Marketability and limitation in excise: disclosed manufacturing process defeated suppression, while Modvat credit and scrap exemption were allowed.

Intermediate flat rolled products were treated as marketable and therefore excisable because evidence showed that identical goods were traded by other manufacturers. The extended period of limitation could not be invoked since the assessee had disclosed the manufacturing process in filed declarations and suppression of facts was not established; the demand beyond six months was time-barred. Once excisability was accepted, Modvat credit on duty-paid inputs was held admissible, the assessable value required recomputation with abatement of duty, and exemption on scrap was available where the scrap arose during manufacture of the exempt final product. The matter was remitted for fresh computation of duty and reconsideration of penalty.

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Issues: (i) whether the intermediate flat rolled products were marketable and therefore excisable; (ii) whether the demand was barred by limitation for absence of suppression; (iii) whether the assessee was entitled to Modvat credit, abatement of duty in valuation, and exemption on scrap.

Issue (i): whether the intermediate flat rolled products were marketable and therefore excisable

Analysis: The goods were manufactured from duty-paid ingots, cut into pieces, heated and re-rolled in a rolling mill. The revenue produced evidence that other manufacturers traded in the same goods. On that basis, the Tribunal found that the goods were capable of being bought and sold in the market and could not be treated as non-marketable merely because they were intermediate products.

Conclusion: The intermediate flat rolled products were held to be marketable and excisable, against the assessee.

Issue (ii): whether the demand was barred by limitation for absence of suppression

Analysis: The assessee had filed declarations describing the manufacturing process and claiming exemption for the final product. The declarations were available to the revenue, and the process of manufacture was specifically mentioned therein. In these circumstances, suppression could not be alleged and the extended period could not be invoked for the earlier part of the demand.

Conclusion: The demand relating to the period beyond six months prior to the notice was held to be time-barred, in favour of the assessee.

Issue (iii): whether the assessee was entitled to Modvat credit, abatement of duty in valuation, and exemption on scrap

Analysis: Once the intermediate product was treated as excisable, credit of duty on inputs used in its manufacture was held admissible on production of duty-paying documents. The assessable value required re-computation, and abatement of excise duty had to be given. As regards scrap, there was no evidence that the scrap cleared by the assessee arose from the intermediate product itself; it arose during manufacture of exempt final discs, so the exemption notification applied.

Conclusion: The assessee was held entitled to Modvat credit, recalculation of assessable value with abatement, and exemption on scrap, in favour of the assessee.

Final Conclusion: The matter was sent back for fresh computation of duty and reconsideration of penalty, while sustaining the finding that the intermediate goods were excisable and limiting the demand to the non-time-barred portion.

Ratio Decidendi: Marketability can be established by evidence that identical goods are traded by other manufacturers, but the extended period of limitation cannot be invoked where the assessee has disclosed the manufacturing process in filed declarations and there is no suppression of facts.

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