Marketability of intermediate compound and tariff classification under Chapter 32, not as a finished article, were affirmed.

An intermediate compound was held marketable because marketability depends on capability of being bought and sold, and actual sale by the assessee is not required; comparison with a chemically identical product purchased in the market supported that finding. For classification, the compound was not an unfinished article with the essential character of a finished crayon, so Rule 2(a) did not apply. As an ingredient used in colouring preparations, and in light of Note 2 to Chapter 32, it fell under Heading 32.04 rather than Heading 96.09. The document states that marketability and Chapter 32 classification were affirmed, with connected appeals partly dismissed and partly allowed.

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Issues: (i) Whether the intermediate product manufactured by the assessee was marketable. (ii) Whether the product was classifiable under Heading 32.04 or Heading 96.09.

Issue (i): Whether the intermediate product manufactured by the assessee was marketable.

Analysis: The product manufactured by the assessee was compared with a similar compound imported and purchased by a competitor. On chemical analysis, the two products were found to be identical in substance. Marketability does not require proof of actual sale by the assessee itself; it is sufficient if the goods are shown to be capable of being bought and sold in the market, and actual purchase by another manufacturer is strong evidence of such capability.

Conclusion: The product was marketable.

Issue (ii): Whether the product was classifiable under Heading 32.04 or Heading 96.09.

Analysis: Heading 96.09 applies to finished articles such as pencils and crayons, while the product in question was an intermediate compound and not an unfinished article having the essential character of a finished crayon. Rule 2(a) of the Rules for the Interpretation of the Schedule to the Central Excise Tariff Act, 1985 did not apply because the product was not incomplete or unfinished in that sense. The product was instead an ingredient used in the manufacture of colouring preparations and, by virtue of Note 2 to Chapter 32, fell within Heading 32.04.

Conclusion: The product was classifiable under Heading 32.04 and not under Heading 96.09.

Final Conclusion: The marketability of the product was upheld and its classification under Chapter 32 was affirmed, resulting in dismissal of some connected appeals and allowance of the others.

Ratio Decidendi: An intermediate compound that is shown to be commercially bought and sold is marketable, and if it is not an unfinished article with the essential character of the finished good, it cannot be classified as the finished good merely by resort to Rule 2(a); classification must then follow the chapter note and the product's actual character.

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