Marketable intermediate goods remain taxable despite captive use under amended excise rules and cess provisions.

An identifiable and marketable intermediate product remains liable to levy even when used captively in the manufacture of final goods. The amended excise rules treated such intermediate goods as removed for consumption, so physical removal from the factory was not required. Applying this principle, jute yarn used within the factory for producing jute goods was held to be taxable and subject to cess under the relevant levy provisions, and the challenge to the levy failed.

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Issues: Whether jute yarn, though an intermediate product used within the factory for producing jute goods, was liable to cess and excise treatment as a marketable commodity under the amended levy provisions.

Analysis: The levy under Section 9(1) of the Industries (Development and Regulation) Act, 1951 operated on goods manufactured or produced in scheduled industries as specified by the Central Government, and the cess rules included jute manufacture within their scope. The later retrospective amendment to Rules 9 and 49 of the Central Excise Rules treated intermediate goods used for manufacture of final products as removed for consumption, so physical removal from the factory was not necessary. Since jute yarn was found to be identifiable, marketable, and saleable by itself, its use in captive consumption did not exclude it from levy.

Conclusion: The cess on jute yarn was validly leviable, and the challenge to the levy failed.

Final Conclusion: The writ petitions were dismissed because the intermediate jute yarn remained a taxable and marketable commodity despite its use in the manufacture of the final product.

Ratio Decidendi: An identifiable and marketable intermediate product remains liable to levy even when consumed captively in the manufacture of the final product, especially where the governing rules are retrospectively amended to treat such intermediate goods as exigible.

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