Marketability of intermediate products and absence of suppression can defeat excise duty, limitation, and penalty claims.

Intermediate products arising in a continuous bulk drug manufacturing process are not excisable unless the Revenue proves, with reliable evidence, that they are marketable goods; where the products are used captively in crude form and marketability is not established by testing, market enquiry, or technical material, the duty demand cannot stand. The extended limitation period is also unavailable unless suppression or wilful misstatement with intent to evade duty is shown; where the manufacturing process was disclosed and the dispute was a bona fide difference of view, the demand is time barred and the penalty cannot survive. The note states that duty, penalty, and confiscation were set aside with consequential relief.

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Issues: (i) Whether the intermediate products arising during the manufacture of bulk drugs were marketable goods and therefore excisable to duty. (ii) Whether the demand and penalty were barred by limitation in the absence of suppression or wilful misstatement.

Issue (i): Whether the intermediate products arising during the manufacture of bulk drugs were marketable goods and therefore excisable to duty.

Analysis: The intermediate products emerged in a continuous manufacturing process and were used captively for further manufacture of the final bulk drugs. The Department did not discharge the burden of proving marketability or excisability by reliable evidence such as sample testing, market enquiry, or technical material. The assessee's position that the products were in crude form and not sold in the market remained unrebutted.

Conclusion: The intermediate products were not shown to be marketable goods and the duty demand on that basis could not be sustained; this issue is decided in favour of the assessee.

Issue (ii): Whether the demand and penalty were barred by limitation in the absence of suppression or wilful misstatement.

Analysis: The manufacturing process had been disclosed and was known to the Department. On the facts, no deliberate suppression or misstatement with intent to evade duty was established. The dispute was treated as a bona fide difference of view regarding duty liability on intermediate products arising in a continuous process.

Conclusion: The extended period of limitation was not available and the demand was time barred; the penalty also could not survive, this issue being decided in favour of the assessee.

Final Conclusion: The appeal succeeded and the duty demand, penalty, and confiscation were set aside with consequential relief.

Ratio Decidendi: In excise proceedings, the burden lies on the Revenue to prove that an intermediate product is marketable and excisable, and the extended limitation period cannot be invoked without proof of suppression or wilful misstatement with intent to evade duty.

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