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Issues: (i) Whether the intermediate product "Upset Forge" was marketable and therefore liable to central excise duty as an excisable product under Heading 84.09 of the Central Excise Tariff Act, 1985; (ii) whether the demand was barred by limitation for want of suppression of facts with intent to evade duty.
Issue (i): Whether the intermediate product "Upset Forge" was marketable and therefore liable to central excise duty as an excisable product under Heading 84.09 of the Central Excise Tariff Act, 1985.
Analysis: Liability of an intermediate product to excise duty depends not merely on its emergence in the manufacturing process, but also on whether it is goods known in the market or otherwise shown to be marketable. The Department produced no evidence to establish marketability of the alleged intermediate product, and the adjudication order did not address that essential requirement. In the absence of proof that the product was marketable, excisability could not be sustained.
Conclusion: The issue was answered in favour of the assessee and against the duty demand.
Issue (ii): Whether the demand was barred by limitation for want of suppression of facts with intent to evade duty.
Analysis: The manufacturing details, technical notes and flow chart had been furnished to the Department well in advance, supporting a bona fide belief that no excisable intermediate product arose. Where full particulars of the process are disclosed, mere non-levy cannot be treated as wilful suppression with intent to evade duty. On the facts, the demand was held to suffer from limitation at least for the major part of the period.
Conclusion: The issue was answered in favour of the assessee and against the revenue.
Final Conclusion: The duty demand and penalty were set aside because excisability was not established and the demand was also hit by limitation.
Ratio Decidendi: An intermediate product is not exigible to central excise duty unless the Department proves that it is marketable, and a demand cannot be sustained on limitation where the assessee has disclosed the manufacturing process and there is no wilful suppression of facts with intent to evade duty.
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