Marketability and intermediate goods exemption: sulphur dioxide used in sugar manufacture was classifiable under residuary Item 68, with no exemption.

Sulphur dioxide gas used in sugar manufacture was treated as marketable and excisable because it was capable of ordinary sale and was not covered by the specific tariff entry, so it fell under residuary Item 68. The gas was also not eligible for exemption under Notification No. 118/75-Central Excises because it functioned only as an aid in manufacture and the sugar output was not produced from it. The operative result was that the classification under Item 68 and the denial of exemption were sustained.

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Issues: (i) whether sulphur dioxide gas used in the manufacture of sugar was marketable and excisable, and if so whether it fell under the residuary tariff item; and (ii) whether the gas qualified as intermediate goods eligible for exemption under Notification No. 118/75-Central Excises.

Issue (i): whether sulphur dioxide gas used in the manufacture of sugar was marketable and excisable, and if so whether it fell under the residuary tariff item.

Analysis: The gas was actually used in the manufacturing process, which satisfied the test of marketability as goods capable of being ordinarily bought and sold. Since it was not classifiable as sulphur dioxide under Item 14H of the First Schedule to the Central Excises and Salt Act, 1944, and did not fall within Items 1 to 67, it was held to be classifiable under the residuary Item 68.

Conclusion: The gas was excisable and correctly classified under Item 68, against the assessee.

Issue (ii): whether the gas qualified as intermediate goods eligible for exemption under Notification No. 118/75-Central Excises.

Analysis: The exemption applied to intermediate goods falling under Item 68, but the gas was only used as an aid in manufacture and sugar was not produced from it. On that basis, it could not be treated as intermediate goods for the notification.

Conclusion: The gas was not eligible for exemption under Notification No. 118/75-Central Excises, against the assessee.

Final Conclusion: The revision application failed because the impugned order was sustained on both classification and exemption grounds.

Ratio Decidendi: Goods that are capable of ordinary sale and are used in manufacture may satisfy marketability for excise purposes, and a product used merely as an aid in manufacture does not become intermediate goods for exemption unless the final product is produced from it.

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