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Issues: (i) Whether P.C. acid, an intermediate product used in the manufacture of the final product, was excisable goods on the basis of marketability and captive consumption; (ii) Whether the demand was barred by limitation and the extended period could be invoked for alleged suppression of facts.
Issue (i): Whether P.C. acid, an intermediate product used in the manufacture of the final product, was excisable goods on the basis of marketability and captive consumption.
Analysis: The relevant test was whether the intermediate product was identifiable and marketable, actual sale not being necessary. On the record, P.C. acid was treated as a well-defined organic chemical with a definite use, capable of isolation and having sufficient shelf life. The material relied on by the assessee did not conclusively establish that it was incapable of being bought or sold in the market. Captive consumption by itself did not negative excisability where marketability was shown.
Conclusion: P.C. acid was held to be excisable goods and liable to central excise duty; the finding was against the assessee.
Issue (ii): Whether the demand was barred by limitation and the extended period could be invoked for alleged suppression of facts.
Analysis: The classification list, declaration and write-up filed by the assessee did not disclose that P.C. acid was being manufactured as such, and the Department could not ascertain the emergence of the product from the information furnished. In these circumstances, non-disclosure of the material facts supporting excisability justified invocation of the extended period.
Conclusion: The demand was held to be within the extended period and not barred by limitation; the finding was against the assessee.
Final Conclusion: The majority upheld the duty demand and the connected penalty and rejected the appeal.
Ratio Decidendi: An identifiable intermediate product is dutiable if it is marketable, and incomplete disclosure in statutory declarations can constitute suppression justifying the extended period of limitation.
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