Stage-wise excise duty on textile processing was not sustained where Modvat credit made the levy revenue neutral.

Stage-wise levy of excise duty on textile processing facilities was not sustained on the facts, because the assessee had already paid duty at the final stage and any duty charged at earlier stages would have been offset by Modvat credit. The Court noted that the Tribunal had treated the scheme as revenue neutral where credit was available against duty paid at each stage, and that the Revenue had accepted the earlier Tribunal view. On that basis, the excise demand at each stage was not upheld and the assessee succeeded.

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Issues: Whether the facilities in the assessee's factory for bleaching, dyeing, printing and mercerising textile fabrics attracted levy of excise duty at each stage of manufacture.

Analysis: The appeal turned on the applicability of stage-wise excise duty and the consequence of availability of Modvat credit. The Tribunal had relied on its earlier view that where duty is paid at each stage, credit is available and the exercise becomes revenue neutral. The Court noted that the Revenue had accepted the earlier Tribunal decision and that the assessee had paid duty at the final stage. If duty were levied at every stage, the assessee would be entitled to Modvat credit, making the entire exercise revenue neutral.

Conclusion: The levy of excise duty at each stage was not sustained on the facts, and the assessee succeeded.

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