Captive-use manufacturing attracts excise duty where goods are marketable, and non-disclosure can justify extended limitation.

Testing equipment fabricated in-house for use within the factory was held dutiable under central excise because the assessee's own records showed manufacture from raw materials and the goods remained marketable; captive consumption and later dismantling did not remove them from the charging provisions. The explanations to Rule 9 and Rule 49 treated such captive use as removal from the premises, so the duty challenge failed. The extended period of limitation was also upheld because the assessee had not obtained the required licence and had not disclosed the manufacture, which amounted to suppression of material facts. The duty demand and penalty were sustained.

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Issues: (i) Whether testing equipment fabricated in-house for use within the factory was dutiable excisable goods notwithstanding captive consumption and dismantling after use. (ii) Whether the extended period of limitation was rightly invoked on the ground of non-disclosure and suppression of relevant facts.

Issue (i): Whether testing equipment fabricated in-house for use within the factory was dutiable excisable goods notwithstanding captive consumption and dismantling after use.

Analysis: The assessee's own balance sheet and director's report recorded addition to plant and machinery, including testing equipment, fabricated in the company out of raw material, stores, spares, salary and wages. Those admissions, together with the reply to the show cause notice, established manufacture of testing equipment. The fact that the goods were used within the factory or later dismantled did not take them out of the charging provisions. Goods which are manufactured and are marketable do not cease to be excisable merely because they are captively consumed. The explanations to Rule 9 and Rule 49 of the Central Excise Rules deemed such consumption to be removal from the premises.

Conclusion: The fabricated testing equipment was liable to central excise duty and the contention based on captive use or non-removal failed.

Issue (ii): Whether the extended period of limitation was rightly invoked on the ground of non-disclosure and suppression of relevant facts.

Analysis: The assessee had not obtained L-4 licence and had not disclosed the manufacture of the goods to the department. The department came to know of the manufacture only later. In that background, the omission amounted to suppression of material facts, making the extended limitation provision applicable.

Conclusion: The extended period of limitation was validly invoked.

Final Conclusion: The appeal failed on merits and on limitation, and the duty demand and penalty were sustained.

Ratio Decidendi: Goods manufactured within the factory for captive use are exigible to central excise duty if they are marketable, and deliberate non-disclosure of such manufacture justifies invocation of the extended period of limitation.

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