Marketability test for captive intermediate goods barred excise duty on sugar syrup used in biscuit manufacture.

An intermediate product captively consumed in manufacture is not liable to Central Excise duty unless the Department proves that it is marketable in the form in which it emerges. Applying this principle, the Tribunal noted that sugar syrup generated during biscuit manufacture was used within the factory and the record contained no evidence of marketability. It also relied on earlier coordinate Bench orders that had decided the same issue in favour of the assessee. On that basis, the sugar syrup was held not exigible to duty and the assessees were granted consequential relief.

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Issues: Whether sugar syrup arising during manufacture of biscuits and captively consumed in the factory was liable to Central Excise duty in the absence of evidence of marketability.

Analysis: The Tribunal followed the coordinate Bench view that duty cannot be levied on the intermediate product unless the Department establishes that the product, in the form in which it emerges, is marketable and otherwise excisable. The record did not show any evidence that the sugar syrup generated during biscuit manufacture was marketable, and the same issue had already been decided in favour of the assessee in earlier Tribunal orders relied upon by both sides.

Conclusion: Sugar syrup captively consumed during the manufacture of biscuits was not liable to Central Excise duty, as marketability was not proved.

Final Conclusion: All the appeals succeeded and the assessees were granted consequential relief in accordance with law.

Ratio Decidendi: An intermediate product captively consumed in manufacture is not exigible to Central Excise duty unless marketability is established by evidence.

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