Excise duty on fly ash requires manufacture plus marketability; a by-product from coal combustion is not excisable.

Fly ash generated during electricity generation was held not to be a manufactured excisable product. It arose only as a by-product of coal combustion in a captive power plant, without any separate manufacturing process. Excise duty requires both manufacture or production and marketability, and these twin conditions must coexist. Mere inclusion of fly ash in a tariff entry or its sale value does not make it excisable where manufacture is absent. The earlier High Court view on the same issue was followed, and fly ash was therefore not liable to central excise duty.

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Issues: Whether fly ash generated during the course of electricity generation is a manufactured excisable product liable to central excise duty.

Analysis: Fly ash arose as a by-product during combustion of coal in the captive power plant and not from any separate manufacturing process. The essential tests for levy of excise duty are manufacture or production and marketability, and both must coexist. Mere inclusion of fly ash in a tariff entry or its sale value does not create excisability when manufacture is absent. The earlier High Court decision on the same point was followed.

Conclusion: Fly ash was not liable to central excise duty.

Ratio Decidendi: Excise duty can be levied only when goods satisfy the twin requirements of manufacture or production and marketability; a by-product generated without manufacture is not excisable merely because it is marketable or placed in a tariff entry.

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