Marketability test for captive sugar syrup defeated excise duty demand on an unproven intermediate product.

Intermediate sugar syrup arising during biscuit manufacture was not shown to emerge in a marketable condition, so it failed the test of excisability. The Tribunal noted that the product had only a very short life in the form in which it came into existence and that the department had not established marketability. Following earlier decisions on identical facts, it held that the captive intermediate product could not attract central excise duty. Duty, interest, and penalties were therefore unsustainable, and the appeal was allowed.

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Issues: Whether the intermediate product, namely sugar syrup arising in the manufacture of biscuits, was marketable and therefore excisable, and whether the demand of central excise duty on such intermediate product was sustainable.

Analysis: The departmental case proceeded on the footing that the final biscuits were exempt and therefore the intermediate sugar syrup used captively attracted duty. The Tribunal found no evidence that the sugar solution or sugar syrup emerged in a marketable condition. It noted that the product had a very short life in the form in which it came into existence during manufacture and that marketability had not been established. The Tribunal also followed its earlier decisions on identical facts, which had held that in the absence of proof of marketability the intermediate sugar syrup could not be subjected to excise duty.

Conclusion: The intermediate sugar syrup was not proved to be marketable or excisable, and the duty demand, interest, and penalties were unsustainable. The appeal was allowed.

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