Customs exemption for yarn used in belting manufacture turns on proven end-use, not on who makes the final belting

The Customs exemption under Notification No. 389/76-Cus. applied to imported man-made fibre yarn used in the manufacture of belting for machinery, provided the importer proved the end-use to the satisfaction of the Assistant Collector. The decisive requirement was actual ultimate use in the belting manufacture, not that the importer must personally produce the finished belting. Use of the yarn in belting ducks, as an essential intermediate product in the manufacturing chain, was sufficient in principle to attract the exemption where the final belting was made by another manufacturer, subject to proof and accounting for any quantity not so used.

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Issues: Whether the benefit of Customs Notification No. 389/76-Cus. dated 02.08.1976 was available where imported nylon filament yarn was used in the manufacture of belting ducks as an intermediate product, and the belting for machinery was manufactured by another manufacturer.

Analysis: The notification granted exemption to yarn of man-made fibres imported for the manufacture of belting for machinery, subject to proof to the satisfaction of the Assistant Collector that the imported yarn was so used. The decisive requirement was actual end-use in the manufacture of belting for machinery, and not that the importer himself must personally manufacture the finished belting. Since belting ducks were treated as an essential intermediate product in that manufacturing chain, the benefit could not be denied merely because the final belting was produced by another manufacturer, provided the importer established the ultimate use of the yarn. The importer would remain liable to pay differential duty on any quantity not so accounted for.

Conclusion: The exemption was held applicable in principle to the imported yarn used for belting ducks, subject to proof of its ultimate use in the manufacture of belting for machinery; the appeal was allowed with corresponding relief.

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