Marketability test for captive intermediate products defeated excise duty demand on sugar syrup used in biscuit manufacture.

Sugar syrup emerging during biscuit manufacture and captively consumed in the factory was not liable to central excise duty because the Revenue failed to prove that it was marketable in the form in which it came into existence or otherwise satisfied the test of excisability. The Tribunal applied its earlier coordinate-bench reasoning that absence of evidence on tariff classification and marketability defeated the duty demand. Once the duty demand failed, the connected penalty appeal also became unsustainable.

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Issues: Whether sugar syrup emerging during the 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 its earlier coordinate-bench decision, which had relied on the absence of evidence showing that the sugar syrup was classifiable under the notified tariff entry or that it was marketable in the form in which it came into existence in the factory. On that basis, the intermediate product was held not to satisfy the test of excisability. The same reasoning applied to the present batch of appeals, and the penalty appeal was also rendered unsustainable once the duty demand itself failed.

Conclusion: The intermediate sugar syrup was not exigible to central excise duty for want of proof of marketability. The assessee's appeals were allowed and the Revenue's penalty appeal was dismissed.

Ratio Decidendi: An intermediate product captively consumed in manufacture is not dutiable unless the revenue establishes its marketability and excisability.

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