Marketability test for captive mixtures defeated excise duty where tailor-made products lacked proof of being goods.

Captive mixtures prepared from duty-paid materials for use in manufacturing polyester staple fibre were treated as non-excisable because marketability was not proved. The controlling test was whether the mixtures had the character of goods; the Department's material did not establish that they were marketable, and their short shelf life weighed against excisability. An earlier Tribunal ruling on tailor-made mixtures lacking proven marketability was followed, and the duty demand under the invoked headings was set aside in favour of the assessee.

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Issues: Whether the mixtures prepared and used captively in the manufacture of polyester staple fibre were excisable goods liable to duty under Heading 3801.90 and thereafter Heading 3815.00.

Analysis: The mixtures were prepared from duty-paid materials and used within the factory in the manufacture of the final product. The controlling consideration was whether they had the character of goods, which depended on marketability. The material relied on by the Department did not establish that the mixtures were marketable, and the short shelf life of the products remained a significant factor against their being treated as excisable goods. The issue was covered by the earlier Tribunal decision relied upon by the appellants, which held that such tailor-made mixtures, lacking proven marketability, were not dutiable.

Conclusion: The mixtures were not excisable goods and were not liable to duty under the headings invoked; the demand was set aside in favour of the assessee.

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