carried into execution by all concerned.

WITNESS the Hon'ble Shri A-I-Mushabber Ahmadi, Chief Justice of India, at the Supreme Court, New Delhi, dated this the 5th day November, 1996.

In the Supreme Court of India

Civil Appellate Jurisdiction Civil Appeal No. 4348 of 1984

ORDER

The respondent-industries filed a Writ Petition in the High Court of Punjab & Haryana, Civil Writ No. 4459 of 1980, 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 Conveyer Belts were not liable to excise duty under item 19 (1) (b) of the Central Excise Tariff and for certain other incidental and consequential relief's. Entry 19 (1) came to be amended by the Central Excise 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 eligible to excise duty under item 19 (1) (b) of the Excise Tariff. After the amendment of this Entry, notices were issued by the Excise Department requiring them to take out L.4 licence for the said intermediate product. On receipt of these 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 judgement dated 2nd September 1981.

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 in composite, integrated and uninterrupted. At the same time he also contended that the intermediary product manufactured by the concerned industries, 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 judgement 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 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 marker. It is obvious from the afore-quoted finding recorded by the Division Bench of the High Court that it overlooked the fact that it was the Department's contention that the it was sold in the market or was having a market. It is, therefore, 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 don't think that the Division Bench was, justified in allowing the petition and preventing the Department form requiring the industries to take out a L. 4 licence.

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.