Friction cloth not dutiable despite statutory provisions. Tribunal rules in favor of assessees.

The Tribunal held that friction cloth used in the manufacturing of certain belts is not subject to duty as it does not align with the description of Rubberised Cotton Fabrics, despite statutory provisions indicating excisability. The decision considered marketability, statutory entries, judicial precedents, and arguments from both parties. The Tribunal rejected the Revenue's appeal due to lack of evidence and legal support, setting aside the Commissioner's order and ruling in favor of the assessees.

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Issues:
Whether friction cloth arising at the intermediate stage in the course of manufacture of TR belting, V Belts, and Conveyor Belts is liable to duty or not.

Analysis:

Issue 1: Marketability of Friction Cloth
The Assistant Collector found that the friction cloth is not marketable after a thorough market enquiry. However, the Revenue challenged this finding, arguing that under the new Tariff Heading 59.05, describing the goods as "Rubberised textile fabric," friction cloth is covered and is excisable. The lower appellate authority upheld the Revenue's argument, emphasizing that the specific entry in the Central Excise Tariff makes friction cloth statutorily excisable, regardless of marketability. The authority also referenced a decision by the Punjab & Haryana High Court supporting this view. On the other hand, another appellate authority held that friction cloth does not conform to the description of Rubberised Cotton Fabrics and is not marketable, thus not eligible for duty. The Tribunal considered both views and concluded that friction cloth does not conform to the description of Rubberised Cotton Fabrics, and therefore, duty is not leviable on this product.

Issue 2: Judicial Precedents and Findings
The Tribunal heard arguments from both parties and considered two sets of findings. One set, by the Collector (Appeals), concluded that the product is not marketable, aligning with a judgment of the Punjab & Haryana High Court. The other set, by the Commissioner (Appeals), held that marketability is not crucial, especially when the Tariff Heading specifically includes rubberised cloth. However, the Tribunal found that the Commissioner's view on marketability not being relevant is unsustainable, citing a Supreme Court judgment. The Revenue failed to provide evidence on marketability, while the Assistant Collector's finding on non-marketability remained unchallenged. Consequently, the Tribunal set aside the Commissioner's order and allowed the appeals of the assessees against it. The Revenue's appeal was rejected based on the lack of evidence and legal grounds.

In conclusion, the Tribunal ruled that friction cloth used in the manufacture of certain types of belts is not liable to duty as it does not meet the description of Rubberised Cotton Fabrics, despite statutory provisions indicating excisability. The decision was based on a detailed analysis of marketability, statutory entries, judicial precedents, and legal arguments presented by both parties.

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