Refinery gas used captively is not excisable when it is neither marketable nor treated as a manufactured product.

Refinery gas that had earlier been flared but was later used within the refinery for steam and power generation was treated as not excisable because it was neither shown to be marketable nor regarded by the Department's own circular as a manufactured product. Its captive use, including for pollution control-related purposes, did not by itself create marketability or convert the gas into dutiable goods. On that basis, the duty demand and penalty were held unsustainable, with consequential relief following.

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Issues: Whether refinery gas, which was earlier flared into the atmosphere but was later utilised in the refinery for generation of steam and power, could be treated as a manufactured and marketable product so as to sustain the duty demand and penalty.

Analysis: The Board's circular treated the same refinery gas as not constituting a manufactured product, and it had been deleted from the list of exempted goods. The gas was not shown to be marketed by anyone, and its later use in the refinery arose partly from pollution control considerations. On that basis, the goods could not be regarded as marketable or as a manufactured product.

Conclusion: The duty demand and penalty were unsustainable, and the appeal was allowed with consequential relief.

Ratio Decidendi: A by-product or waste gas that is neither marketable nor regarded by the Department's own circular as a manufactured product cannot be subjected to excise duty merely because it is subsequently used within the refinery for captive purposes, including pollution control-related use.

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