Marketability of captive intermediate goods governs excisability; tariff classification alone does not establish duty liability.

An intermediate product captively consumed in manufacture is excisable only if the Revenue proves that it is marketable or capable of being marketed as goods. Marketability must be supported by evidence, and mere classification under a tariff heading is insufficient. Where the notice does not specifically allege marketability and the record lacks technical material, testing, expert evidence, or market enquiry, the duty liability fails. On the stated facts, the product's alleged short shelf life and dependence on the manufacturer's own formula did not establish commercial salability, so the demand for duty could not survive and interest or penalty could not be sustained.

---

---

Issues: Whether rubberised cotton cord fabric captively consumed in the manufacture of cycle tyres was marketable and therefore excisable, and whether the demand of duty, interest, and penalty could survive.

Analysis: The duty liability of an intermediate product depends on whether it answers the test of marketability as goods capable of being bought and sold. The burden to establish marketability lay on the Department. The show cause notice did not specifically allege marketability, and the evidence relied upon by the adjudicating authority was insufficient. The finding that the product had a shelf life of two days was unsupported by technical material, testing, expert evidence, or market enquiry. The product was also shown to depend upon the manufacturer's own trade secret formula, which weakened the claim that it was a commercially saleable commodity. Mere classification under a tariff heading did not establish excisability. In the absence of proof that the intermediate product had sufficient shelf life and was capable of being marketed, the Revenue failed to discharge its burden.

Conclusion: The product was not marketable and was not excisable as goods under Section 3 of the Central Excise Act, 1944. The duty demand was unsustainable, and no interest or penalty could survive.

Ratio Decidendi: An intermediate product captively consumed becomes dutiable only if the Revenue proves that it is marketable or capable of being marketed as goods; tariff classification by itself is insufficient.

---