Excise duty on terry towels was not payable again where duty had already been paid at the fabric stage.

Where terry towelling fabric had already suffered duty under the applicable exemption notification, no further excise duty was payable again at the terry towel stage after cutting, stitching and hemming. The notification treated the towel stage as exempt once duty was discharged at the fabric stage, so a second levy on the finished towels was not sustainable. The demand for additional duty therefore could not survive and the impugned order was set aside.

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Issues: Whether any further excise duty was payable on terry towels when duty had already been paid at the terry towelling fabric stage under the applicable exemption notification.

Analysis: The appellants manufactured terry towelling fabric and terry towels. The notification in force provided that where duty had been paid at the fabric stage, no duty was payable again at the towel stage after cutting, stitching and hemming. Since the appellants had already discharged duty on the towels and the notification exempted the towel stage on payment at the fabric stage, the demand for further duty could not survive.

Conclusion: No further duty was payable on the towels. The impugned order was set aside and the appeal was allowed.

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