Marketability of intermediate goods determined excise classification of rubber coated fabric and friction tapes under the residuary tariff item

Rubber coated cotton fabric used as an intermediate product, and friction tapes manufactured from it, were analysed under the Central Excise Tariff on the basis of marketability. Applying the principle that an intermediate product is excisable only if it is marketable, the Tribunal held that unvulcanised rubber coated fabric, whose marketability was not established, could not be classified under Item 19(I)(b). As the friction tapes were not specifically covered elsewhere in the tariff, both the coated fabric and the tapes fell outside the specific item and were classifiable under the residuary Item 68.

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Issues: Whether the rubber coated cotton fabric intermediate product and the friction tapes manufactured from it were dutiable under Tariff Item 19(I)(b) of the erstwhile Central Excise Tariff, or were correctly classifiable under Item 68.

Analysis: The rubber coated fabric emerged as an intermediate product in the course of manufacture and was not subjected to vulcanisation. Applying the principle that an intermediate product must be marketable before it can be treated as excisable goods, the Tribunal relied on binding precedent holding that unvulcanised, unmarketable fabric does not attract duty under Item 19. Since the department failed to establish marketability of the intermediate product, neither the coated fabric nor the friction tapes produced from it could be brought within Item 19(I)(b). The tapes were not specifically covered elsewhere in the tariff.

Conclusion: The goods were not dutiable under Item 19(I)(b) and were correctly classifiable under Item 68. The appeal was dismissed.

Ratio Decidendi: An intermediate product is not excisable unless it is marketable, and where rubber coated fabric and friction tapes are not covered by the specific tariff entry, they fall under the residuary item.

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