Marketability of intermediate goods bars excise duty where hotmelt wax is captively consumed without proof of saleability.

Hotmelt wax emerging during manufacture of wax-coated wrappers and papers was held not to be marketable in the condition in which it arose. Marketability remains a necessary condition for excise duty even where an intermediate product is captively consumed. Because the Revenue produced no evidence that the molten wax could be bought and sold in the market as it emerged from the process, it could not be treated as excisable goods under Tariff Heading 34.04. The duty demand and connected penalty were therefore unsustainable.

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Issues: Whether hotmelt wax arising in the course of manufacture of wax coated wrappers/papers was marketable excisable goods liable to duty under Tariff Heading 34.04.

Analysis: The disputed product emerged only at a very high temperature during a continuous manufacturing process and was consumed in that very stage for coating paper. Marketability is a necessary condition for levy of excise duty even where an intermediate product is captively consumed. The Revenue produced no evidence to show that the molten wax, in the condition in which it emerged from the factory, was capable of being bought and sold in the market. In the absence of proof of marketability, the product could not be treated as excisable goods.

Conclusion: The hotmelt wax was not marketable and therefore was not liable to excise duty; the issue was decided in favour of the assessee.

Final Conclusion: The demand of duty and the connected penalty were unsustainable, and the assessee succeeded on merits.

Ratio Decidendi: An intermediate product used captively is dutiable only if the Revenue proves that it is marketable in the condition in which it emerges.

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