Marketability of intermediate products can trigger excise duty where the product is capable of sale in the market.

An intermediate product arising in the manufacture of T.R. beltings, V-belts and conveyor belts can attract excise duty if it is marketable, even where it forms part of a composite, integrated and uninterrupted manufacturing process. Marketability had to be specifically examined, because the Department's case was that the intermediate product was capable of sale in the market. The High Court erred by proceeding on the assumption that marketability was not in issue and by not recording a clear finding on that aspect. On that reasoning, the challenge to excise liability failed, and the requirement to take out an L-4 licence was upheld.

---

---

Issues: Whether the intermediate product arising in the course of manufacture of T.R. beltings, V-belts and conveyor belts was liable to excise duty and whether the Department could require the industries to take out an L-4 licence.

Analysis: The decisive question was whether the High Court could assume that the intermediary product had not been shown to be used or sold in the market when the Department's case was that it was a marketable commodity. A finding on marketability was necessary because, even where manufacture is part of a composite, integrated and uninterrupted process, excise liability may still arise if the intermediate product is capable of being sold in the market. The High Court's conclusion proceeded on an erroneous assumption that marketability was not in issue, and there was no clear finding resolving that aspect.

Conclusion: The challenge to excise liability on the intermediate product was not sustainable on the High Court's reasoning, and the Department was justified in requiring the industries to take out an L-4 licence.

Final Conclusion: The appeal succeeded, the High Court's order was set aside, and the writ petition stood dismissed.

Ratio Decidendi: An intermediate product in a composite manufacturing process can attract excise duty if it is marketable, and relief cannot be granted on an assumption that marketability is not in issue without a clear finding on that point.

---