COMMISSIONER OF CENTRAL EXCISE, MUMBAI-I versus M/S BOMBAY DYEING & MFG. CO. LTD.

Citation: [2007] 8 S.C.R. 913 · Decided: 08-08-2007 · Supreme Court of India · Bench: S.H. KAPADIA · Disposal: Dismissed
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Judgment (excerpt)

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COMMISSIONER OF CENTRAL EXCISE, MUMBAI-I 
A 
v. 
MIS BOMBAY DYEING & MFG. CO. LTD. 
AUGUST 8, 2007 
[S.H. KAPADIA AND B. SUDERSHAN REDDY, JJ.J 
B 
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Central Excise Act, 1944-Fabrics not subjected to any process-
Exempted from excise duty-By a Notification-Subject to twofold conditions-
Claim for exemption-Denied by Revenue-Claim of the assessee permitted c 
by the appellate authority and the Tribunal-On appeal, held: In the facts 
of the case, the twofold conditions for the exemption has been satisfied by 
the assessee-Hence, entitled for exemption-Notification No. 1412002-CE 
dated March 1, 2002-CENVAT Credit Rules, 2002. 
The assessee-company (respondent), in one of its Mills used to spin the D 
yarn and then used to prepare grey fabrics on weaving the yarns. The woven 
fabrics which were not subjected to any process used to be sold to third parties. 
Entry 1 of the table of Notification No. 14/2002-CE dated March 1, 2002 
granted exemption from the duty on the condition that the said fabrics were 
made from the textile yarn on which appropriate duty of excise sto(ld paid and 
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no duty paid on inputs had been taken under CENV AT Credit Rules, 2002. 
As the assessee was not in a position to pay duty on yarn at spindle 
stage, they opted to pay duty on yarn on deferred basis at the time of clearance 
of grey fabric for home consumption alongwith interest at the rate prescribed 
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under s. llAB of Central Excise Act, 1944 r/w r. 8(3) of Central Excise Rules, F 
2002. On paymentof duty he availed CENV AT credit, which was reversed by 
the assessee before utilization of the same. Revenue-appellant demanded duty 
at the rate of 12% denying exemption under the Notification for 'Nil' rate of 
duty on the ground that the assessee had not complied with the two conditions 
for the exemption. The demand was confirmed by Deputy Commissioner. 
Commissioner (Appeals) allowed the appeal of the assessee relying on Trade G 
Notice No. 40/96. The order was confirmed by the Tribunal. Hence the present 
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appeal. 
Dismissing the appeal. the Court 
913 
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914 
SUPREME COURT REPORTS 
[2007) 8 S.C.R. 
A 
HELD: Under Notification No. 14/2002-CE dated March 1, 2002, mode 
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of payment has not been prescribed. Further, exemption is given to the final 
product, namely, grey fabric under the Central Excise Act, 1944, levy is on 
manufacture but payment is at the time of clearance. Under the Act, payment 
of duty on yarn had to be at the spindle stage. Under the Exemption Notification 
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the requirement was that exemption on grey fabrics was admissible subject 
to the assessee paying duty on yarn before claiming exemption and subject to 
the assessee not claiming CENV AT credit before claiming exemption. The 
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question of exemption from payment of duty on grey fabrics arose on 
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satisfaction of the said two conditions. In this case, payment of duty on yarn 
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on deferred basis took place before clearance of grey fabrics on which 
c exemption was claimed. Therefore, payment was made before the stage of 
exemption. Similarly, on payment of duty on the input (yarn) the assessee got 
the credit which was never utilized. That before utilization, the entry has been 
reversed which amounts to not taking credit. Hence, in this case, both the 
conditions are satisfied. Hence item no. 1 of the table to the Notification would 
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apply and accordingly the grey fabrics would attract nil rate of duty. 
(Para SJ (925-C, D, E, FJ 
Collector of Central Excise v. Dai !chi Karkaria Lid., (1999) 112 E.L.T. 
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353, relied on. 
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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1767 of2007. 
From the final Order No. A/1342/WZB/06-C.II (E.B.) dated 06.07.2006 of 
the Customs Excise and Service Tax Appellate Tribunal, West Zonal Bench, 
Mumbai in Appeal No. E/1333 of2003 Mum. 
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Vikas Singh, ASG, Shweta Garg, Raguvender Rao and B.K. Prasad for 
the Appellant. 
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Atul Setalvad, F. Karbhari, R.N. Karanjawala, Nandini Gore, D. Banerjee 
and Manik Karanjawala for the Respondent. 
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The Judgment of the Court was delivered by 
KAPADIA: J. I. Interpretation of Notification No. 14/2002-CE arises for 
detennination in this civil appeal filed by the Department. The facts giving rise 
to this civil appeal are as follows: 
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2. The assessee has two textile mills in Mumbai known as the Spring 
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COMMNR. OF CENTRAL EXCISE, MUMBAI-Iv. BOMBAY DYEING & MFG. CO.LTD. [KAPADIA, J.) 915 
Mills and the Textile Mills. This ci
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