Marketability as a condition of excisability: captive UF and PF resin solutions were treated as non-excisable, with notification relief allowed.

Marketability was treated as an essential condition of excisability, so UF and PF resin solutions captively consumed in blockboard manufacture were not liable to excise duty because they were not marketable goods. On that basis, the assessee could not be denied the benefit of Notification No. 217/86 merely on the assumption that duty was payable on the final product. The demand on the captive resin solutions was set aside, and consequential relief followed.

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Issues: (i) Whether UF and PF resin solutions captively consumed in the manufacture of blockboard were liable to excise duty in the absence of marketability; (ii) Whether the benefit of Notification No. 217/86 was available when the final product had been held to be non-excisable on the ground of non-marketability.

Issue (i): Whether UF and PF resin solutions captively consumed in the manufacture of blockboard were liable to excise duty in the absence of marketability.

Analysis: The basic test for excisability is marketability. The Tribunal followed the earlier High Court view in the assessee's own matter that UF and PF resin solutions used in the factory were not marketable goods. It also applied the settled principle that goods which are not marketable cannot be subjected to excise duty even if they are described in the tariff.

Conclusion: UF and PF resin solutions were held not liable to excise duty as non-marketable and therefore non-excisable goods.

Issue (ii): Whether the benefit of Notification No. 217/86 was available when the final product had been held to be non-excisable on the ground of non-marketability.

Analysis: The denial of the notification benefit rested on the premise that the final product had been cleared without payment of duty. Once the final product was treated as non-excisable, that basis could not survive. The Tribunal therefore accepted the assessee's claim for the notification benefit in consequence of the finding on marketability and excisability.

Conclusion: The assessee was entitled to the benefit of Notification No. 217/86.

Final Conclusion: The demand confirmed on captively consumed UF and PF resin solutions was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Marketability is an essential condition for excisability, and goods found to be non-marketable cannot be subjected to excise duty or denied consequential exemption benefits on the assumption that duty was payable on the final product.

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