Excise duty on stored brown sugar failed where no final sugar was manufactured and deeming removal did not apply.

Unprocessed brown sugar stored in a factory godown was not liable to excise duty because Rule 9's deeming fiction applies only when an intermediate product is converted into the end-product and treated as removed from the premises. No final sugar had been manufactured from the stored brown sugar, so the fiction did not operate. Rule 49 also did not support the levy, as brown sugar was not shown to fall within the class of excisable goods and sugar could not ordinarily be read to include brown sugar. The demand was therefore unsustainable, and the challenge succeeded.

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Issues: Whether unprocessed brown sugar retained in the factory godown could be subjected to excise duty under Rule 49 and the explanation to Rule 9 on the footing that it was an excisable good or an intermediate product deemed to have been removed.

Analysis: Rule 9 could apply only where an intermediate product is converted into the end-product so that the deeming fiction treats it as removed from the premises. On the facts, no final sugar had been manufactured from the brown sugar kept in storage, and therefore the deeming provision was inapplicable. Rule 49 governs duty on excisable goods, but brown sugar was not shown to fall within the enumerated class of excisable goods, and sugar cannot normally be understood to include brown sugar. The basis on which duty was demanded was therefore unsustainable.

Conclusion: The levy of excise duty on the unprocessed brown sugar was not justified, and the challenge succeeded.

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