Marketability of captive intermediate goods must be proved before excise duty can be sustained on sugar syrup used in biscuits.

Captively consumed sugar syrup used in biscuit manufacture was not shown to be marketable in the form in which it emerged, so central excise duty could not be imposed. The Tribunal held that marketability must be affirmatively proved with reliable evidence of the actual product's nature and composition; a third-party invoice for a different product was insufficient. Since the Department relied on assumption rather than proof of excisability, the demand failed and the assessee's appeal was allowed.

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Issues: Whether sugar syrup prepared captively in the manufacture of biscuits was liable to central excise duty in the absence of proof that it was marketable in the form in which it emerged, and whether the demand could be sustained merely because the final biscuits were exempt.

Analysis: The duty demand rested on the assumption that the intermediate sugar syrup became dutiable once the final biscuits were exempted. The controlling test, however, was whether the product, as it emerged in the factory, was marketable. The Department did not establish the actual nature and composition of the syrup by chemical test or other reliable evidence, and marketability was inferred only from a third-party invoice for a different product described as invert sugar syrup. Such derivative comparison was insufficient, because marketability must be proved with reference to the goods in the condition in which they come into existence. The Tribunal followed its earlier decisions on similar job-work manufacture of biscuits and held that the record did not support excisability.

Conclusion: The demand of central excise duty on the captively consumed sugar syrup was unsustainable. The impugned orders were set aside and the appeals were allowed in favour of the assessee.

Final Conclusion: The decision turns on failure to prove that the intermediate product was marketable in its emergent form, and therefore the excise demand could not be upheld.

Ratio Decidendi: An intermediate product is chargeable to central excise only if its marketability in the form in which it emerges is affirmatively proved; a demand cannot be sustained on assumptions or on comparison with a different product manufactured by another entity.

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