Captive consumption of excisable goods remains dutiable where goods are deemed removed before internal use

Zinc calots manufactured and consumed captively within the same factory were held dutiable because excise duty attaches at the stage of manufacture. Rule 9 and Rule 49 were treated as governing collection, not as excluding levy on intermediate goods used in a continuous manufacturing process. Under Rule 9(2), goods produced and consumed in the same premises are deemed to have been removed immediately before such consumption, so the absence of sale or physical clearance did not defeat duty liability. The duty demand was therefore upheld.

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Issues: Whether zinc calots manufactured and consumed within the same factory for making dry battery cells were dutiable and deemed to have been removed for the purposes of central excise law.

Analysis: Zinc calots were specifically listed as excisable goods, and duty under Section 3 attached to them at the stage of manufacture. Rule 9 and Rule 49 were treated as governing the point of collection, not as defeating levy on intermediate goods used within the factory. Under Rule 9(2), goods produced and consumed or utilised in a continuous process for manufacture of another commodity in the same premises are deemed to have been removed immediately before such consumption or utilisation. The absence of sale, the internal use of the goods, or the alleged absence of a separate designation of premises did not negate the duty liability.

Conclusion: The zinc calots were dutiable, were deemed removed on captive use, and the duty demand was upheld against the assessee.

Ratio Decidendi: Excisable goods used captively in the manufacture of another commodity are deemed to be removed under Rule 9(2) and remain liable to duty under Section 3 notwithstanding that they are not sold or leave the factory.

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