Captive sugar syrup marketability and tariff classification failed where the department could not prove the product matched the tariff description.

In-process sugar syrup captively consumed in biscuit manufacture was held not classifiable under tariff item 17029090 because the Department failed to prove that it matched the tariff description of sugar syrup blends containing 50% fructose in dry stage; the scientific report showed only 31% fructose. Applying the settled test of marketability, the Tribunal found no evidence that the syrup, as emerging in the factory, was capable of sale in the market or had demonstrated shelf life in that form. Test reports referring to invert sugar did not establish marketability or excisability, so the duty and penalty demand could not be sustained.

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Issues: (i) whether the sugar syrup captively consumed in the manufacture of biscuits was classifiable under tariff item 17029090 as a marketable product, and (ii) whether duty could be sustained on the basis of its alleged marketability and the available test reports.

Issue (i): whether the sugar syrup captively consumed in the manufacture of biscuits was classifiable under tariff item 17029090 as a marketable product

Analysis: The disputed product was an in-process sugar syrup prepared for captive use in biscuit manufacture. The finding recorded was that the syrup was specific to the appellant's own manufacturing requirement and was not shown to be comparable with commercially sold syrup. The Tribunal relied on the settled principle that classification under the relevant tariff entry required the product to satisfy the description of sugar syrup blends containing 50% by weight of fructose in the dry stage, and the record showed only 31% fructose as certified by the scientific report. In the absence of proof that the product answered the tariff description, the classification adopted by the Department could not stand.

Conclusion: The product was not sustainable for classification under tariff item 17029090.

Issue (ii): whether duty could be sustained on the basis of its alleged marketability and the available test reports

Analysis: The Tribunal applied the settled test that marketability must be proved in the condition in which the product emerges. The syrup was consumed captively, had no demonstrated shelf life in the form in which it emerged, and the test reports did not establish individual constituents or marketability. The absence of evidence showing that the product, as manufactured in the appellant's factory, was capable of being sold in the market defeated the demand. The reliance placed by the Department on reports referring to invert sugar did not cure the lack of proof of marketability or establish excisability for the product as found on the facts.

Conclusion: Marketability was not established, and the demand of duty and penalty could not be sustained.

Final Conclusion: The impugned orders were set aside and the appeals succeeded on merits, with the disputed sugar syrup held not liable to central excise duty on the facts proved.

Ratio Decidendi: An in-process product captively consumed within the factory is not exigible to central excise duty unless the Department proves, by reliable evidence, that it answers the tariff description and is marketable in the condition in which it emerges.

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