Marketability test defeats excise duty on captively consumed intermediate product used in laminated sheet manufacture.

Phenol formaldehyde solution used captively as an intermediate in the manufacture of laminated sheets was held not to be marketable goods and therefore not excisable. The Tribunal applied the principle that non-marketable materials are not liable to duty and followed its earlier order in the same assessee's case on the same product. Because the product failed the marketability test, the alternative claim under Notification No. 201/79 did not require separate examination. The departmental appeal was rejected and the Collector (Appeals) order was affirmed.

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Issues: Whether phenol formaldehyde solution prepared and used captively in the manufacture of laminated sheets was marketable and therefore excisable and dutiable.

Analysis: The product was an intermediate material used in an integrated manufacturing process. The Tribunal followed the Supreme Court's ruling that materials which are not marketable are not liable to duty, and also relied on its own earlier order in the assessee's case holding the same product to be non-excisable. In view of that conclusion, the alternative question regarding eligibility under Notification No. 201/79 did not require separate examination.

Conclusion: The phenol formaldehyde solution was not marketable goods and was not liable to excise duty.

Final Conclusion: The departmental appeal was rejected and the order of the Collector (Appeals) was affirmed.

Ratio Decidendi: A captively consumed intermediate product that is not marketable does not amount to excisable goods and cannot be subjected to duty.

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