COMMISSIONER OF CUSTOMS, CENTRAL EXCISE & SERVICE TAX, RAJKOT versus NARSIBHAI KARAMSIBHAI GAJERA & ORS.

Citation: [2025] 12 S.C.R. 281 · Decided: 02-12-2025 · Supreme Court of India · Bench: PAMIDIGHANTAM SRI NARASIMHA · Disposal: Appeal(s) allowed

cites 1 · see the full citation network in Lexace

Judgment (excerpt)

[2025] 12 S.C.R. 281 : 2025 INSC 1374
Commissioner of Customs, Central Excise & 
Service Tax, Rajkot 
v. 
Narsibhai Karamsibhai Gajera & Ors.
(Civil Appeal No(s). 3405-3407 of 2012)
02 December 2025
[Pamidighantam Sri Narasimha and  
Atul S. Chandurkar,* JJ.]
Issue for Consideration
Whether the CESTAT fell in error while coming to the conclusion 
that the conversion of grey fabrics to cotton fabrics did not include 
an integral process of stentering undertaken with the aid of power 
and thus the benefit of the Exemption Notification was available 
to Unit No.1. Whether the Order-in-Original rightly considers the 
entire process of manufacture which is conversion of grey fabrics 
into cotton fabrics for being cleared by Unit No.1 as one and 
fastening liability on it.
Headnotes†
Central Excise Act, 1944 – ss.11AB, 11AC, 35-L(b) – 
Appellant’s case that on the basis of information received 
by its intelligence agency Unit No.1 and Unit No.2 were 
processing cotton fabrics with the aid of power but without 
following any of the procedures laid down under the Act of 
1944 as well as the Rules framed thereunder – After taking 
a stock and recording the statements of the partners of Unit 
Nos.1 and 2 along with other employees of both the Units, 
the Commissioner, Customs and Central Excise issued show 
cause notice dated 14.07.2003 on the premise that both the 
Units were not entitled to exemption from paying customs 
duty – He made a demand of excise duty u/s.11-A(1), interest 
on the amount of duty u/s.11AB and penalty u/s.11AC of 
the Act of 1944 – The CESTAT set aside the order of the 
Commissioner – Correctness:
* Author
282
[2025] 12 S.C.R.
Supreme Court Reports
Held: This Court is of the considered view that the CESTAT fell in 
error while coming to the conclusion that the conversion of grey 
fabrics to cotton fabrics did not include an integral process of 
stentering undertaken with the aid of power and thus the benefit 
of the Exemption Notification was available to Unit No.1 – In the 
present case, the show cause notice indicates that Unit No.1 
was receiving grey fabrics which were thereafter bleached and 
mercerized at the said Unit – The fabric in wet condition was then 
shifted to Unit No.2 and subjected to squeezing and stentering – The 
dry fabrics were thereafter returned to Unit No.1 where they were 
bailed and packed – It was thereafter that the cotton fabrics were 
finally cleared – The CESTAT misdirected itself while emphasizing 
upon the distinct identities of the two Units and in the process 
ignoring the fact that both the Units were together involved in the 
process of manufacture of cotton fabrics from grey fabrics – It 
has come on record that after the grey fabrics were bleached 
and mercerized at Unit No.1, they were taken to Unit No.2 which 
was an adjoining Unit within the same premises – After the wet 
fabrics were subjected to squeezing and stentering at Unit No.2, 
the dry fabrics were brought back to Unit No.1 for being bailed 
and packed – It is clear that the entire activity of undertaking the 
various processes amounted to “manufacture” for the purposes of 
s.2(f) of the Act of 1944 – The CESTAT thus committed an error in 
bifurcating the continuous process of manufacture to come to the 
conclusion that each Unit though undertaking a distinct process 
of manufacture, the activities of one Unit could not be clubbed 
with the other – The Order-in-Original rightly considers the entire 
process of manufacture which is conversion of grey fabrics into 
cotton fabrics for being cleared by Unit No.1 as one and has thus 
fastened liability on it. [Paras 8, 11-13]
Case Law Cited
Steel Authority of India Ltd. v. Directorate General of Anti-Dumping 
& Allied Duties, 2017 INSC 356 : [2017] 6 SCR 598 – held 
inapplicable.
CCE v. Rajasthan State Chemical Works, 1991 INSC 235 : [1991] 
Supp. 1 SCR 124; Impression Prints v. CCE, 2005 INSC 377 : 
[2005] Supp. 2 SCR 904; Standard Fireworks Industries, Sivakasi 
and Another v. Collector of Central Excise (1987) 1 SCC 600 – 
referred to.
[2025] 12 S.C.R. 
283
Commissioner of Customs, Central Excise & Service Tax, Rajkot v. 
Narsibhai Karamsibhai Gajera & Ors.
List of Acts
Central Excise Act, 1944.
List of Keywords
Cotton fabrics; Processing cotton fabrics; Electricity connection; 
Industrial electricity connection; Domestic lighting connection; 
Payment of custom duty; Demand of excise duty under Section 
11-A(1) of Central Excise Act, 1944; Interest on

Excerpt shown. Read the full judgment & AI analysis in Lexace.