Intermediate marketable product doctrine: plastic tubes in bag manufacture remained dutiable despite exemption for the final product.

Plastic tubes emerging at an intermediate stage in the manufacture of plastic bags were treated as a distinct marketable product and therefore attracted central excise duty. The fact that the final plastic bags were cleared under an exemption scheme did not, by itself, exempt the intermediate product. Heading 39.17 provided a concessional rate for the goods, but the notification did not extend protection to the intermediate stage absent a specific exemption. The duty demand on the intermediate plastic tubes was upheld, and no relief was granted to the assessee.

---

---

Issues: Whether plastic tubes arising at an intermediate stage in the manufacture of plastic bags were liable to central excise duty, and whether the exemption structure in Notification No. 15/94 protected them from duty.

Analysis: A new product, namely plastic tubes, was found to come into existence during the manufacturing process. The appellant did not dispute emergence of a distinct product and did not contend that it was unmarketable. Once a new marketable product comes into existence, it is liable to duty unless it is specifically exempted. Heading 39.17 of the Tariff provided a concessional rate for the goods in question without any condition, and the notification did not support the claim that the intermediate product escaped duty merely because the final product was cleared under the exemption scheme.

Conclusion: The intermediate plastic tubes were dutiable and the appeal failed.

Final Conclusion: The demand of duty on the intermediate product was upheld and the assessee obtained no relief.

Ratio Decidendi: A distinct and marketable intermediate product is chargeable to excise duty unless a specific exemption applies, and the exemption for the final product does not automatically exclude duty on the intermediate stage.

---