Marketability and removal control excise duty on captive intermediate goods used within the same factory.

Excise duty on calcium carbide manufactured and consumed captively within the same factory turns on marketability and the statutory point of removal. The text states that an intermediate product must attain a saleable, commercially marketable form before it can be treated as excisable goods, and that intra-factory movement within the same factory does not amount to removal. On that reasoning, the demand was set aside because the product was not shown to be marketable excisable goods and no removal from the factory was established.

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Issues: (i) Whether the calcium carbide manufactured and consumed within the same factory was "goods" and capable of being assessed to excise duty under the Act and the applicable rules. (ii) Whether excise duty could be levied and collected in the absence of removal of the product from the factory.

Issue (i): Whether the calcium carbide manufactured and consumed within the same factory was "goods" and capable of being assessed to excise duty under the Act and the applicable rules.

Analysis: The levy of excise depends on the manufacture of excisable goods having material form, economic utility, exchangeability, and marketability. Where a product is only an intermediate substance used within the same factory, its character as goods depends upon whether it has reached a saleable form. The safety and regulatory regime under Chapter III of the Carbide of Calcium Rules, 1937 also restricts transport, storage, delivery, dispatch, and sale except in compliance with prescribed precautions, which reinforces the requirement of marketability. The product here was used captively for acetylene gas and had not attained the statutory and commercial attributes of marketable calcium carbide.

Conclusion: The calcium carbide in question was not shown to be marketable goods for excise purposes, and this issue is answered in favour of the assessee.

Issue (ii): Whether excise duty could be levied and collected in the absence of removal of the product from the factory.

Analysis: Under the scheme of Sections 3 and 4 of the Act and Rules 9 and 49, valuation and collection are linked to removal from the factory. The movement of material from one plant to another within the same premises does not amount to removal from the factory where both plants form part of the same factory within Section 2(e). As the product never left the factory, the stage for levy and collection was not reached.

Conclusion: Excise duty could not be collected absent removal from the factory, and this issue is answered in favour of the assessee.

Final Conclusion: The writ petition succeeds, and the orders demanding excise duty were set aside because the product was not established to be marketable excisable goods and, in any event, no removable event from the factory was shown.

Ratio Decidendi: Excise duty on a product manufactured within a factory can be sustained only if the product is marketable excisable goods and the statutory point of removal from the factory is reached; captive intra-factory transfer does not by itself constitute removal.

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