Excise duty on intermediate goods fails without proof of marketability in the form produced by the factory

For excise levy, manufacture alone is insufficient; the department must also prove marketability of the intermediate product in the form in which it emerges from the factory. Silver chloride arising in the zinc-manufacturing process was treated as a chemically defined compound satisfying the manufacture test, but the record did not show that the slurry form with lower silver content and purity was capable of being bought and sold as such. The absence of a proper market enquiry or proof that the factory product matched the commercially available product meant marketability was not established, and duty could not be sustained.

---

---

Issues: Whether the intermediate product, silver chloride, emerging in the assessee's zinc-manufacturing process was marketable so as to constitute excisable goods liable to duty, and whether it was classifiable under Tariff Heading 28.43.

Analysis: Levy under Section 3 of the Central Excise Act, 1944 requires both manufacture and marketability. The product was found to satisfy the manufacture test because it was a chemically defined compound arising at a recoverable stage in the process. However, marketability is a question of fact, and the burden lay on the department to show that the silver chloride actually produced in the factory, in slurry form with lower silver content and purity, was capable of being bought and sold in the market as such. The material on record did not establish proper market enquiry or proof that the factory product was the same as the product available in the market. Mere reference to comparable silver chloride or to valuation under Rule 6(b)(i) of the Central Excise (Valuation) Rules, 1975 did not discharge that burden.

Conclusion: The product was not proved to be marketable, and duty could not be sustained against the assessee.

Ratio Decidendi: For excise levy, manufacture alone is insufficient; the department must independently prove that the goods are marketable in the form in which they emerge from the assessee's factory.

---