Marketability of intermediate goods defeated excise duty on friction cloth in a continuous manufacturing process.

Intermediate friction cloth or rubberised cloth produced in a continuous manufacturing process was not marketable, was not bought or sold as a distinct commodity, and was not known to trade as a separate article. On that basis, it did not answer the statutory concept of "goods" and was not exigible to central excise duty under the charging scheme. The 1982 explanations to Rules 9 and 49 of the Central Excise Rules could not create liability where the intermediate product was not itself an excisable article within the charging provisions. The excise notices demanding licence and duty were therefore without jurisdiction and were quashed.

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Issues: Whether friction cloth or rubberised cloth arising at an intermediate stage in the composite manufacture of transmission rubber belting, V-shaped belts and conveyor belts was exigible to central excise duty.

Analysis: The relevant charging scheme under section 3 of the Central Excises and Salt Act, 1944 applied to excisable goods specified in the First Schedule, and the statutory concept of goods required an article ordinarily capable of being bought and sold in the market. The court held that the so-called friction cloth was only an intermediate product emerging in a continuous and integrated manufacturing process, was not sold or purchased in the market, and was not known to trade as a distinct commodity. The 1982 explanations added to Rules 9 and 49 of the Central Excise Rules, 1944 did not alter this position because they could operate only where the intermediate product was itself an excisable article within the charging provisions.

Conclusion: The intermediate friction cloth or rubberised cloth was not exigible to central excise duty, and the impugned notices requiring licence and duty were without jurisdiction.

Final Conclusion: The writ petitions succeeded and the challenged excise notices were quashed, with costs awarded to the petitioners.

Ratio Decidendi: An intermediate product arising in a continuous manufacturing process is not liable to excise duty unless it is a marketable good falling within the charging provisions of the excise statute.

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