In Brief
Manufacturers of knitted garments sought exemption from excise duty under 2002 notifications on the condition that fabrics were duty-paid and no CENVAT credit was taken. The Revenue denied the benefit, arguing actual duty payment was required. The Court held that Explanation II to the notifications creates a legal fiction deeming fabrics duty-paid even without proof of payment, reflecting the Government's budgetary intent to grant full exemption to those not claiming CENVAT credit. The Court distinguished an earlier judgment and allowed the manufacturers' appeals, holding the legal fiction must be given full effect.
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