Marketability as an excise prerequisite defeats duty demand on an intermediate carpet product treated as felt.

An intermediate product removed for further processing under Rule 56B was not marketable in the trade as felt, so it lacked the essential attribute for central excise duty. The Tribunal noted that marketability is a prerequisite for levy; where no marketable product emerges, classification and assessment do not arise. As the earlier finding that no manufacture of felt had occurred had become final between the parties, the classification-based duty demand could not survive. The product was therefore not liable to excise duty as felt, and the demand failed.

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Issues: Whether the intermediate product emerging during manufacture of carpets was marketable and hence excisable, and whether duty could be sustained on its classification as felt.

Analysis: The dispute turned on whether the goods cleared for further processing under Rule 56B retained the character of marketable felt so as to attract central excise duty. The Tribunal noted that the earlier order between the parties had examined expert and commercial evidence and had found that the product at the stage of removal was not known in the market as felt and was not marketable. It further held that marketability is an essential attribute of goods for levy of excise duty, and if no marketable product emerges, the question of classification and assessment does not arise. As the finding that no manufacture of felt occurred had become final between the parties, the incidental classification dispute could not survive.

Conclusion: The intermediate product was not marketable felt and was not liable to excise duty; the classification demand failed.

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