Marketability test for intermediate products: captive sandwiched fabric assembly was not excisable because commercial identity was not proved.

Unvulcanised sandwiched fabric assembly used captively in footwear manufacture was held not to be excisable because the Revenue failed to prove marketability. The decisive test was whether the intermediate product was commercially known and capable of being bought and sold in the condition in which it emerged. On the evidence, the material relied on by the Revenue did not show independent commercial identity or saleability without further processing, while the assessee's evidence supported captive consumption only. As marketability was not established, the article was not "goods" chargeable to central excise duty, and the demand and penalty could not be sustained.

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Issues: Whether unvulcanised sandwiched fabric assembly captively consumed in the manufacture of footwear is "goods" and excisable as a marketable product falling under sub-heading 5905.10 of the Central Excise Tariff Act, 1985.

Analysis: The decisive test for excisability was whether the intermediate product had marketability, i.e. whether it was commercially known and capable of being bought and sold in the condition in which it emerged. The burden to prove marketability lay on the Revenue. The material relied on by the Revenue, including the test report and related documents, did not establish that the product was commercially identifiable or capable of sale without further processing. By contrast, the evidence produced by the assessee supported the position that the product was only an intermediate article used for captive consumption and lacked independent commercial identity.

Conclusion: The product was not proved to be marketable and therefore was not excisable goods; the demand and penalty could not be sustained.

Ratio Decidendi: An intermediate product is chargeable to central excise duty only if the Revenue proves that it has commercial identity and is marketable or capable of being marketed in the condition in which it emerges; mere manufacture or theoretical possibility of sale is insufficient.

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