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Punjab Rubber and Allied Industries and ors. Vs. Union of India (Uoi) and ors. - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtPunjab and Haryana High Court
Decided On
Case NumberCivil Writ No. 4459 of 1980
Judge
Reported in1983(12)ELT54(P& H)
ActsCentral Excise Act, 1944; Constitution of India - Articles 226 and 227
AppellantPunjab Rubber and Allied Industries and ors.
RespondentUnion of India (Uoi) and ors.
Appellant Advocate Roshan Lal Batta, Adv.
Respondent Advocate Gopi Chand and; Mani Ram, Advs.
DispositionPetition accepted
Cases ReferredRajkot v. Commissioner of Sales Tax
Excerpt:
.....to make a master batch, which is in the shape of a sheet and is like a soft paste. the payment of excise duty for so many intermediary processes, would result in the price of the product being raised to such an exorbitant level that the production of the material would become unfeasible, both for the manufacturer as well as for the consumer. it is a well-known rule of interpretation of statutes or statutory provision having the force of law that an interpretation which leads to absurd result, cannot be made and what is required to be seen is as to what was the real intention in framing the relevant provision. 151d (gujarat). this was a case where whole milk powder which becomes time expired, is regenerated into fluid milk by applying a mechanical process and by a further manufacturing..........duty ---------------------------------------item discription of basic additional handloomno. goods duty duty cess________________________________________________________________________________1 2 3 4 519(1)(b) cotton fabrics, twenty five per cent 1.9 paise subjected to the per cent ad valorem per sq. m. process of ad valorem bleaching, mercerising, dyeing, printing, water-proofing, rubberising, shrink-proofing, organdie processing or any other process or any two or more of these processes.__________________________________________________________________________________5. mr. r.l. batta, learned counsel appearing on behalf of the petitioners has referred to the above provision, and has forcefully contended that the said provision cannot be interpreted in such a way that if more than one.....
Judgment:

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 :

_______________________________________________________________________________

Rate of duty

---------------------------------------

Item Discription of Basic Additional Handloom

No. goods duty duty cess

________________________________________________________________________________

1 2 3 4 5

19(1)(b) cotton fabrics, Twenty Five per cent 1.9 paise

subjected to the per cent ad valorem per sq. m.

process of ad valorem

bleaching,

mercerising,

dyeing, printing,

water-proofing,

rubberising,

shrink-proofing,

organdie

processing or any

other process or

any two or more

of these processes.

__________________________________________________________________________________

5. Mr. R.L. Batta, learned counsel appearing on behalf of the petitioners has referred to the above provision, and has forcefully contended that the said provision cannot be interpreted in such a way that if more than one processes as mentioned therein are employed, the liability to pay excise duty would be attracted on the completion of every such process. After hearing the learned counsel for the parties at considerable length, we find that the contention of the learned counsel for the petitioners merits a favourable consideration. A perusal of the provision reproduced above, would show that cotton fabrics may be subjected to one or more of the several processes mentioned therein, for creating an end-product. Taking an example, the manufacture of a superior type of printed cotton fabric may undergo the process, first of water- proofing, with a view to make it shrink-proof. Thereafter, the same material may have to be bleached, mercerised, dyed, and then printed, before it is ready for being released in the market for sale. Can it be then said that merely because all these processes are mentioned in Item No. 19 (1) (b) of the Tariff, the Excise Department can claim duty at every step of the intermediary process of the manufacture of the cotton fabric. The answer to the question is apparently in the negative. The reason is not far to seek. The payment of excise duty for so many intermediary processes, would result in the price of the product being raised to such an exorbitant level that the production of the material would become unfeasible, both for the manufacturer as well as for the consumer. It is a well-known rule of interpretation of statutes or statutory provision having the force of law that an interpretation which leads to absurd result, cannot be made and what is required to be seen is as to what was the real intention in framing the relevant provision. Viewed from that angle, the only reasonable interpretation that can be put to Item No. 19(1)(b) of the Tariff is that the excise duty would be payable only on the end-product and not at every intermediary stage of the process of manufacture.

