Textile cess cannot be recovered twice from processor where supplier already paid, and demand fails without personal hearing.

A processing unit was not required to pay textile cess again where unrebutted records showed the supplier had already discharged the cess on the same material, and the governing 14-11-1984 circular did not permit double collection from both supplier and processor. The demand was therefore unsustainable on the merits. The final demand was also vitiated because, after the show cause reply sought a personal hearing, no hearing was granted before the demand was issued under Rule 8. On both grounds, the cess demand was set aside and the appeal succeeded.

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Issues: (i) Whether a processing unit was liable to pay textile cess where the supplier had already discharged the cess on the same material; (ii) whether the demand notice issued under Rule 8 was sustainable when no personal hearing was granted after reply to the show cause notice.

Issue (i): Whether a processing unit was liable to pay textile cess where the supplier had already discharged the cess on the same material.

Analysis: The demand was based on the premise that processing activities could attract cess, but the appellant produced unrebutted documents showing payment of cess by the suppliers. The circular of 14-11-1984 governing processing factories provided that where cess had already been paid and proof was available, cess need not again be collected from the processor. No contrary circular or instruction was shown to require double payment by both supplier and processor for the same material.

Conclusion: The processing unit was not liable to pay cess once the supplier had already paid it, and the demand on that count was unsustainable.

Issue (ii): Whether the demand notice issued under Rule 8 was sustainable when no personal hearing was granted after reply to the show cause notice.

Analysis: The record showed issuance of a show cause notice and a reply seeking personal hearing, but the demand was issued without granting that hearing. The opportunity contemplated under the rule was therefore not afforded before the final demand was raised.

Conclusion: The demand notice issued under Rule 8 was vitiated for want of hearing and was not sustainable.

Final Conclusion: The cess demand was set aside and the appeal succeeded because the cess had already been paid by the supplier and the demand was also issued in breach of the hearing requirement.

Ratio Decidendi: A processor is not required to pay cess again on material for which cess has already been paid by the supplier when the governing circular so provides and proof of such payment is produced, and a demand raised without affording the required hearing cannot be sustained.

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