Marketability test for excise duty defeats levy on transient captive-process alcohol lacking proof of saleability

Intermediate denatured ethyl alcohol was held not dutiable because excise applies only to goods that are marketable in a practical sense. The Tribunal accepted that extra neutral alcohol was cooled and denaturing ingredients were added almost immediately, so the product existed only briefly as a captive-process output. In the absence of material showing that it could be bought and sold as denatured ethyl alcohol, mere transient emergence in the manufacturing process did not satisfy the test of excisable goods under Chapter Heading 22.04. The Revenue's claim failed because marketability was not established.

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Issues: Whether denatured ethyl alcohol emerging in the assessee's process, with a very short shelf life and no shown marketability, was liable to central excise duty as excisable goods under Chapter Heading 22.04.

Analysis: The Tribunal accepted the factual finding that extra neutral alcohol was cooled to a very low temperature and the denaturing ingredients were added almost immediately, so that the alleged intermediate product existed only for a brief period. It applied the settled test that excise duty is attracted only if the article is marketable as goods, and that mere captive consumption is not enough. On the record, there was no material to show that the product could be practically bought and sold in the market as denatured ethyl alcohol.

Conclusion: The alleged intermediate product was not shown to be marketable goods and therefore was not liable to duty; the Revenue's appeals failed and the assessee succeeded.

Ratio Decidendi: An intermediate product is exigible to excise duty only if it is marketable as goods in a practical sense, and transient captive-consumption output with no evidence of marketability is not dutiable.

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