Marketability test for manufacture fails where liquid sodium silicate is not proved to be a consumer product.

Conversion of solid sodium silicate into liquid sodium silicate was held not proved to amount to manufacture because the Revenue failed to establish that the resultant liquid product was marketable as a consumer good under Chapter Note 10. The record showed earlier departmental clarification against excisability, and no sample test or expert evidence was produced to show stability or marketability of the liquid product. On the same factual basis, the assessee's belief that no declaration was required was treated as bona fide, so the extended period of limitation could not be invoked absent suppression or wilful misstatement. Penalty and consequential demands therefore fell with the duty demand.

---

---

Issues: (i) whether conversion of solid sodium silicate into liquid sodium silicate amounted to manufacture and marketable goods under Note 10 to Chapter 28; (ii) whether the extended period of limitation was invocable in the absence of declaration after insertion of Note 10; and (iii) whether penalty and other consequential demands were sustainable.

Issue (i): whether conversion of solid sodium silicate into liquid sodium silicate amounted to manufacture and marketable goods under Note 10 to Chapter 28.

Analysis: The process had to result in a product marketable to the consumer. The record showed that the department had earlier clarified that the process did not amount to manufacture, and the adjudicating authority itself noted that liquid sodium silicate could not be stored for long and that only solid sodium silicate was marketed as such. The department adduced no sample test, expert evidence, or other material to establish that the liquid product was stable and marketable as a consumer product.

Conclusion: The process was not proved to bring into existence marketable goods for the consumer, and the demand on this footing failed.

Issue (ii): whether the extended period of limitation was invocable in the absence of declaration after insertion of Note 10.

Analysis: Since the department had initially treated the process as non-excisable and the authority's own findings supported the view that the liquid product was not a stable marketable commodity, the appellants' belief that no declaration was required was held to be bona fide. In the absence of suppression or wilful misstatement established by the department, the ingredients for invoking the longer limitation period were not satisfied.

Conclusion: The extended period of limitation was not invocable.

Issue (iii): whether penalty and other consequential demands were sustainable.

Analysis: Once marketability, duty liability, and the extended period were not established, the basis for penalty and the consequential demand also fell. The appellants were additionally entitled to the benefit of duty-related deductions and credit if the demand were otherwise to survive.

Conclusion: Penalty and the consequential demand were not sustainable.

Final Conclusion: The orders below were set aside and the appeals succeeded with consequential relief according to law.

Ratio Decidendi: For a process to attract duty under a chapter note treating treatment as manufacture, the Revenue must prove that the resultant product is marketable as a consumer good; absent such proof and in the presence of bona fide belief, the extended period and penalty cannot be sustained.

---