Marketability and classification of foam goods decide exemption, excisability, and remand on unresolved stock and penalty issues.

Polyurethane foam mattresses, pillows, cushions and similar articles were held classifiable under Chapter 94 as bedding and furnishing articles, not as Chapter 39 polyurethane foam goods, because they were described and cleared in the market as such and the Revenue produced no contrary evidence. On that basis, the small-scale exemption under Notification No. 1/93 was available and the classification-based demand failed. The intermediate foam blocks were held not excisable because the Revenue did not prove marketability; a theoretical possibility of use was insufficient. Issues concerning excess stock and the director's penalty were remanded for fresh adjudication because they had not been dealt with in the impugned order.

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Issues: (i) Whether polyurethane foam mattresses, pillows, cushions and similar articles were classifiable under Chapter 39 as articles of polyurethane foam or under Chapter 94 as bedding and furnishing articles, and whether the exemption under Notification No. 1/93 was available. (ii) Whether the intermediate foam blocks were marketable and excisable, and whether the matters relating to excess stock and penalty on the director required remand.

Issue (i): Whether polyurethane foam mattresses, pillows, cushions and similar articles were classifiable under Chapter 39 as articles of polyurethane foam or under Chapter 94 as bedding and furnishing articles, and whether the exemption under Notification No. 1/93 was available.

Analysis: The goods were described and cleared as mattresses, pillows, cushions, seats and similar articles, which are specifically covered by Chapter 94. The Revenue did not produce material to show that such goods were known in the market as polyurethane foam articles or that Chapter 39 was the appropriate classification. Once the goods were held to be classifiable under Chapter 94, there was no basis to deny the small-scale exemption merely because the articles were made of foam or were supplied under an exemption for naval use.

Conclusion: The goods were correctly classifiable under Chapter 94, and the benefit of Notification No. 1/93 was available. The Revenue's demand on this count failed.

Issue (ii): Whether the intermediate foam blocks were marketable and excisable, and whether the matters relating to excess stock and penalty on the director required remand.

Analysis: The burden to prove marketability rested on the Revenue, but no concrete evidence was produced to show that the large foam blocks were ordinarily bought and sold in the market or were capable of being so sold. Mere possibility of use in furniture manufacture was insufficient. On the separate questions of excess stock and the director's penalty, the impugned order had not dealt with the show cause notice proposals, and that omission warranted further adjudication.

Conclusion: The intermediate foam blocks were held not to be excisable for want of proof of marketability. The issues relating to excess found goods and penalty on the director were remanded for fresh decision.

Final Conclusion: The appeal succeeded only to the limited extent of remand on the unanswered issues, while the principal demand based on classification and alleged excisability of the foam blocks was rejected.

Ratio Decidendi: Marketability is a condition precedent for excisability, and the Revenue must adduce evidence that the goods are ordinarily capable of being bought and sold in the market; a mere theoretical possibility of sale is insufficient.

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