Marketability and proof of suppression controlled excise duty on captively used sugar syrup in biscuit manufacture.

Captively consumed sugar syrup used in biscuit manufacture was held not dutiable because the Revenue failed to prove marketability of the product in the condition in which it emerged or to support the chosen classification with adequate material. The Tribunal noted that the syrup was made to a specific specification for immediate factory use and that the burden to establish excisability remained on the Revenue. It also held that the extended limitation period was unavailable because the assessee had filed regular returns and no deliberate suppression or concealment was proved. The demand and related proceedings were therefore set aside with consequential relief.

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Issues: (i) Whether the captively consumed sugar syrup manufactured for use in biscuits was excisable and marketable so as to attract central excise duty; (ii) whether the demand was barred by limitation on the ground that the extended period could not be invoked for alleged suppression.

Issue (i): Whether the captively consumed sugar syrup manufactured for use in biscuits was excisable and marketable so as to attract central excise duty.

Analysis: The sugar syrup was manufactured only for the appellant's own factory use and there was no evidence from the Revenue that the product was marketable in the form in which it emerged. The product was made to a specific specification for biscuit manufacture and was intended for immediate use, unlike ordinary market sugar syrup with preservatives and longer shelf-life. The Tribunal followed earlier decisions on identical facts holding that, in the absence of evidence of marketability and proper material to support classification under sub-heading 1702 90 90, duty could not be sustained. The burden to establish excisability and marketability remained on the Revenue.

Conclusion: The issue was decided in favour of the assessee and the demand on merits was not sustainable.

Issue (ii): Whether the demand was barred by limitation on the ground that the extended period could not be invoked for alleged suppression.

Analysis: The appellant had been filing regular returns showing manufacture of exempt biscuits, and the department had not established any concealment regarding the captively consumed sugar syrup. The dispute turned on classification and excisability, which was a matter of interpretation on the available facts. In the absence of documentary proof of deliberate suppression, invocation of the extended period was not justified.

Conclusion: The issue was decided in favour of the assessee and the demand was held time-barred.

Final Conclusion: The appeal succeeded on both merits and limitation, and the impugned demand and related proceedings were set aside with consequential relief according to law.

Ratio Decidendi: For an intermediate product to be subjected to central excise duty, the Revenue must establish both its marketability in the condition in which it emerges and the factual basis for the classification adopted; where the dispute is one of interpretation and no suppression is proved, the extended period cannot be invoked.

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