6. Mr. Gopi Chand, learned counsel for the contesting respondents concedes that no duty would be leviable on intermediary product if the process of manufacture of the end-product is composite, integrated and uninterrupted. He has, however, urged that this was not so in the present case. The counsel also raised an objection that the petitioners had nowhere taken up this stand in the Writ Petition that the process of manufacture was one of that type. However, the attention of the learned counsel was invited to the averment made in Ground No. (vii) of the Writ Petition where it was specifically mentioned that the intermediate product produced was used for obtaining an end-product in an uninterrupted process of manufacture. This fact has indeed been denied in the return filed by the respondents, but there is no reason mentioned for this denial, and it is merely repeated that the intermediary product would attract duty under Item No. 19(1 )(b) of the Tariff. The learned counsel for the respondents has also urged that the intermediary product, i.e., the Friction Cloth, is a marketable commodity and hence the same would attract excise duty. In support of his argument, he has referred to certain authorities, but we find that these authorities either do not support the contention of the counsel or are distinguishable on facts. The first case cited is Collector of Central Excise v. J.K. Synthetic Ltd., Kota, 1981 E.L.T. 5 (Del.), wherein it was held that an intermediary product used for obtaining an end-product in a single uninterrupted process will not attract duty. But, it would be dutiable if it is obtained by one process and is used for being converted into another product by a separate distinct process. The authority instead of helping the respondents, rather goes against them. As already noticed, the process of manufacture of Transmission of T.R. Beltings/V. Belts and Conveyor Belts is a continuous process, and not a separate or distinct process. In the above case, it was rather found that if polymer chips were manufactured in one place and then sent to another place for the purpose of manufacturing nylon yarn, it would only be a single continuous process of manufacture starting with caprolactum and ending with the emergence of nylon 6 yarn. It was further held that it cannot be said that these were two separate processes, merely because in the initial stages certain parts of the plant did not start functioning. The second case cited by the learned counsel is Sabarkantha District Co-operative Milk Producers Union Limited v. Union of India and Ors., 1981 E.C.R. 151D (Gujarat). This was a case where whole milk powder which becomes time expired, is regenerated into fluid milk by applying a mechanical process and by a further manufacturing process, the whole milk powder is converted into skimmed milk as well as butter. On the facts of this case, it was rightly held that two manufacturing processes bring two different sets of products into existence which are marketable, and hence excise duty would be payable on these two products. The authority has, however, no relevance in so far as the present case is concerned. In another case cited as Indian Vegetable Products Limited v. Union of India and Ors., 1980 E.L.T. 704 (Bom.), it was found that as vegetable tallow is used further for manufacture of soaps etc., it would not make the vegetable tallow as unfinished product. It was, thus, held that the vegetable tallow manufactured by the process of hydrogenation is not exempt from duty under the aforesaid notification. This case also does not advance the contention of the respondents any further. The only other case on the subject referred to by the counsel is, Hind Engineering Company, Rajkot v. Commissioner of Sales Tax, Gujarat, (1973) 31 S.T.C. 115, and though the said case relates to Rubber Beltings, the point which was considered and decided is as to whether Rubber Beltings would fall within the definition of the words 'cotton fabrics', as defined in Item No. 19 of the First Schedule to the Central Excises and Salt Act, 1944. It was held that even though it is assumed that canvas is comprehended within the meaning of 'cotton fabrics' for the purposes of the Act, the process of superimposition of rubber brings about such a basic change in its character nature and form that it loses its identity and is converted into an altogether different commercial commodity, which cannot be said to fall within the meaning of the expression 'cotton fabrics'. In so far as the present case is concerned, we are not faced with any such question in regard to the interpretation of the words 'cotton fabrics'. Some other similar authorities were also cited, which have no relevance whatsoever to the facts of the present case and the judgment need not, therefore, be burdened with the same.

7. After giving the matter our careful consideration, we find that in so far as the present case is concerned, 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.

8. In the result, this Writ Petition is accepted and the impugned notices Annexures 'P-1', 'P-3', issued to petitioner No. 1 and similar notices issued to the other petitioners are quashed. The respondents shall also bear the costs of the writ petition. The Counsel's fee is assessed at Rupees five hundred.


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