Marketability of intermediate products must be proved by Revenue before excise duty can apply to captive consumption.

Central excise duty on an intermediate product depends on whether the product, in the form in which it emerges and is captively consumed, is excisable and marketable. The Revenue must prove marketability with positive evidence; here, no samples were drawn, no testing was done, and assumptions based on precious metal content or website references were insufficient to establish that the liquid intermediate product was offered for sale or marketable in that condition. The burden was not discharged, so the demand and penalties were unsustainable.

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Issues: Whether the intermediate products arising in the course of manufacture, and captively consumed within the factory for production of exempted goods, were excisable and dutiable in the absence of evidence of marketability.

Analysis: The liability to central excise duty on an intermediate product depends on its excisability, and marketability in the form in which it emerges is a vital requirement. The Revenue had not produced positive evidence that the liquid intermediate product, as such, was offered for sale or was marketable in the condition in which it was consumed. No samples were drawn and no test was conducted. The Tribunal held that mere assumptions based on the presence of precious metal content or website references could not establish that the exact intermediate product was marketable. The burden to prove marketability lay on the Revenue, and that burden was not discharged.

Conclusion: The intermediate products were not shown to be marketable and could not be subjected to excise duty on the material on record; the demand and penalties were unsustainable.

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