Marketability is essential for excise duty; finished-goods records alone do not prove duty liability on fabrics.

Excise duty under the compounded levy regime is attracted only when fabrics have completed manufacture and become marketable excisable goods. Mere entry in the RG-1 register, inclusion in the finished goods account, or presence in the finishing room does not by itself prove that the goods were finished or marketable. On the record, there was no evidence that the fabrics had completed the manufacturing process so as to attract duty. In the absence of proof of marketability, the demand could not be sustained, and the assessee's contention prevailed.

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Issues: Whether the stock of fabrics lying in the finishing room on the relevant date was finished and marketable goods liable to excise duty under the compounded levy regime.

Analysis: Liability to excise depends on manufacture and marketability. Mere entry of goods in the RG-1 register or their presence in the finished goods account does not by itself establish that the goods had become marketable finished goods. The record contained no evidence showing that the goods in question had completed the manufacturing process so as to attract duty. In the absence of proof of marketability, the demand could not be sustained.

Conclusion: The issue is decided in favour of the assessee. The goods were not shown to be marketable excisable goods and the demand was liable to be set aside.

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

Ratio Decidendi: Excise duty cannot be demanded on goods merely because they are recorded in the finished goods register or found in a finished room unless the department proves that they had become marketable and excisable goods.

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