Marketability of intermediate chewing tobacco goods and absence of suppression defeated excise demand and extended limitation

An intermediate chewing tobacco product was held not liable to central excise duty because the department failed to prove that it was marketable goods capable of being bought and consumed as such; the burden of establishing marketability and excisability remained on the revenue and was not discharged. Reliance on a cited chewing tobacco decision was found misplaced, and departmental acceptance of similar proceedings in other units supported the assessee's position. The extended limitation period was also unavailable because the manufacturing process was within departmental knowledge and no suppression of material facts was shown. The duty demands therefore could not be sustained.

---

---

Issues: (i) whether the intermediate chewing tobacco product was marketable and excisable so as to attract central excise duty, and (ii) whether the demand was barred by limitation for want of suppression of facts.

Issue (i): whether the intermediate chewing tobacco product was marketable and excisable so as to attract central excise duty.

Analysis: The revenue had to establish that the intermediate product was goods capable of being marketed and consumed. The evidence, including statements of revenue witnesses, did not show that the product was consumable as such. The burden of proving marketability and excisability lay on the department, and that burden was not discharged. The Tribunal also accepted that the product in question was not shown to be the same as the product considered in the cited chewing tobacco decision, and therefore the reliance on that authority was misplaced. Acceptance by the department of identical proceedings dropped in the appellants' other units reinforced the view that the intermediate product was not dutiable as goods.

Conclusion: The intermediate product was not proved to be marketable goods and was not liable to duty; this issue was decided in favour of the assessee.

Issue (ii): whether the demand was barred by limitation for want of suppression of facts.

Analysis: The manufacturing process was within the department's knowledge, and duty had been paid on the final product. On those facts, there was no suppression of material particulars so as to justify invocation of the extended period.

Conclusion: The demand was time-barred and the plea against suppression succeeded in favour of the assessee.

Final Conclusion: The impugned duty demands could not be sustained because the department failed to prove marketability of the intermediate product and also failed to establish grounds for the extended limitation period.

Ratio Decidendi: An intermediate product is not dutiable unless the revenue proves that it is marketable goods, and the extended limitation period cannot be invoked without proof of suppression of facts.

---