Marketability of intermediate goods sustained excise duty, extended limitation, and penalties for suppression and captive consumption.

Lacquered polyester film at the intermediate stage was treated as marketable and excisable because the lacquering process had been brought within manufacture by amendment, and evidence of marketability displaced the plea against duty; captive consumption did not save the goods where the final products were exempt, so central excise duty was sustainable. Non-registration, failure to file returns, and non-payment after the legal change were treated as suppression with intent to evade, justifying the extended limitation period and penalties. In the connected Telstar matter, the duty issue was reopened only in part, while the directors' penalties were upheld and the seizure-related aspect was remanded for fresh adjudication.

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Issues: (i) Whether lacquered polyester film arising at the intermediate stage was marketable and, therefore, excisable and liable to central excise duty despite captive consumption for manufacture of exempt final products; (ii) whether the extended period of limitation and penalties under the Central Excise law were rightly invoked; (iii) whether the Revenue's challenge to the order dropping duty demand and seizure in the Telstar matter, and the connected penalty proceedings against its directors, deserved interference.

Issue (i): Whether lacquered polyester film arising at the intermediate stage was marketable and, therefore, excisable and liable to central excise duty despite captive consumption for manufacture of exempt final products.

Analysis: The process of lacquering on metallised polyester film had been treated as manufacture by the amendment to Note 16 of Chapter 39 of the Central Excise Tariff Act, 1985. The intermediate product was found to be capable of being bought and sold in the market, and the evidence relied upon by the Revenue, including commercial sale of similar goods, displaced the plea that the goods were not marketable. Since the final products were exempt, the exemption for captive consumption was unavailable.

Conclusion: The intermediate lacquered polyester film was held to be marketable, excisable, and liable to central excise duty, and the demand was sustained against the assessees.

Issue (ii): Whether the extended period of limitation and penalties under the Central Excise law were rightly invoked.

Analysis: The assessees had not obtained registration, had not filed returns, and had not discharged duty after the legal change that made the process dutiable. These omissions were treated as suppression of material facts with intent to evade duty, which justified invocation of the extended period. On the same factual foundation, the contraventions attracted penalty under the statutory provisions governing confiscation and mandatory penalty.

Conclusion: The extended period of limitation and the penalties were held to be sustainable.

Issue (iii): Whether the Revenue's challenge to the order dropping duty demand and seizure in the Telstar matter, and the connected penalty proceedings against its directors, deserved interference.

Analysis: The same legal conclusion on dutiability of the intermediate product applied to the Telstar proceedings. The order dropping the demand could not be sustained in full, but the seizure-related issues required fresh consideration because the factual position regarding the seized goods after a long lapse of time was not clear. The directors were found liable on the basis of their role in the manufacture and clearance of the dutiable goods.

Conclusion: The Revenue's appeal succeeded in part, the penalties on the directors were upheld, and the seizure/demand matter was remanded for de novo adjudication.

Final Conclusion: The common ruling sustained duty liability, limitation, and penalty in the assessee appeals, while granting the Revenue only partial relief in the connected matter by reopening the seizure and demand issue for fresh adjudication.

Ratio Decidendi: Where an intermediate product is rendered dutiable by a statutory deeming provision, is marketable, and is captively consumed for exempt final goods, central excise duty is payable and failure to register or pay duty justifies invocation of the extended period and penalty.

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