Exemption condition for cotton fabrics supported prima facie waiver where duty-paid inputs and Board circular favoured the appellant.

Eligibility for exemption under Notification No. 14/2000 turned on whether the knitted or crocheted cotton fabrics had borne the required excise duty or additional customs duty and whether CENVAT credit had been taken. The appellant argued that duty paid on yarn and fibres satisfied the condition, while the revenue treated the grey fabrics as not duty paid. On a prima facie reading of the exemption condition, that construction was found supportable and a Board circular also favoured it. The appellant therefore established a prima facie case, and unconditional waiver of pre-deposit was granted.

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Issues: Whether the appellant had made out a prima facie case for unconditional waiver of the pre-deposit of duty demanded on denial of exemption under Notification No. 14/2000.

Analysis: The condition attached to the exemption required the relevant knitted or crocheted textile fabrics of cotton to have borne the appropriate duty of excise or additional customs duty, as applicable, and no credit to have been taken under the CENVAT Credit Rules, 2002. The appellant contended that duty had been paid on yarn and fibres, while the revenue treated grey fabrics cleared under the exemption as if no duty had been paid. On a prima facie reading of the condition, the claim that duty-paid inputs satisfied the requirement was found to have force, and the Board's circular was also relied upon to support that view.

Conclusion: The appellant was found to have established a prima facie case, and the pre-deposit was waived unconditionally in favour of the appellant.

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