Marketability is essential for excisability; captively used graphite-clay mixture was not liable to duty without proof of saleability.

A captively used mixture of graphite and clay was held not excisable because the department failed to prove marketability. The mere fact that the product was mentioned in the tariff or in an exemption notification was insufficient to establish excisability. Applying the settled test that goods must be capable of being bought and sold before they can be treated as excisable, the intermediate product was found not liable to duty, and the related duty demand and penalty could not be sustained.

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Issues: Whether the mixture of graphite and clay used captively in the manufacture of pencil lead was marketable and therefore excisable, and whether the demand of duty and penalty could be sustained.

Analysis: The authorities below had accepted that the mixture was not bought or sold in the market. The department produced no evidence to show that the intermediate product was marketable. Mere inclusion of the product in the tariff or reference to it in the exemption notification was held insufficient to establish excisability. Applying the settled test that goods must be marketable before they can be treated as excisable goods, the captively used mixture was found not liable to duty.

Conclusion: The mixture of graphite and clay was not excisable for want of marketability, and the demand of duty and penalty could not be sustained.

Ratio Decidendi: An intermediate product is not excisable unless the department proves that it is marketable and capable of being bought and sold.

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