BMF BELTING LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) The petitioner, M/s. B. M. F. Beltings Limited, Patancheru, Medak District, has filed this writ petition for the issue of a writ of certiorari to quash the orders C. No. V/19-I/17-12/82-VC dated 22-1-1985 and to direct the first respondent not to treat the unvulcanised friction cloth in the process of manufacture of belts as cotton fabrics or goods within the description of Tariff Item No. 19I(b) of the First Schedule to the Central Excises and Salt Act, 1944 read with Section 3 thereof and the Rules made thereunder and also prays for the consequential relief by way of refund of the amounts, if any, collected thereon.

(2.) The petitioner is a public limited company registered under the Companies Act, 1956. They manufacture fan belts, V. belts and other allied products in their licensed factory at Patancheru. The process of manufacturing of the fan belts and V-belts involves the preparation of a sticky material, styled as friction cloths. The preparation of the friction cloth involves application of rubber compound to the cotton fabrics. It seems, the petitioner-company purchased gray cotton sheetings falling under Central Excise Tariff Item No. 19I(a) which is coated with rubber compound and which, after a continuous process, ultimately takes shape as fan belts and V-belts. The contention of the petitioner-company is that at no stage in the manufacturing process, goods, as known in common trade parlance, emerge in the factory. In other words, the end product, which is eligible as rubber beltings, will be in a continuous and uninterrupted process in which gray fabrics undergo application of rubber compound when fed in a calendering machine. The petitioner-company has been paying duty on the ultimate goods, known in the market as rubber beltings. The sticky material, styled as "friction cloth", has no commercial characteristic and is not known in the market as such. The petitioner-company says that there is reason to believe that a similar view has been taken by the Chief Chemist of the respondents department as early as in 1984 in connection with certain doubts raised in the matter of exigibility of friction cloth and type cord warp sheet with reference to TI 19.

(3.) The sum and substance of the petitioners argument is that the material, called friction cloth, is merely an in process material undergoing preparation for manufacturing rubber belts. It serves after the necessary cutting and melting for the purpose of an outer jacket enclosing the other ingredients forming the shape of the belt which is taken further to the culminating stage of vulcanisation of the rubber products, called beltings, eligible under TI 16 A (4). The inprocess material, known as friction cloth does not come within the category of goods and cannot be classified as rubberised cotton fabrics under Tariff Item No. 19I(b). The petitioner-company was served with a Tariff Advice No. 66/80 dated 13-10-1980 and was obliged to pay excise duty for the inprocess material, viz., friction cloth, under protest. Since the petitioner-company questioned the legality and validity of such a classification, levy and collection of duty on the material in process, the matter was brought to the notice of the Assistant Collector, who, by his letter dated 17-7-1982, stated that the unvulcanised friction cloth attracted Tariff Item No. 19 I (b) as rubberised cotton fabrics. Thereupon, the petitioner-company again filed a representation on 11-9-1982 as contemplated in Rule 233-B of the Central Excise Rules setting out their objections and contending that the manufacture of fan belts and V-belts is a composite, integrated and uninterrupted process in which the gray fabric was treated within rubber compound and that it is not a product in any sense of the term. The petitioner-company brought to the notice of the Assistant Collector that no speaking order was passed by the Assistant Collector and reminded him of his duty to pass a reasoned order in the matter. A hearing was given to the petitioner-company on 29-10-1984 in which the petitioner-company reiterated the stand taken by them and relied upon several judicial pronouncements of the various High Courts in support of their claim. Thereafter the impugned order dated 22-1-1985 was passed which was received by the petitioner-companion February, 1985. In the said order a detailed technical analysis is sought to be made of the process of manufacture involved in the manufacture of fan veldts and V. belts and in the end it is concluded that the rubberised friction cloth was not generally marketed but was captively used in the manufacture of other finished goods. It would be in the fitness of things to reproduce hereunder the operative part of the impugned order, which is in the following lines :