Marketability test defeats excise duty on captively used sugar syrup in biscuit manufacture

Sugar syrup arising during biscuit manufacture and captively consumed in the factory was held not liable to Central Excise duty because the Revenue failed to prove that it was marketable in the form in which it emerged. The Tribunal followed earlier coordinate bench decisions and applied the principle that an intermediate product becomes exigible only if marketability is established. In the absence of such proof, mere emergence during manufacture and captive use did not attract duty. All appeals were allowed and consequential relief followed.

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Issues: Whether sugar syrup arising during the manufacture of biscuits and captively consumed in the factory was marketable and hence chargeable to Central Excise duty.

Analysis: The appeals arose from demands raised on sugar syrup treated as an intermediate product. The Tribunal noted that the issue had already been considered in earlier coordinate bench decisions, which held that there was no evidence to show that the sugar syrup, in the form in which it came into existence in the factory, was marketable. In the absence of proof of marketability, the product could not be subjected to Central Excise duty merely because it emerged during the manufacturing process and was used captively.

Conclusion: Sugar syrup captively consumed in the manufacture of biscuits was not dutiable, as its marketability was not established.

Final Conclusion: All the appeals were allowed and consequential relief followed.

Ratio Decidendi: An intermediate product is not exigible to Central Excise duty unless the Revenue establishes that it is marketable in the form in which it comes into existence.

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