Excise exemption on processed fabric depends on the final cleared product, not an intermediate manufacturing stage.

Excise duty on processed fabric was to be assessed by reference to the goods as finally cleared, not by an intermediate grey-stage fibre content that was part of a continuous manufacturing process. Because the fabric was removed only after carbonisation as 100% polyester fabric, the exemption under Notification No. 4/97-C.E. applied to the finished condition of clearance. The intermediate cotton content was not separately cleared for consumption and could not be used to deny exemption. Duty on the grey-stage composition was therefore not demandable, and the exemption claim on the final cleared fabric was upheld.

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Issues: Whether duty could be demanded on the fibre content existing at the grey stage, when the fabric was finally cleared only after carbonisation as 100% polyester fabric and claimed exemption under Notification No. 4/97-C.E. dated 1-3-1997.

Analysis: The exemption notification was applied to the fabric in the form in which it existed at the time of clearance. The process of carbonisation was part of a continuous manufacturing process, and the cotton content present at the intermediate grey stage was not cleared as such for outside consumption. The taxable character of the goods had therefore to be determined by the condition of the fabric at final clearance, not by an earlier intermediate stage that no longer represented the goods as cleared.

Conclusion: Duty could not be demanded on the basis of the intermediate grey-stage fibre content. The exemption was available on the final cleared fabric, and the Revenue's challenge failed.

Final Conclusion: The assessment had to be made on the finished fabric as cleared after processing, and the order granting exemption was upheld.

Ratio Decidendi: Excise duty on processed goods must be determined on the goods as they exist at the time of clearance, and an exemption notification cannot be denied by reference to an intermediate stage of manufacture that is not the form in which the goods are finally removed.

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