"Same factory" means the factory where goods are actually used for manufacture; imports need not be manufactured there - Section 3(1)

SC held that the phrase "same factory" in exemption notification No.4/2006-CE means the factory where the goods are actually used for manufacturing, not that the goods themselves must have been manufactured there. Literal reading producing absurdity is avoided; imports need not be manufactured in the same factory to qualify. There is no requirement in Section 3(1) that production occur in the factory owning the goods. Applying this interpretation, the exemption applies and the appeals are dismissed.

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Issues Involved:
1. Interpretation of exemption notification No. 4/2006-CE dated 1.03.2006.
2. Applicability of additional duty (CVD) under Section 3 of the Customs Tariff Act, 1975.
3. Conditions for availing exemption notification.
4. Relevance of the decision in Thermax Private Ltd. v. Collector of Customs.
5. Literal vs. purposive interpretation of exemption notifications.

Issue-wise Detailed Analysis:

1. Interpretation of exemption notification No. 4/2006-CE dated 1.03.2006:
The core issue is the interpretation of the exemption notification No. 4/2006-CE dated 1.03.2006. The respondent claimed that no excise duty was payable on the imported goods under this notification, which was upheld by the Tribunal. The notification exempts certain excisable goods used in the same factory for manufacturing textiles and textile articles from excise duty.

2. Applicability of additional duty (CVD) under Section 3 of the Customs Tariff Act, 1975:
Section 3(1) of the Customs Tariff Act, 1975, mandates that any imported article shall be liable to additional duty equal to the excise duty leviable on a like article if produced or manufactured in India. If the excise duty on a like article is 'nil', no additional duty would be payable. The Tribunal's decision was based on this interpretation, asserting that if the notification applies, no additional duty is due.

3. Conditions for availing exemption notification:
The appellant argued that the exemption notification should be construed strictly and that the conditions precedent must be satisfied, including that the raw material must be a product of the same factory. The court clarified that an exemption notification must be read literally, and once applicable, should be construed liberally. The expression "same factory" was interpreted to mean the factory where the goods are actually manufactured, not necessarily the factory that produced the raw materials.

4. Relevance of the decision in Thermax Private Ltd. v. Collector of Customs:
The Tribunal based its decision on the judgment in Thermax Private Ltd. v. Collector of Customs, which was referred to a Constitution Bench in Hyderabad Industries Ltd. v. Union of India. However, the court noted that the referral to the Constitution Bench was limited to the manner of applying Chapter X of the Act and not the specific question at hand. The court upheld the principle that imported goods used in the factory of the importer for manufacturing should be treated as if they were manufactured in the same factory.

5. Literal vs. purposive interpretation of exemption notifications:
The court emphasized that an exemption notification should be read literally and strictly, but once it is found applicable, it should be construed liberally to achieve its purpose. The court rejected the appellant's contention that the goods must be manufactured in the same factory, clarifying that the notification's purpose was to ensure that imported goods used in the manufacturing process are treated equitably with domestically produced goods.

Conclusion:
The appeals were dismissed, affirming that the exemption notification No. 4/2006-CE dated 1.03.2006 applies to the respondent's imported goods used in their manufacturing process, thereby exempting them from additional duty. The court awarded costs to the respondent, assessed at Rs. 50,000.

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