Marketability and suppression in excise: intermediate sugar syrup held non-excisable, with demand also barred by limitation.

Extended limitation was not available because the department's own circulars showed that the excisability and marketability of sugar syrup were controversial, so mere failure to file a declaration did not amount to wilful suppression with intent to evade duty; the demand for the disputed period was therefore time-barred. On merits, the department had to prove marketability of the intermediate sugar syrup, and on the facts it failed to do so, so the product was not treated as excisable goods under the tariff entry. The departmental demand was consequently held unsustainable on both limitation and merits.

---

---

Issues: (i) whether the demand for the period December 1992 to May 1997 was barred by limitation on the ground that suppression with intent to evade duty was not established; and (ii) whether the intermediate sugar syrup was marketable and excisable under Chapter Heading 1702.30 of the Central Excise Tariff Act, 1985.

Issue (i): whether the demand for the period December 1992 to May 1997 was barred by limitation on the ground that suppression with intent to evade duty was not established.

Analysis: The period in dispute overlapped with years in which the department itself had issued circulars showing that excisability and marketability of sugar syrup were controversial issues. In such a situation, mere inaction or omission to file a declaration could not be treated as wilful suppression with intent to evade duty.

Conclusion: The demand for December 1992 to May 1997 was rightly held to be time-barred, in favour of the assessee.

Issue (ii): whether the intermediate sugar syrup was marketable and excisable under Chapter Heading 1702.30 of the Central Excise Tariff Act, 1985.

Analysis: The Department had the burden to show that the intermediate product was marketable. The product came into existence during manufacture with added ingredients, and on the facts it did not answer the description of the tariff entry for sugar syrup. The absence of proved marketability meant that the intermediate product could not be treated as excisable goods.

Conclusion: The intermediate sugar syrup was held to be not marketable and therefore not excisable, in favour of the assessee.

Final Conclusion: The appeal failed on both limitation and merits, and the departmental demand was not sustainable.

Ratio Decidendi: An intermediate product is not exigible to duty unless the Department proves its marketability, and where the issue of excisability is genuinely controversial, mere omission by the assessee does not amount to wilful suppression justifying the extended period of limitation.

---