Intermediate products in continuous manufacturing are not excisable when they never emerge as separate identifiable goods.

Acetylene gas generated at an intermediate stage of a continuous, integrated and uninterrupted manufacturing process was not a separate excisable commodity, because it never came into existence as an identifiable article outside the production stream. The gas was neither stored nor sold and was wholly consumed within the factory line before acetylene black emerged. The rule treating goods consumed within a factory as dutiable did not apply to such an intermediate product. Accordingly, excise duty was not payable and the demand, as well as the refusal of refund, were unsustainable.

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Issues: Whether acetylene gas emerging at an intermediate stage in a continuous, integrated and uninterrupted manufacturing process was liable to excise duty under Tariff Item No. 14H(vi), and whether its intra-factory movement or consumption attracted duty.

Analysis: The gas in question arose only as one of several gases released during cracking of naphtha and passed through the manufacturing line as an intermediate product before the final product, acetylene black, emerged. The gas was not stored, sold, or used for any purpose outside the continuous production stream. On these admitted facts, it was not an identifiable article coming into existence as a separate excisable commodity. The rule on consumption of goods within the factory did not govern an intermediate product that formed part of an uninterrupted process of manufacture of the final product.

Conclusion: Acetylene gas in the present process was not liable to excise duty, and the demand and rejection of refund were unsustainable.

Ratio Decidendi: An intermediate product that arises and is wholly consumed within a continuous, integrated and uninterrupted manufacturing process, without coming into existence as a separate identifiable article outside that process, is not liable to excise duty merely because it passes through the factory line.

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