Marketability and captive-use exemption defeat excise demand on sugar syrup used in biscuit manufacturing.

Sugar syrup used in biscuit manufacture was not established as marketable excisable goods classifiable under Chapter heading 1702 9090 because the required fructose content was not proved in one matter and was found below 50% by weight in another, so excise demand failed on classification and marketability grounds. Independently, Notification No. 67/95-CE continued to exempt the captively consumed intermediate product where the final product was exempt and the procedural requirement under Rule 6 of the CENVAT Credit Rules, 2001 had been complied with, making the demand unsustainable.

---

---

Issues: (i) Whether the sugar syrup manufactured in the course of producing biscuits was marketable and classifiable under Chapter heading 1702 9090 so as to attract excise duty; (ii) Whether the intermediate product was exempt under Notification No. 67/95-CE when the final products were exempt and the procedural requirement under Rule 6 of the CENVAT Credit Rules, 2001 had been followed.

Issue (i): Whether the sugar syrup manufactured in the course of producing biscuits was marketable and classifiable under Chapter heading 1702 9090 so as to attract excise duty.

Analysis: The absence of sufficient evidence of marketability was material, since excise duty can arise only on goods that are marketable and excisable. The claimed tariff entry required the syrup to satisfy the specified fructose content. In one appeal the fructose content was not tested, and in the other it was found to be below 50% by weight. On that basis, the product could not be brought within the stated heading.

Conclusion: The sugar syrup was not shown to be a marketable excisable product classifiable under Chapter heading 1702 9090, and the demand failed on this ground.

Issue (ii): Whether the intermediate product was exempt under Notification No. 67/95-CE when the final products were exempt and the procedural requirement under Rule 6 of the CENVAT Credit Rules, 2001 had been followed.

Analysis: Notification No. 67/95-CE exempts captively consumed inputs and intermediate products even where the final product is exempt, provided the prescribed conditions are satisfied. The record showed that the appellants had complied with the relevant obligation under Rule 6 of the CENVAT Credit Rules, 2001. The exemption therefore applied independently of the classification controversy.

Conclusion: The intermediate product was covered by Notification No. 67/95-CE and the demand was unsustainable.

Final Conclusion: The impugned orders were unsustainable because the syrup was not proved to be marketable excisable goods and, in any event, the intermediate product was protected by the captive consumption exemption.

Ratio Decidendi: Excise demand on an intermediate product fails unless marketability and the relevant tariff classification are established, and a captively consumed intermediate product remains exempt where the governing exemption notification and prescribed procedural conditions are satisfied.

---