Marketability test governs excise duty on captive intermediate products; duty fails where revenue cannot prove the item is marketable goods.

Excise duty on an intermediate product captively consumed in further manufacture depends on proof that the item is a distinct, identifiable and marketable commodity known to the market. The settled marketability test applies even where the product is used within the same manufacturing process, and the revenue must establish marketability with evidence. On the facts described, no such evidence was produced and the correct legal test was not applied, so the intermediate product was not treated as excisable goods. The excise demand could not be sustained and the duty collected was refundable.

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Issues: Whether benzyl methyl salicylate, an intermediate product captively consumed in the manufacture of salbutamol sulphate, was dutiable as excisable goods despite the absence of proof of marketability.

Analysis: Excise duty is attracted only when the article is goods known to the market and capable of being bought and sold. The settled law reiterated by the Supreme Court requires the marketability test to be satisfied even where the item is an intermediate product captively consumed in the manufacture of another product. The Department adduced no evidence to show that the intermediate was a distinct, identifiable, marketable commodity, and the adjudicating authority failed to apply the correct legal test.

Conclusion: The intermediate product was not established to be marketable goods and was not liable to excise duty.

Final Conclusion: The impugned excise demand could not be sustained and the assessee was entitled to refund of the duty collected.

Ratio Decidendi: An intermediate product captively consumed in further manufacture is dutiable only if the revenue proves that it is a marketable commodity known to the market as distinct goods.

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