Excise duty is payable only on the end-product and not at every intermediary stage of the process of manufacture.

Surinder Singh, J.

1. This writ petition under Articles 226/227 of the Constitution of India, has been filed by Messrs Punjab Rubber and Allied Industries, Jullundur City, and twelve other manufacturers of Rubber Products, against the Union of India and the other respondents who are officials of the Central Excise and Customs Department, with a view to impugn the directions of the said Department issued to the petitioners to take out licences for the manufacture of rubberised cloth, and to pay duty on the same with immediate effect. The demand is contained in the letters issued by the superintendents, Central Excise, Jullundur, to petitioner No. 1, copies whereof have been annexed as Annexures P-1 and P-3. It is stated that similar demands have been made from the other petitioners by the respective Divisions of the Central Excise, dealing with their cases.

2. In order to understand the controversy, a brief reference to the pleadings of the parties would be necessary. The petitioners are manufacturers and dealers of Transmission Rubber Beltings/V. Shaped Belts and Conveyor Belts. The process of manufacture of these articles has been described in the Writ Petition, the same being that raw rubber, both natural and synthetic, is compounded with various chemicals to make a master batch, which is in the shape of a sheet and is like a soft paste. The selected grade of cotton canvas is impregnated with the above Rubber Paste in different consistency by rolling the paste in the fabric under pressure on a Calender Machine. The Fabric, thus, impregnated with the Rubber Paste forms a ply inter-layer. The layers are then piled up to give the required thickness and while doing so, a thin sheet of rubber compound or paste mentioned above, is placed in between each layer. It is stated that the process of manufacture up to this stage, remains un-vulcanised. For the purpose of manufacture of T.R. Beltings/V. Belts and Conveyor Belts, the pile formed as above in required thickness, is steam-heated in Hydraulic Press, and this process is known as vulcanisation. The prepared sheets of laminated plies are then cut to size for ultimate conversion into Flat Transmission Belts. For the manufacture of V. Belts, an almost similar process is carried out, as in the case of Flat Transmission Belts. It is emphasised in the Writ Petition that the end-product, i.e., T.R. Beltings/V. Belts and Conveyor Belts, is complete only after vulcanisation has been done and the final product is produced in the shape of Belts etc.

3. In the return filed by the respondents, the details of the process of manufacture as noticed above, are not admitted and the contention raised on behalf of the respondents is that the intermediary product, which is cotton canvas or fabric impregnated with Rubber Paste and which in trade parlance is known as Friction Cloth, would attract Central Excise Duty under Tariff Item No. 19(1)(b) of Central Excise Tariff (hereinafter referred to as Tariff), as rubberised cotton fabric and consequently the petitioners are required to take a licence in Form L.4, and to observe the various Central Excise formalities apart from paying the Central Excise Duty on the said item. During the course of the arguments, it has not been disputed that the petitioners are already paying the required duty in respect of the end-product, i.e., T.R. Beltings/V. Belts and Conveyor Belts. The demand of the respondent- Department, however, is for the payment of additional duty for the intermediary product, referred to above, as Friction Cloth. The controversy, therefore, falls in a narrow compass, the same being as to whether the intermediary product is liable for payment of excise duty, or not.

4. The statutory provision in regard to the above matter as contained in Item No. 19(1 )(b) of the Tariff, has been mentioned varbatim in Para 9 of the Writ Petition, but it may be of benefit to reproduce it here for ready reference :

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