Marketability is essential for excise duty: a captively consumed intermediate fabric was treated as non-excisable.

An intermediate product used only within a continuous manufacturing process is not excisable unless it is marketable. Here, the impregnated special woven fabric arising during manufacture of tubular bags had only a very short self-life, was not capable of being marketed, and was consumed captively in producing the final goods. Because marketability is an essential attribute of excisable goods, the non-marketable intermediate fabric did not attract central excise duty. The duty demand was therefore set aside.

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Issues: Whether the intermediate product, impregnated special woven fabric arising during manufacture of tubular bags, was marketable and therefore excisable, and whether central excise duty was leviable on such product.

Analysis: The intermediate fabric emerged in a continuous manufacturing process and had a very short self-life of only a few minutes. On the facts found, it was not capable of being marketed and was only captively consumed in the manufacture of the final product. Since marketability is an essential attribute of excisable goods, a non-marketable intermediate product does not fall within the charge of central excise duty.

Conclusion: The intermediate product was held to be non-marketable and non-excisable, and the duty demand was set aside in favour of the assessee.

Ratio Decidendi: An intermediate product that is not marketable cannot be treated as excisable goods, and no central excise duty can be levied on such captively consumed goods.

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