Intermediate excisable goods remain dutiable when they independently satisfy a tariff entry, even if captively consumed in making the final product.

An intermediate textile product containing 54% polyester and 46% cotton, arising during manufacture of the final fabric, was treated as independently classifiable and dutiable under Item 19(I)(b) of the First Schedule to the Central Excises and Salt Act, 1944. The fact that the final fabric fell under Item 22 and that the intermediate product was captively consumed within the factory did not prevent levy, because amended Rules 9 and 49 were understood to treat in-factory removals for further manufacture as removals for duty purposes. The earlier Supreme Court ruling was read as addressing the final product only, not barring duty on a separately identifiable intermediate excisable good.

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Issues: Whether the intermediate product containing 54% polyester and 46% cotton, emerging in the course of manufacture of the final fabric, was classifiable and dutiable under Item 19(I)(b) of the First Schedule to the Central Excises and Salt Act, 1944, notwithstanding that the final product was classifiable under Item 22 and the process involved captive consumption within the factory.

Analysis: The governing distinction was between the final product and the intermediate product. The earlier Supreme Court ruling on similar fabrics was treated as concerning the duty liability of the final product and not as prohibiting levy on an intermediate product that independently satisfied the description of a tariff entry. The amended Rules 9 and 49 of the Central Excise Rules were understood to treat removals for consumption within the factory for manufacture of other goods as removals for duty purposes. On that basis, a product that emerges in the course of manufacture and squarely falls within a tariff item can be classified and subjected to duty under that item.

Conclusion: The intermediate product was correctly classifiable and dutiable under Item 19(I)(b), and the assessee's challenge failed.

Final Conclusion: The appeal did not disclose any ground for interference with the impugned order and was dismissed, leaving the duty demand on the intermediate product intact.

Ratio Decidendi: Where excisable goods emerge during manufacture and are removed from the factory, they are liable to classification and duty under the tariff entry they independently satisfy, even if they are subsequently used captively to produce another final product.

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