Marketability of intermediate goods controls excise duty where the product has only short shelf life and no proven market sale.
Rubberised cotton cord/fabric was held to lack sufficient shelf life and therefore could not be treated as goods for excise purposes. The evidence showed only very limited usability, rapid curing at room temperature, and loss of binding character within hours, which defeated durable commercial handling. The product was also found not marketable: it was captively consumed in tyre manufacture, no market sale was shown, and the Department failed to prove that it was known as a commodity capable of purchase and sale. On that basis, the intermediate product was not excisable goods under Section 3 and the duty demand could not survive.
Issues: (i) Whether rubberised cotton cord/fabric had sufficient shelf life and could be treated as goods; (ii) Whether rubberised cotton cord/fabric was capable of being bought and sold in the market and therefore liable to central excise duty.
Issue (i): Whether rubberised cotton cord/fabric had sufficient shelf life and could be treated as goods.
Analysis: The evidence comprised affidavits from manufacturers and users showing that the product remained usable only for a few hours, along with expert opinion stating that its storage life was limited and that in practice it was used within 24 hours. The short duration of usability, coupled with the likelihood of curing at room temperature and loss of binding character, showed that the product did not have a durable shelf life capable of supporting commercial handling.
Conclusion: The product did not have sufficient shelf life to be treated as goods for excise purposes, and this issue was decided in favour of the assessee.
Issue (ii): Whether rubberised cotton cord/fabric was capable of being bought and sold in the market and therefore liable to central excise duty.
Analysis: Marketability is a necessary attribute of excisable goods, and the burden lay on the Department to establish it. The material on record showed only captive consumption in tyre manufacture, while the affidavits and expert opinion indicated that the product was not commercially sold. No evidence was produced by the Department to show that the product was known to the market as a commodity capable of sale and purchase. Once the product was found to be not marketable, its classification under the tariff and the demand of duty could not survive.
Conclusion: The product was not marketable and was not excisable goods under Section 3; this issue was decided in favour of the assessee.
Final Conclusion: The duty demand failed because the intermediate product lacked marketability, and the classification and recovery questions became academic once it was held not to be excisable goods.
Ratio Decidendi: An intermediate product is chargeable to central excise only if it is marketable as goods; where the product is captively consumed, has a very short shelf life, and is not shown to be bought and sold in the market, no excise duty can be levied.