Marketability and suppression in excise law barred duty on waste liquor by-products and defeated the extended limitation period.

Waste liquor I and waste liquor II generated as by-products in caprolactum manufacture were held not to be excisable, because they were in substance waste or refuse and occasional sales did not establish the essential element of marketability. The central excise duty demand therefore could not be sustained. On limitation, the extended period was unavailable because the relevant facts about generation and combustion of the waste liquors had already been disclosed to the department, so suppression or wilful misstatement was not proved. The duty demand and penalty were accordingly set aside in favour of the assessee.

---

---

Issues: (i) Whether waste liquor I and waste liquor II obtained as by-products in the manufacture of caprolactum were excisable and dutiable. (ii) Whether the demand was barred by limitation for want of suppression or wilful misstatement.

Issue (i): Whether waste liquor I and waste liquor II obtained as by-products in the manufacture of caprolactum were excisable and dutiable.

Analysis: The products arose as waste or refuse in the manufacturing process. The fact that they had been sold on a few occasions did not establish that they were commercially marketable goods. Marketability is an essential attribute of excisable goods, and the mere possibility of sale of refuse does not convert it into excisable commodity. The reasoning was aligned with the settled principle that goods which are in substance waste, rubbish, or refuse, and not capable of being marketed as such, are not liable to central excise duty merely because they emerge in the course of manufacture.

Conclusion: The goods were not excisable and no central excise duty was leviable on waste liquor I and waste liquor II. The finding was in favour of the assessee.

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

Analysis: The material facts regarding generation of the waste liquors and their combustion had been disclosed to the department in earlier correspondence. In the absence of concealment of facts, suppression or wilful misstatement was not established for invoking the longer period.

Conclusion: The demand was hit by limitation. This issue was also in favour of the assessee.

Final Conclusion: The duty demand and penalty could not be sustained, and the appeal succeeded.

Ratio Decidendi: Mere emergence of waste or refuse in manufacture, coupled with occasional sales, does not by itself make the product marketable excisable goods; the extended period of limitation requires proof of suppression or wilful misstatement.

---