Marketability test controls excise duty on captive sugar syrup used in exempt final products.

Sugar syrup manufactured at an intermediate stage and used captively in exempt final products was assessed on marketability, because central excise duty could arise only if the syrup was capable of sale as such. The analysis relied on test reports showing total soluble solids below the recognised 65% threshold for saleable syrup and on a certificate stating that such low-concentration syrup was perishable and unfit for marketing. CBEC circulars were read as treating sugar syrup as dutiable only where marketability is established. Reliance on alleged examples involving other assessees was rejected for want of proof and comparability, and the demand, interest, and penalty were set aside.

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Issues: Whether sugar syrup manufactured at an intermediate stage and consumed captively in the manufacture of exempt final product was marketable and therefore excisable to central excise duty.

Analysis: The dispute turned on marketability, since duty could be sustained only if the intermediate sugar syrup was capable of being sold as such. The Court relied on the test reports showing total soluble solids below the 65% threshold recognised in the Food Safety and Standards regime for saleable syrup, and on the certificate indicating that such low-concentration syrup was perishable and unfit for marketing. The Court also noted the CBEC circulars which consistently treated sugar syrup as dutiable only where marketability was established. The adjudicating authority had relied on examples of alleged marketability of other assessees' products without proving the contents or showing that those products were comparable, and that basis was found to be outside the show cause notice and unsupported by evidence.

Conclusion: The sugar syrup was held not to be marketable and therefore not excisable. The demand, interest, and penalty were set aside, and the appeal was allowed with consequential relief.

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