1985 (4) TMI 70 - HC - Central Excise

Summary

Issues Involved:
1. Classification of manufactured goods under the Excise Tariff.
2. Jurisdiction of the Superintendent, Central Excise, to issue notice and detention order.
3. Applicability of excise duty on intermediary products.
4. Marketability of intermediary products.
5. Interpretation of relevant tariff items and amendments to Excise Rules.

Detailed Analysis:

1. Classification of Manufactured Goods Under the Excise Tariff:
The petitioner manufactures rubber belting, including V belts, which it claims fall under Excise Tariff Item No. 16-A(4) of Schedule 1 to the Central Excises and Salt Act, 1944. The Superintendent of Central Excise issued a notice asserting that the goods were processed cotton fabrics falling under Tariff Item No. 19-1(1). This classification was initially contested and resolved in favor of the petitioner by the Assistant Collector, Central Excise, Aligarh, in 1978. However, a fresh notice in 1985 reasserted that the goods were rubberised cotton fabrics (intermediary product) falling under Tariff Item No. 19-I(b).

2. Jurisdiction of the Superintendent, Central Excise, to Issue Notice and Detention Order:
The petitioner argued that the Superintendent had no jurisdiction to issue the impugned notice and detention order once the matter had been decided by the Assistant Collector in 1978. Additionally, it was asserted that the notice and detention order were barred by time.

3. Applicability of Excise Duty on Intermediary Products:
The respondents contended that due to amendments in the definition of "manufacture" (Section 2(f)(v) of the Act) and changes in Rules 9 and 49 of the Excise Rules, 1944, excise duty could be levied on intermediary products. The amendments specified that processes like rubberising would constitute "manufacture," making intermediary products like vulcanised sheets subject to excise duty.

4. Marketability of Intermediary Products:
The petitioner argued that vulcanised sheets, termed as Rubberised Cotton Fabrics by the respondents, were not marketable goods. They were intermediary products used in the continuous process of manufacturing belts, which are the marketable end-products. The petitioner cited precedents emphasizing that excise duty is payable only on marketable goods.

5. Interpretation of Relevant Tariff Items and Amendments to Excise Rules:
The court examined the definitions and amendments:
- Section 2(f)(v) includes processes like rubberising in "manufacture."
- Tariff Item No. 16-A(4) covers "Transmission, conveyor or elevator belts or belting, or vulcanised rubber."
- Tariff Item No. 19-I(b) includes "Cotton fabrics, subjected to processes like rubberising."

The court found that vulcanised sheets, used to make belts, fit the definition of "belting" under Tariff Item No. 16-A(4) rather than "rubberised cotton fabrics" under Tariff Item No. 19-I(b). The principle of "generalia specialibus non-derogant" (specific provisions prevail over general ones) was applied, favoring the specific classification under Item 16-A(4).

Conclusion:
The court quashed the impugned notice and detention order, ruling that the vulcanised sheets (termed as Rubberised Cotton Fabrics by the respondents) should be classified under Tariff Item No. 16-A(4) as "belting," exempt from excise duty. The court emphasized that intermediary products not marketable as independent goods do not attract excise duty. The writ petition was allowed, and the respondents were directed not to enforce the impugned notice and detention order. No costs were awarded.