Marketability of intermediate products governs excisability where Revenue must prove the product is saleable in its emerging condition.

An intermediate hot molten mixture arising during manufacture of boroline cream was examined for excisability as petroleum jelly under sub-heading 2712.10. The text notes that the product emerged in an unfinished, molten condition and was immediately consumed in the continuing manufacturing process. The chemical reports were found insufficient because the cone penetration test was not carried out and the method for determining congealing point was not shown. The governing excise test remained whether the product, as it emerged from the factory, was a distinct and marketable commodity. The burden to prove marketability of the intermediate product rested on the Revenue, and the evidence did not establish that the mixture could be bought and sold in that condition.

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Issues: Whether the intermediate hot molten mixture emerging during manufacture of boroline cream was excisable and classifiable as petroleum jelly under sub-heading 2712.10, and whether the Revenue proved that the product was marketable in the condition in which it emerged.

Analysis: The product arose at an intermediate stage in a hot molten state and was immediately used in the ongoing manufacturing process. The chemical reports did not establish all the conditions required by the HSN note for petroleum jelly, since the cone penetration test was not carried out and the method adopted for congealing point was not shown. The relevant test in excise law remained whether the product, as it emerged from the factory, was a distinct and marketable commodity. On the evidence, the Revenue did not show that the molten mixture was capable of being bought and sold in that condition. The burden to prove marketability of an intermediate product rested on the Revenue.

Conclusion: The intermediate product was not proved to be marketable or excisable as petroleum jelly, and the demand could not survive.

Final Conclusion: The appeal succeeded on merits and the duty demand and penalty were set aside.

Ratio Decidendi: An intermediate product is not dutiable unless the Revenue proves that it is marketable in the very condition in which it emerges and that the applicable classification criteria are cumulatively satisfied.

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