Trade parlance and marketability decide excise classification, while unmarketable slurry escapes duty and limitation remains open.

Egg trays, egg cartons, tube light packing trays, duck egg trays and apple trays were held classifiable by reference to their trade identity and tariff description: they were not cartons, boxes or other paper containers, so Item 17(4) / 17(3) did not apply, exemption under Notification No. 66/82-C.E. was unavailable, and the goods fell under Item 68 for the pre-1986 period and Heading 4818.90 under the new tariff. Slurry was not exigible because marketability was not shown. A demand for short-levied duty was maintainable under Section 11A despite an approved classification list, but the larger limitation question for the earlier period required fresh determination.

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Issues: (i) Whether the respondents' egg trays, egg cartons, tube light packing trays, duck egg trays and apple trays were classifiable under Item 68 of the erstwhile Central Excise Tariff or under Item 17(4) / 17(3) as articles of paper and paperboard, and whether exemption under Notification No. 66/82-C.E. was available; (ii) whether the intermediate product "slurry" was excisable and liable to duty; (iii) whether the demand relating to the earlier period was sustainable in view of the approved classification list and the plea of limitation.

Issue (i): Whether the respondents' egg trays, egg cartons, tube light packing trays, duck egg trays and apple trays were classifiable under Item 68 of the erstwhile Central Excise Tariff or under Item 17(4) / 17(3) as articles of paper and paperboard, and whether exemption under Notification No. 66/82-C.E. was available.

Analysis: The products were examined in the light of the tariff scheme, the manufacturing process, dictionary meaning of "container", and trade parlance. The articles did not answer the description of cartons, boxes, bags or other packing containers, and were known in the trade as egg trays, apple trays, and similar articles rather than as paper containers. As they were not containers of paper, classification under Item 17(4) for 1982-83 and Item 17(3) for 1983-86 was excluded. They were therefore assessable under the residuary Item 68 for the period prior to 1-3-1986. Since they did not fall under Item 17(4), the exemption notification was also unavailable. For the new tariff from 1-3-1986, Heading 4818.19 was held inapplicable because it covered cartons, boxes, containers and cases, whereas these goods were not containers; however, as articles of paper and paper pulp they were classifiable under Heading 4818.90.

Conclusion: The classification under Item 68 for the old tariff period and under Heading 4818.90 for the new tariff period was upheld, and exemption under Notification No. 66/82-C.E. was denied.

Issue (ii): Whether the intermediate product "slurry" was excisable and liable to duty.

Analysis: Excise duty is attracted only when the product is marketable and capable of being bought and sold as goods. No material showed that the slurry had marketability, and the Revenue also conceded that the demand on slurry was not sustainable. The intermediate product was therefore not an excisable commodity.

Conclusion: Duty on slurry was not leviable and the demand to that extent was set aside.

Issue (iii): Whether the demand relating to the earlier period was sustainable in view of the approved classification list and the plea of limitation.

Analysis: The show cause notice dated 4-5-1984 was found to be a notice for recovery of short-levied duty and not a proper notice proposing modification of the approved classification list. The Department was not estopped from correcting an earlier mistake in classification, and Section 11A provided the statutory basis for recovery of short-levied duty. At the same time, the Collector (Appeals) had not decided the question whether the larger period of limitation could be invoked for the entire demand, because the appeal had earlier been allowed on merits. That question required fresh determination on remand.

Conclusion: The demand under Section 11A was maintainable in principle, but the limitation issue for the earlier period was remanded for fresh decision.

Final Conclusion: The Revenue succeeded on the main classification issue for both tariff regimes, the respondents succeeded on the question of duty on slurry, and the matter was sent back only on limitation for the pre-1986 demand.

Ratio Decidendi: For excise classification, the decisive test is the nature of the article as known in the trade and as described by the tariff, and excise duty can be levied only on a marketable product that answers the relevant tariff description; an approved classification does not bar correction under Section 11A, but limitation must still be separately examined where invoked.

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