Marketability test governs excise duty on intermediate products; starch slurry not shown to be marketable and not liable

A proper officer approving a classification list under Rule 173-B(2) could direct inclusion of an item earlier shown by the assessee and later omitted without explanation, so the officer's modification power was not limited to changes in description, exemption or rate. Excise duty, however, attached only to goods that were marketable, and the Department failed to prove that starch slurry was ever marketed or otherwise shown to have a market. As an intermediate product arising in an integrated manufacturing process, starch slurry was not established as excisable goods and no duty could be levied.

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Issues: (i) whether the proper officer, while approving a classification list under Rule 173-B(2), could direct inclusion of an item earlier shown in the assessee's list but later omitted; and (ii) whether starch slurry was marketable goods liable to excise duty, being an intermediate product emerging in the course of manufacture of starch.

Issue (i): whether the proper officer, while approving a classification list under Rule 173-B(2), could direct inclusion of an item earlier shown in the assessee's list but later omitted

Analysis: The power to approve a classification list with modifications was held to be wide enough to correct an omission where the assessee had itself earlier included the item and later omitted it without explanation. Modification was not confined to changing item numbers, exemption claims, or rates, and could extend to directing inclusion of an item wrongly left out.

Conclusion: The objection to the officer's power failed and the inclusion of starch slurry in the classification list was upheld.

Issue (ii): whether starch slurry was marketable goods liable to excise duty, being an intermediate product emerging in the course of manufacture of starch

Analysis: Excise duty was held to attach only to goods that are marketable and have a market. The Department did not disprove the assessee's case that starch slurry was never marketed, nor did it adduce evidence that it was marketed by anyone else. As the product emerged only as an intermediate stage in an integrated manufacturing process and marketability was not established, duty could not be imposed.

Conclusion: Starch slurry was not proved to be marketable goods and was therefore not liable to excise duty.

Final Conclusion: The appeals succeeded because the disputed product was not shown to be excisable goods, and the demand of duty was unsustainable.

Ratio Decidendi: A product is exigible to central excise only if it is marketable goods, and an intermediate product emerging in an integrated manufacturing process cannot be subjected to duty unless its marketability is proved by the Department.

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