DUNLOP INDIA LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) The appellant assessee manufactures goods known in the market as cushion repair compound, tread repair compound and cover compound. These materials, according to the assessee, are used to mend injured and defective sections of tyres and are not meant to be used either in the resoling or in retreading of tyres. Under the Central Excises and Salt Act, 1944, ('the Act'), the above goods were normally dutiable under tariff item No. 16A(2). However, the assessee claimed exemption from duty under notification No. 71 of 1968 dated 1-4-1968. By this notification under section 8 of the Act, the Central Government exempted "all rubber products, in the form of plates, sheets and strips unhardened, whether vulcanised or not, and whether combined with any textile material or otherwise (other than the products which are made either wholly or partly of rubber and which are used for the resoling or retreading of tyres, including the products commonly known as tread rubber, camel back, cushion compound, cushion gum, tread gum and tread packing strips) failing under sub-item (2) of this item, from the whole of the duty of excise leviable thereon". The Superintendent of Central Excise having rejected the claim for exemption and charged the goods in question to duty at 20% (basic) under the tariff item above mentioned, the assessee preferred an appeal to the Collector of Central Excise, West Bengal. The Collector also rejected the claim observing that there was no evidence that the goods in question could not be used for the resoling or retreading of tyres. The assessee thereupon preferred, a revision to the Central Government under section 36 of the Act as it then stood. In the revision petition, it was pointed out that tread repair compound and cushion repair compound were primarily meant for and also used as repair material only with reference to the treads and cushions of tyres and that since they were designed to serve. the limited purpose of mending small sections of tyres it would be grossly erroneous to hold that these repair materials could be used in place of tread rubeer or camel back which only have the necessary physical dimensions and technical properties to serve as retreading and resoling material. Similarly cover compound, it was said, was material which was used only for repairing conveyor belting and was also marketed by the assessee solely for the purpose of repairing damaged sections of the conveyor belting. It was not meant for use in, retreading and resoling of tyres since their sole intended use was to repair conveyor belts. The Central Government, however, dismissed the revision petition by its order dated 21-5-1974. The Government referred to the fact that the notification of exemption specifically excluded cushion compound, cushion gum and tread gum and observed that, in view of this, cushion repair compound and tread repair compound would also be assessable to duty under item No. 16A. So far as cover compound was concerned, it was observed that its composition was such that its use for repair of conveyor belts was indistinguishable from the other use of resoling of tyres. The present appeal has been preferred from the order of the Central Government.

(2.) On behalf of the appellant it is pointed put that the whole purpose of the exemption notification was to exclude products which were used for the resoling and retreading tyres. The Government has overlooked that while tread rubber, cushion compound and tread gum are all items used for resoling or retreading of tyres, that was not the use to which the articles manufactured by the assessee were put. The statement of the assesse that the goods manufactured by it were employed only for repairing tyres and conveyor belts has not been disbelieved. It is therefore submitted that the Government erred in holding that the goods produced-by the assessee are not eligible for the exemption in question.

(3.) In support of his contention, learned counsel for the appellant relied on two important circumstances. One is that by a notification No. 27 of 1973 dated 1-3-1973, notification No. 71 of 1968 was amended and the words "used for resoling, retreading or repairing of tyres" was substituted for the words "used for the resoling or retreading of tyres". This amendment was not effective for the period with which we are concerned and it is therefore argued that the compounds used for repairing as against resoling or retreading will not be covered by the exclusion in the exemption notification. The second circumstance relied upon by the learned counsel for the appellant is this. Earlier, there was a notification No. 31 of 1964 under which the duty leviable in respect of latex foam sponge as well as products commonly known as tread rubber or camel back including cushion compound, cushion gum, tread gum, and tread packing strips were subjected to a concessional rate of duty while other rubber products falling under item 16A were granted an exemption from the levy of duty. In the context of that notification, a question arose as to whether rubber products which are capable of being used for retreading or resoling of tyres but are only used for repairs would attract duty or not. The position was clarified by the Central Board of Excise and Customs in its circular No. Rubber 1/66 dated 7-2-196.6. The relevant part of the circular reads as follows: