Marketability test for excise duty upheld for intermediate goods, despite captive use, job work transfers, and revenue neutrality plea.

Manufactured intermediate goods are excisable if they have commercial identity and are capable of being bought and sold as such; actual sale is not required. Milk crumb was found marketable because it was produced in bulk, had shelf life, was cleared in identifiable form, and had commercial recognition. Clearance to sister units or job workers did not negate marketability or excisability, and captive use did not exempt the product. Revenue neutrality was also rejected as a defence where duty was otherwise payable. The duty demand was therefore sustained and the order dropping proceedings was set aside.

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Issues: (i) Whether milk crumb manufactured by the respondent was marketable and therefore excisable goods; (ii) whether clearance of milk crumb to sister units and job workers, without actual sale, negatived marketability or excisability; (iii) whether revenue neutrality could defeat the duty demand.

Issue (i): Whether milk crumb manufactured by the respondent was marketable and therefore excisable goods.

Analysis: Marketability is an essential condition for levy of excise duty, and it is enough if the product is capable of being taken to the market and is known to the market as a distinct commodity. Actual sale is not necessary. On the evidence, the goods were manufactured in bulk, had shelf life, were cleared in identifiable form, and were shown by the record to have commercial recognition. The earlier decision relied upon by the respondent was distinguished on facts and on the basis of the later statutory definition of excisable goods.

Conclusion: The milk crumb was marketable and therefore excisable.

Issue (ii): Whether clearance of milk crumb to sister units and job workers, without actual sale, negatived marketability or excisability.

Analysis: The absence of an actual sale or the fact that the goods were transferred for further manufacture did not displace the test of marketability. Intermediate products can still attract duty if they are distinct, identifiable, and capable of being marketed. The record showed that the product had commercial identity and could be taken to market notwithstanding captive use or job work removal.

Conclusion: Clearance to sister units or job workers did not make the goods non-marketable or non-excisable.

Issue (iii): Whether revenue neutrality could defeat the duty demand.

Analysis: Revenue neutrality is not a ground to deny duty on excisable goods. If duty is otherwise payable, availability of credit in another unit or downstream transaction does not extinguish the levy. The plea of neutrality was therefore rejected.

Conclusion: Revenue neutrality did not defeat the demand.

Final Conclusion: The demand was held sustainable, and the order dropping the proceedings was set aside.

Ratio Decidendi: For excise levy, a manufactured intermediate product is dutiable if it has commercial identity and is capable of being bought and sold as such, irrespective of whether it is actually sold or captively consumed.

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