Textile exemption under Notification No. 15/2002-CE upheld for knitted garments made from exempt fabrics without Cenvat credit.

Notification No. 15/2002-CE allowed nil duty on knitted garments where Cenvat credit was not availed, and its explanation deemed fibres and yarns to be duty paid even without duty-paying documents. Applied to garments made from exempt knitted fabrics, the textile exemption scheme was read consistently with the Apex Court's interpretation that manufacturers who forgo credit are not required to prove actual duty payment through documents. The earlier departmental view was displaced by the later binding interpretation, so denial of the exemption was unsustainable and the benefit under the notification was available.

---

---

Issues: Whether the appellant was entitled to the benefit of Notification No. 15/2002-CE dated 01.03.2002 in respect of knitted garments manufactured from exempt knitted fabrics, where the fabrics were treated as not having suffered duty and credit was not availed.

Analysis: The notification granted nil rate of duty subject to the condition regarding non-availment of Cenvat credit. The explanation to the notification created a legal fiction by deeming fibres and yarns to be duty paid even without production of duty-paying documents. The exemption scheme for the textile sector was interpreted by the Apex Court to mean that manufacturers opting not to take credit were not required to pay duty, and documentary proof of duty payment could not be insisted upon. The reasoning adopted in the earlier authority relied upon by the department was displaced by the later binding interpretation of the Apex Court.

Conclusion: The appellant was entitled to the exemption under Notification No. 15/2002-CE dated 01.03.2002, and the denial of the benefit was unsustainable.

---