Duty-paid yarn exemption applies to dyed yarn even if an intermediate doubling stage was separately exempted.

A beneficial exemption under Notification No. 6/2002-C.E. was available where dyed yarn was manufactured from yarn on which excise duty had already been paid. The notification's condition 19(ii) did not require duty payment at every intermediate processing stage, and the exemption could not be denied merely because the doubling stage had itself been cleared under a separate exemption. On the plain wording of the notification, the decisive factor was that the final dyed yarn was traceable to duty-paid single yarn. The assessee was therefore entitled to the exemption under Sl. No. 97.

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Issues: Whether dyed yarn manufactured from doubled yarn, where duty had been paid at the stage of the original single yarn but exemption had been availed at the doubling stage, satisfied condition 19(ii) of Notification No. 6/2002-C.E. dated 1-3-2002 for exemption under Sl. No. 97.

Analysis: Condition 19(ii) required the dyed yarn to be manufactured out of yarn on which appropriate duty of excise had already been paid. The question was whether this condition was defeated merely because the intermediate doubled yarn was cleared under an exemption. The relevant reading of the notification showed that the dyed yarn was ultimately manufactured from single yarn on which duty had in fact been discharged. The notification did not insist that duty must be paid at every intermediate stage of processing, and the exemption could not be denied only because the doubling stage had been exempted. The interpretation consistent with the plain words of the notification favoured the assessee.

Conclusion: Condition 19(ii) was satisfied, and the dyed yarn was entitled to exemption under Sl. No. 97.

Final Conclusion: The appeal succeeded and the assessee obtained consequential relief on the exemption issue.

Ratio Decidendi: Where a beneficial exemption notification requires manufacture out of duty-paid yarn, the condition is met if the final product is traceable to yarn on which duty was already paid, and exemption cannot be denied merely because an intermediate stage of processing was cleared under a separate exemption unless the notification expressly so provides.

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