Marketability and captive consumption: aluminium castings were treated as non-marketable, while exemption notification issues were remanded.

Aluminium castings used captively in the manufacture of spring brake chambers were held not marketable because the supply agreement barred sale, marketing and disclosure, and the Department failed to prove a real market; excisability on that ground was therefore negatived in favour of the assessee. However, the applicability of exemption notifications to captively consumed castings required separate examination where the final product was cleared without duty, and that issue had not been addressed by the original authority or the Tribunal. The matter was remanded for fresh consideration of the notification-based exemption claim.

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Issues: (i) Whether the aluminium castings were marketable and therefore liable to excise duty. (ii) Whether the benefit of the exemption notifications was available to captively consumed aluminium castings when the final product was cleared without payment of duty.

Issue (i): Whether the aluminium castings were marketable and therefore liable to excise duty.

Analysis: The castings were produced for use in the manufacture of spring brake chambers supplied to the Defence Ministry's vehicle factory. The agreement between the parties prohibited sale, marketing, and disclosure of information relating to the castings. On those admitted facts, the record supported the finding that the castings were not capable of being marketed, and the Department had not established marketability independently.

Conclusion: The castings were held to be not marketable, and the finding against excisability on that ground was upheld in favour of the assessee.

Issue (ii): Whether the benefit of the exemption notifications was available to captively consumed aluminium castings when the final product was cleared without payment of duty.

Analysis: The appellate authority had specifically reasoned that the notifications governing captive consumption could not be applied where the final product itself enjoyed exemption from duty. That aspect had not been examined by the original authority or the Tribunal. The omission required reconsideration because the applicability of the notifications was central to the demand.

Conclusion: The matter was remanded for fresh consideration of the applicability of the exemption notifications to the intermediate castings.

Final Conclusion: The finding on marketability was sustained, but the controversy on notification-based exemption was sent back for reconsideration, so the dispute was not finally concluded on merits.

Ratio Decidendi: A captively consumed product is not exigible on the basis of marketability where its sale or marketing is contractually prohibited and the Department fails to establish a real market, but the availability of exemption notifications must still be separately examined where the final product is exempt and that issue has not been adjudicated.

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