Marketability and limitation in excise: intermediate product not shown to be independently marketable, and extended period failed for lack of suppression.

Excise duty on an intermediate product was unsustainable because the Revenue did not prove that the audio cassette housing or its component stage had emerged as independent, marketable goods with separate commercial identity, name, character and use. The manufacturing process showed assembly into the final cassette, and there was no evidence of actual marketability or separate sale. The demand was also time-barred because the assessee had disclosed the classification lists and price bifurcation, and the department failed to establish wilful suppression or misdeclaration needed to invoke the extended limitation period. The excise demand and penalty were set aside.

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Issues: (i) Whether the impugned intermediate product was proved to be marketable goods liable to central excise duty; (ii) whether the demand was barred by limitation for want of wilful misdeclaration or suppression.

Issue (i): Whether the impugned intermediate product was proved to be marketable goods liable to central excise duty.

Analysis: The dispute centred on whether the alleged audio cassette housing and its component parts emerged as independent, commercially identifiable goods before the final audio cassette came into existence. The burden lay on the Revenue to establish marketability and dutiability. The record did not show any evidence of actual marketing of the intermediate product, nor was it demonstrated that trade and commerce recognised it as a separate with a distinct name, character and use. The manufacturing process indicated that the components were assembled with the magnetic tape to produce the final cassette, and the intermediate product was not shown to have a separate independent existence capable of sale as such.

Conclusion: The Revenue failed to prove that the impugned product was marketable goods; duty could not be sustained on that basis, and the finding was in favour of the assessee.

Issue (ii): Whether the demand was barred by limitation for want of wilful misdeclaration or suppression.

Analysis: The classification lists and price bifurcation were disclosed to the department, and the department had the opportunity to seek any further particulars needed for approval. In the absence of proof that the assessee deliberately withheld the manufacturing process or suppressed material facts, the extended period could not be invoked. The allegation of wilful misdeclaration was not substantiated on the evidence discussed.

Conclusion: The demand was time-barred and unsustainable on limitation, in favour of the assessee.

Final Conclusion: The appeal succeeded, the excise demand and penalty were set aside, and consequential relief followed.

Ratio Decidendi: Excise duty on an intermediate product cannot be sustained unless the Revenue proves that it came into existence as independent, marketable goods and, where full disclosure is made, limitation cannot be extended absent proof of wilful suppression or misdeclaration.

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