Cess not leviable twice on grey fabrics sent for processing when processed fabrics already suffered cess; penalty also fell.

Cess was held not leviable again on grey fabrics cleared for captive processing where cess had already been paid on the processed fabrics in the same manufacturing chain. The Tribunal applied its earlier view that the demand could not survive because the grey cloth was only sent for processing and the processed cloth had already suffered cess. As the underlying duty demand failed, the connected penalty, being consequential, also could not stand. The impugned duty and penalty order was therefore set aside and the appeal succeeded in full.

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Issues: Whether cess was leviable on grey fabrics cleared for captive consumption when cess had already been paid on the processed fabrics, and whether the penalty based on such demand could be sustained.

Analysis: The Tribunal applied its earlier view that cess is not exigible on grey cloth cleared for processing where the processed cloth has already suffered cess. On the facts, the demand related to grey fabrics sent for processing, while cess had been paid on the processed fabrics cleared thereafter. The basis for the duty demand therefore did not survive, and the connected penalty, being consequential to the duty demand, also could not stand.

Conclusion: The appellants were held not liable to cess on the grey fabrics cleared for processing, and the duty demand as well as the penalty were set aside.

Final Conclusion: The appeal succeeded in full and the impugned duty and penalty order was annulled.

Ratio Decidendi: Cess is not leviable again on grey fabrics cleared for processing where cess has already been paid on the processed fabrics cleared from the same chain of manufacture.

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