Captive consumption of non-marketable intermediate goods: friction cloth used in belting manufacture was held not liable to excise duty.

Friction cloth used as an intermediate product in the continuous manufacture of transmission belting was treated as non-marketable and only captively consumed within an uninterrupted production process. On that basis, and following the binding High Court view, the Tribunal held that the amended Rules 9 and 49 of the Central Excise Rules, 1944 did not make such friction cloth dutiable when used in the manufacture of belting and conveyor belts. The Revenue's challenge therefore failed, and the intermediate product was held not liable to central excise duty.

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Issues: Whether friction cloth, being an intermediate product captively used in the continuous manufacture of transmission belting, was marketable and liable to central excise duty.

Analysis: The friction cloth was used in an uninterrupted manufacturing process and was not shown to be a marketable commodity. The adjudicating authority had found that it was only an intermediate product. The Tribunal followed the binding High Court view that such friction cloth, even after the amendment of Rules 9 and 49 of the Central Excise Rules, 1944, was not liable to duty when captively consumed in the manufacture of belting and conveyor belts.

Conclusion: The friction cloth was not dutiable and the Revenue's challenge failed.

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