Strict construction of exemption notification leaves terry-towelling fabric dutiable, with adjustment for duty paid on towels.

An exemption notification must be construed strictly according to its terms: where it covered terry towelling but did not extend to terry-towelling fabric, the fabric was not exempt and remained dutiable under Heading 5802.12 for the notification period. Duty already paid on towels was to be adjusted against the fabric liability, with any excess refundable and any shortfall recoverable. The clarification was confined to the period of the notification, and exemption could not be enlarged to a goods category not expressly covered.

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Issues: Whether terry-towelling fabric was covered by Notification No. 65/1987 dated 1 March 1987 so as to be exempt from duty, and whether duty was payable on the fabric under Heading 5802.12 with adjustment for duty already paid on towels.

Analysis: The notification exempted terry towelling but did not exempt terry-towelling fabric. The duty had been paid on towels, which were the exempted item, whereas no duty had been paid on the fabric. Since the notification did not extend to fabrics, duty liability continued on the fabric under Heading 5802.12. At the same time, the respondent was entitled to adjustment of duty already paid on towels, and any excess payment was refundable while any shortfall remained recoverable. The clarification was confined to the period covered by the notification.

Conclusion: The exemption was not available for the fabric, and duty was payable on it, subject to adjustment of duty paid on towels.

Final Conclusion: The Tribunal's view was rejected and the duty liability on the fabric was upheld for the notification period only, with consequential adjustment and refund or recovery as found on calculation.

Ratio Decidendi: An exemption notification must be construed strictly according to its terms, and where it exempts only a specified item, exemption cannot be extended to a different goods category not expressly covered by the notification.

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