Exemption under textile notification extends to market-purchased fibres treated as duty paid for captive consumption benefit

Interpretation of exemption conditions under Notification No. 14/2002-C.E. determined the eligibility of a composite textile mill using captively consumed yarn and base fabric. The Bench applied its earlier ruling, together with the Board circular and the notification's explanation, to hold that textile fibres purchased from the market were to be treated as duty paid for exemption purposes. On that basis, the composite mill was entitled to the concessional benefit, even though the captively consumed yarn and base fabric did not themselves suffer duty under Notification No. 22/1996-C.E. The lower appellate order was set aside.

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Issues: Whether a composite textile mill manufacturing fabrics was entitled to the benefit of Notification No. 14/2002-C.E. when the captively consumed yarn and base fabric did not themselves suffer duty under Notification No. 22/1996-C.E.

Analysis: The entitlement turned on interpretation of the notification conditions requiring payment of appropriate excise duty on the raw materials. The Bench followed its earlier decision on the same question, read with the Board circular and the explanation to the notification, and held that textile fibres purchased from the market were to be treated as duty paid for the purpose of the exemption. On that basis, the assessee's composite mill was held eligible for the concessional benefit.

Conclusion: The issue was decided in favour of the assessee, and the lower appellate order was set aside.

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