Marketability test bars excise duty on trial-run HDPE; technical non-accountal in bonded storage cannot justify confiscation or penalty.

Imported HDPE used in a trial run was held not liable to excise duty because the converted material remained in mixed form and its marketability was not established; mere transformation during testing did not satisfy the test of manufacture. The alleged non-accountal in the bonded store room was treated as a technical lapse within licensed premises, with no proof of intent to evade duty or clandestine removal, so confiscation was not justified and the penalty fell with it. The demand, confiscation, and penalty were set aside.

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Issues: (i) Whether the disputed HDPE in its changed forms was liable to excise duty as goods manufactured during the trial run; (ii) whether confiscation of the goods and imposition of penalty were sustainable on the facts of non-accountal in the bonded store room.

Issue (i): Whether the disputed HDPE in its changed forms was liable to excise duty as goods manufactured during the trial run.

Analysis: The imported HDPE was used for a trial run of the plant before regular manufacturing commenced. The converted material remained in mixed condition and its marketability was not established. Excise liability requires that the product answer the test of manufacture and also emerge as marketable goods. Mere transformation during a trial process, without proof that the resulting goods were marketable, was held insufficient to bring the goods within the excise net.

Conclusion: The duty demand was not sustainable and is against the Revenue.

Issue (ii): Whether confiscation of the goods and imposition of penalty were sustainable on the facts of non-accountal in the bonded store room.

Analysis: The goods were stated to be kept in the bonded store room within the licensed premises, and the omission was treated as a technical or clerical lapse rather than a substantive concealment or attempted illicit removal. In the absence of established intent to evade duty or preparation for clandestine removal, confiscation under the invoked rules was not justified. Once confiscation could not stand, the penalty also had no foundation.

Conclusion: Confiscation and penalty were not sustainable and are in favour of the assessee.

Final Conclusion: The demand, confiscation, and penalty were all set aside, and the assessee obtained complete relief.

Ratio Decidendi: Excise duty, confiscation, and penalty cannot be sustained where the alleged manufactured goods are not shown to be marketable and the record discloses only a technical non-accountal in bonded storage without evidence of intended clandestine removal.

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