Deeming fiction in textile exemption notification removed need for duty-paying documents, preserving concessional benefit.

Notification No. 14/2002-CE granted concessional treatment to specified processed fabrics subject to use of textile yarn or fabrics on which duty had been paid, but its explanation created a deeming fiction treating such inputs as duty paid even without documentary proof. The Supreme Court had already held that this explanation removes the insistence on duty-paying documents and that exemption cannot be denied merely because the underlying textile fabrics were otherwise exempt. On that legal basis, the appellant was entitled to the notification benefit and denial of exemption was unsustainable.

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Issues: Whether the appellant was entitled to the benefit of Notification No. 14/2002-CE dated 01.03.2002 without producing duty-paying documents for the textile fabrics used in manufacture, in view of the deeming fiction contained in the notification.

Analysis: The notification prescribed a concessional rate for the specified processed fabrics subject to the condition that the goods were made from textile yarn or fabrics on which appropriate duty had been paid. The explanatory provision in the notification created a legal fiction that textile yarn or fabrics shall be deemed to have been duty paid even without production of documents evidencing such payment. The issue had already been settled by the Supreme Court, which held that the explanation was intended to remove the insistence on documentary proof and that the benefit could not be denied merely because the underlying textile fabrics were exempt from duty. In that legal setting, the appellant was not required to produce duty-paying documents.

Conclusion: The appellant was entitled to the benefit of Notification No. 14/2002-CE and the denial of exemption was unsustainable.

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