Captive LSHS held non-marketable and non-excisable, defeating duty demand, extended period invocation, and penalty consequences.

LSHS used captively in a refinery for steam and electricity generation was held to be an intermediate product with specifications materially different from the saleable standard product. Because it had much higher viscosity and flash point and was unsuitable for transport or sale in that condition, it was treated as not marketable and therefore not excisable. Once the product itself was non-excisable, the duty demand based on its alleged diversion for residential use failed. The Tribunal also found no basis for invoking the extended period, and the connected penalty consequences could not be sustained.

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Issues: Whether the LSHS used captively in the refinery for generation of steam and electricity was marketable and therefore excisable, and whether the duty demand based on its diversion for residential use could be sustained.

Analysis: The product consumed in the refinery was found to be only a loosely termed LSHS in an intermediate form, with specifications materially different from the saleable product marketed under the prescribed standard. The material used captively had much higher viscosity and flash point and was unsuitable for transportation or sale in that condition. On that basis, it was held not to be marketable, and therefore not excisable. Once the product itself was held non-excisable, the demand of duty failed. The Tribunal also found no ground for invoking the extended period.

Conclusion: The impugned LSHS was not marketable or excisable, and the duty demand, along with the connected invocation of extended period and penalty consequences, could not be sustained.

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