Marketability and excisability of Low Sulphur Heavy Stock required fresh adjudication before any exemption question could arise.

The dispute concerned whether Low Sulphur Heavy Stock was the same commodity as Residual Fuel Oil, whether it was excisable and marketable, and whether exemption under Notification No. 67/95-CE could apply. The CESTAT held that the foundational questions of actual manufacture, marketability, and excisability had not been finally determined, and that the Revenue had to discharge the burden of proving marketability. Exemption could be examined only after the product was first found to be the same commodity and dutiable, including in the context of use in power generation and partial sale to TNEB. The matter was remanded for fresh, reasoned adjudication on these issues.

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Issues: Whether the dispute required remand for fresh adjudication on the foundational questions whether Low Sulphur Heavy Stock was the same as Residual Fuel Oil, whether the product was excisable and marketable, and whether exemption under Notification No. 67/95-CE was available.

Analysis: The controversy arose from the show cause notice itself and the core questions were not finally determined by the authorities below. The proper enquiry was whether the product was actually manufactured, whether it satisfied the twin requirements of manufacture and marketability, and whether the Revenue had discharged the burden of proving marketability. Only if the product was found to be the same commodity and dutiable could the question of exemption arise under the notification when used in power generation partly sold to TNEB. The earlier precedent on Chennai Petroleum Corporation Ltd. was treated as fact-specific, while the issue of excisability had to be examined independently on the basis of the Board of Trustees, Hindustan Petroleum, and Hindustan Zinc principles.

Conclusion: The matter was remanded to the adjudicating authority for fresh, reasoned adjudication on the foundational issues, and the Revenue appeal was disposed of accordingly.

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