Marketability test in central excise defeated duty on forged intermediates that had already become hand tools.

Forged products after fettling were held not to be assessable as marketable excisable goods under the residuary tariff entry because the department failed to prove marketability at the intermediate stage. The products had only undergone finishing operations such as broaching, grinding, hardening and plating, and had already assumed the shape of hand tools. Marketability remained a condition for levy under section 3 of the Central Excises and Salt Act, 1944, and the burden to establish excisability lay on the department. As that burden was not discharged, central excise duty could not be levied and the confiscation and penalty also failed.

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Issues: Whether the forged products after fettling were marketable excisable goods falling within the residuary tariff item and liable to central excise duty, confiscation and penalty.

Analysis: The products came out of the forging stage and were subjected only to subsequent finishing operations such as broaching, grinding, barrelling, hardening, tempering, shot blasting, gauging, straightening and plating. The decisive question was whether, after fettling, the goods had acquired the character of marketable excisable goods. The absence of evidence from the department to show that the goods at the intermediate stage were marketable was material, because marketability is a condition for levy under section 3 of the Central Excises and Salt Act, 1944. The burden to prove excisability and marketability lay on the department. On the facts, the forged products after fettling had already assumed the shape of hand tools and could not be treated as the residuary forged products sought to be taxed.

Conclusion: The goods were not proved to be marketable excisable goods at the intermediate stage and duty could not be levied on them; the confiscation and penalty also could not stand.

Ratio Decidendi: For central excise levy, the department must prove that the goods are marketable and excisable; an intermediate forged product which has already taken the form of a specific final article and is not shown to be marketable cannot be assessed under a residuary tariff entry.

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