Central excise duty on captively used sugar syrup fails where classification and marketability are not proved by reliable evidence.

Central excise duty on captively consumed sugar syrup could not be sustained because the Department failed to prove the correct tariff classification and marketability on the evidence required. The Tribunal relied on an earlier decision on identical facts and held that, without chemical test evidence establishing the requisite fructose content, the disputed classification could not be accepted. It also found that marketability of the product in the form in which it emerged from the factory had not been shown, and that presumptions based on other products or other manufacturers could not replace proof. The denial of exemption and the duty demand were therefore set aside.

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Issues: Whether the sugar syrup manufactured and used captively in the manufacture of biscuits was liable to central excise duty and whether the impugned classification and demand could be sustained.

Analysis: The dispute was covered by an earlier Tribunal decision on identical facts. The decisive reasoning was that classification under the disputed tariff entry could not be upheld in the absence of chemical test evidence establishing the requisite fructose content. The Tribunal also held that marketability had not been proved in the condition in which the product emerged from the factory, and that presumptions based on other products or other manufacturers could not substitute proof. On that basis, the denial of exemption and the resulting duty demand were not sustainable.

Conclusion: The issue was decided in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeal was allowed.

Ratio Decidendi: Excise duty cannot be sustained on a product unless the Department establishes, by reliable evidence, both the correct classification and the marketability of the goods in the form in which they emerge.

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