Marketability of intermediate sugar syrup and limitation on extended-duty demand where facts were already disclosed.

Intermediate sugar syrup produced in manufacture was treated as marketable and therefore excisable because the product was technically stable, had shelf life, and was shown on the record to be captively consumed as well as sold. For limitation, the extended period was found unavailable because the material facts about the manufacturing process were already disclosed to the department and the dispute arose in the context of shifting departmental views on marketability. The duty demand and penalty were therefore set aside on limitation, even though the product was dutiable on merits.

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Issues: (i) Whether the intermediate product sugar syrup emerging in the manufacture of the final product was marketable and therefore excisable; (ii) whether the demand for duty was barred by limitation.

Issue (i): Whether the intermediate product sugar syrup emerging in the manufacture of the final product was marketable and therefore excisable

Analysis: The product was plain sugar syrup prepared by dissolving sugar in water and heating it to 85 C, with concentration above 65%. The technical opinion on record stated that syrup of such concentration is resistant to fermentation and deterioration and has shelf life. The Board's later circular also treated marketability as the governing test for excisability. On the record, the product had been described by the assessee itself as being captively consumed in manufacture and also sold to distributors, and this was treated as sufficient evidence of marketability. Earlier Tribunal decisions on similar sugar syrup were also relied upon as supporting excisability.

Conclusion: The sugar syrup was held to be marketable and excisable, so the demand was sustainable on merits.

Issue (ii): Whether the demand for duty was barred by limitation

Analysis: The material facts regarding the process of manufacture had been disclosed to the department in earlier statements and correspondence. The department was aware that the syrup was an intermediate product, yet the show-cause notice invoking the extended period was issued much later for an old period. The record also showed fluctuation in the departmental view on marketability, which weighed against invocation of the extended period.

Conclusion: The demand was held to be time-barred and the penalty could not survive.

Final Conclusion: The appeal succeeded on limitation, with the duty demand and penalty set aside, though the product itself was found dutiable on merits.

Ratio Decidendi: Where an intermediate product is technically stable and the record itself shows its marketability through actual or admitted commercial disposition, it is excisable; but the extended period of limitation cannot be invoked when the material facts were already within the department's knowledge and the controversy arose from shifting departmental views.

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