Captive plastic jars lacking marketability are not dutiable; bona fide SSI claim and no suppression defeat demand

Plastic jars manufactured in-house and used captively for packing the final product were treated as non-dutiable because excise liability depended on independent marketability, which was absent on the stated facts. The demand was also unsustainable because the assessee had a bona fide small scale exemption claim within the relevant threshold and there was no deliberate suppression of material facts. On that basis, both the duty demand and the impugned order were set aside, with consequential relief to the assessee.

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Issues: (i) Whether the plastic jars manufactured and used captively as an intermediate product were dutiable in the absence of independent marketability; (ii) whether the demand could be sustained in view of the assessee's claim to small scale exemption and absence of deliberate suppression.

Issue (i): Whether the plastic jars manufactured and used captively as an intermediate product were dutiable in the absence of independent marketability.

Analysis: The dispute concerned duty liability on plastic jars manufactured in-house and used for packing the final product. The determining factor was whether the intermediate product had independent marketability. The record showed that the jars were branded and used within the assessee's own manufacturing process, and the decision proceeded on the principle that an intermediate product lacking marketability is not exigible to excise duty.

Conclusion: The issue was decided in favour of the assessee and the intermediate product was held not liable to duty on the stated facts.

Issue (ii): Whether the demand could be sustained in view of the assessee's claim to small scale exemption and absence of deliberate suppression.

Analysis: The assessee claimed bona fide belief that its turnover remained within the exemption threshold under Notification No. 8/2003. The stated values for the relevant periods were below the SSI limit, and the order accepted that there was no deliberate intention to suppress material facts. On that basis, the exemption claim and limitation defence were accepted.

Conclusion: The issue was decided in favour of the assessee and the demand was held unsustainable.

Final Conclusion: The duty demand and the impugned order were set aside, and the appeal succeeded with consequential relief.

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