Controlled cloth exemption fails when fabrics are sold above the prescribed maximum ex-factory price

Exemption under Notification 70/88 applied only to cloth that satisfied the statutory definition of controlled cloth under the Textile (Control) Order, 1986, including sale at the maximum ex-factory price fixed by the Textile Commissioner. Fabrics sold above that prescribed price did not meet the controlled cloth condition and therefore fell outside the exemption, leaving the duty demand sustainable.

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Issues: Whether fabrics sold by the assessee at a price higher than the maximum ex-factory price fixed by the Textile Commissioner could still qualify as "controlled cloth" for the purpose of exemption under Notification 70/88.

Analysis: The exemption under Notification 70/88 applied only to cloth answering the description of controlled cloth as defined under the Textile (Control) Order, 1986, for which the Textile Commissioner had specified maximum ex-factory prices. The relevant order empowered the Textile Commissioner to fix the maximum price at which cloth could be sold, and the later notification issued under that order also required sale at the prescribed maximum ex-factory price. Since the fabrics in question were sold above the stipulated price, they did not satisfy the definition of controlled cloth for the purpose of the exemption.

Conclusion: The fabrics were not eligible for exemption under Notification 70/88, and the demand of duty was sustainable in favour of the Revenue.

Ratio Decidendi: Where an exemption depends on compliance with a price condition built into the statutory definition of the exempted goods, sale above the prescribed maximum price disqualifies the goods from exemption.

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