Deemed duty-paid textile inputs under exemption notification cannot be denied for lack of duty-paying documents.

Notification No. 14/2002-CE deeming textile yarns or fabrics to be duty paid could not be denied merely because the manufacturer lacked duty-paying documents. The exemption scheme for the textile sector was intended to operate without insisting on proof of actual duty payment on such inputs where the assessee opted out of Cenvat credit. The explanation in the notification had to be given full effect, so the legal fiction extending duty-paid status to the inputs controlled the exemption. On that basis, the benefit of the notification was available despite the absence of documentary evidence of payment.

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Issues: Whether the benefit of Notification No. 14/2002-CE dated 01.03.2002 could be denied for want of duty-paying documents in respect of textile fabrics used as inputs, and whether such fabrics were to be treated as duty paid by virtue of the notification's explanation.

Analysis: The notification created a legal fiction by providing that textile yarns or fabrics were to be deemed duty paid even where no documentary proof of actual payment was produced. The exemption scheme for the textile sector was intended to allow manufacturers opting out of Cenvat credit to clear the goods without insisting on proof of duty payment on the underlying fabrics. The governing legal position had already been settled by the Supreme Court, which held that the explanation had to be given full effect and that the manufacturer was not required to produce duty-paying documents where the scheme itself deemed the inputs to be duty paid.

Conclusion: The appellant was entitled to the benefit of Notification No. 14/2002-CE and could not be denied such benefit for absence of duty-paying documents relating to textile fabrics.

Ratio Decidendi: Where an exemption notification expressly deems inputs to be duty paid, the legal fiction must be carried to its logical conclusion and the benefit cannot be denied merely because documentary proof of actual duty payment is not produced.

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