Excise classification of intermediate fabric upheld; marketability, suppression, and extended limitation accepted, while penalty was deleted.

Intermediate fabric was held classifiable under Heading 54.09 because greig fabric emerged after weaving and underwent heat treatment, and the tariff entry covered fabrics subjected to the specified process; proof of more than one process was not required. The goods were treated as marketable since actual sale was unnecessary and no material showed incapability of being bought and sold. Suppression was found because manufacture and captive use were not disclosed and the classification list was not filed, so the extended limitation period applied. Penalty was not sustained on the precedent relied upon, and the question whether duty was payable for the initial nil-basic-duty period was remitted for limited factual verification.

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Issues: (i) Whether the impugned intermediate fabric was classifiable under Heading 54.09 of the Central Excise Tariff; (ii) Whether the goods satisfied the test of marketability and whether the extended period of limitation was invocable; (iii) Whether penalty was sustainable and whether the demand required verification for the period when basic excise duty was nil.

Issue (i): Whether the impugned intermediate fabric was classifiable under Heading 54.09 of the Central Excise Tariff.

Analysis: The process description showed that greig fabric came into existence after weaving and was thereafter subjected to heat treatment. Heading 54.09 covered fabrics of man-made filament yarn woven on looms other than handlooms and subjected to one or more specified processes, including heat-setting. Note 3 to Chapter 54 treated such processing as manufacture. The presence of only one specified process was held sufficient; the provision did not require proof that two or more processes must be applied as a condition precedent to classification under the heading.

Conclusion: The impugned product was correctly classified under Heading 54.09, against the assessee.

Issue (ii): Whether the goods satisfied the test of marketability and whether the extended period of limitation was invocable.

Analysis: Goods become excisable only if they are capable of being bought and sold in the market, and actual sale is not necessary. On the record, no material showed that polyester-based greig fabric was incapable of marketability; a bare assertion was insufficient to displace excisability. The assessee had not disclosed manufacture and captive use to the Department, and the classification list was not filed as required at the material time. On that basis, suppression was found and the proviso to the limitation provision was held applicable.

Conclusion: The goods were held marketable and the extended period of limitation was invocable, against the assessee.

Issue (iii): Whether penalty was sustainable and whether the demand required verification for the period when basic excise duty was nil.

Analysis: Penalty was not sustained in view of the governing precedent relied upon for similar facts. The claim that no duty was chargeable for the initial three financial years because the basic excise duty was nil required factual verification by the adjudicating authority. The matter was therefore sent back only for that limited examination after giving the assessee an opportunity of hearing.

Conclusion: Penalty was set aside, and the limited duty aspect was remitted for verification in favour of the assessee.

Final Conclusion: The duty demand was substantially upheld on classification, marketability, and limitation, but penalty was deleted and the matter was remanded for restricted reconsideration of the nil-duty period.

Ratio Decidendi: For excise classification, an intermediate fabric is dutiable if it is commercially marketable and falls within the tariff description; actual sale is unnecessary, suppression justifies the extended limitation period, and penalty will not survive where the applicable precedent negates it on the proved facts.

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