Non-marketable captive use of low sulphur heavy stock was treated as non-excisable, and the extended demand was time-barred.

Low sulphur heavy stock used captively for generating electricity was held not marketable on the evidence, including failure to meet the BIS parameters relied on in the record. Applying the principle that a non-marketable product is not excisable, the Tribunal treated the captive consumption as outside duty liability and distinguished the cited Supreme Court authority on the basis that there was no allegation of sale or marketing to third parties. The extended demand for January 2007 to March 2007 was also held time-barred because the captive use was reflected in the appellant's records and returns, and the department had been aware of the facts for a long period.

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Issues: (i) whether low sulphur heavy stock used captively for generation of electricity was marketable and therefore excisable, and whether exemption under the captive consumption notifications was available; (ii) whether the demand for the period January 2007 to March 2007 was barred by limitation.

Issue (i): whether low sulphur heavy stock used captively for generation of electricity was marketable and therefore excisable, and whether exemption under the captive consumption notifications was available.

Analysis: The product failed to meet the BIS parameters relied on in the record, including flash point and water content, and the evidence showed that the captively consumed material could not be marketed or sold as such. The Tribunal applied the principle that a product which is not marketable is not excisable, and distinguished the cited Supreme Court decision because, in the present case, there was no allegation of sale to third parties or marketing of the product. On that footing, the captive use of the product for generation of electricity did not attract duty in the manner alleged by the department.

Conclusion: The issue is decided in favour of the assessee.

Issue (ii): whether the demand for the period January 2007 to March 2007 was barred by limitation.

Analysis: The record showed that the department had been aware of the captive use of the product for a long period and that the relevant consumption was reflected in the appellant's records and returns. In the absence of timely action and in view of the disclosed nature of the use, the extended demand for the period in question could not be sustained.

Conclusion: The demand for the period January 2007 to March 2007 is time-barred.

Final Conclusion: The demand was set aside on merits and also failed on limitation for the relevant period, leaving the appellant entitled to consequential relief according to law.

Ratio Decidendi: A captively consumed product is not exigible to duty where the evidence shows that it is not marketable, and an extended-period demand cannot be sustained when the facts were disclosed and known to the department.

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