TMI Blog1979 (1) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... actured in a factory, but excluding (a) alcohol, all sorts, including alcoholic liquors for human consumption; (b) opium, Indian hemp and other narcotic drugs and narotics; and (c) dutiable goods as defined in Section 2(c) of the Medicinal and Toilet Preparations Excise Duties Act, 1955, and the Explanation to Item 68 points out that in this item, the expression "factory" has the meaning assigned to it in Section 2(m) of the Factories Act, 1948. Under Section 2(f) of the Act, "manufacture" includes any process incidental or ancillary to the completion of a manufactured product. Item 18A of the Schedule to the Act refers to "Cotton Twist, yarn and thread, all sorts, containing not less than nine per cent. by weight of cotton calculated on the total fibre content whether sized or unsized." Item 19 of the Schedule provides for the description of goods and rates of duty. Item 19 covers cotton fabrics and is in these terms : Cotton fabrics' means all varieties of fabrics manufactured either wholly or partly from cotton and includes dhoties, sarees, chadders, bedsheets, bedspreads, counterpanes, table-cloths, embrodiery in the piece, in strips or in motifs and fabrics impregnated or co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an-made (i) cellulosic fibre or yarn or (ii) non-cellulosic fibre or yarn, predominates in weight". 4. It is well-known that art silk fabrics are manufactured from cellulosic fibre or yarn and therefore the entry would cover art silk of the type under Item 22. It is to be noticed that so far as embroidery in piece and strips or motifs is concerned and fabrics impregnated or coated or laminated with preparations of cellulosic derivatives or other artificial plastic materials are concerned, both as regards cotton fabrics as well as man-made fabrics, the description is the same both under Items 19 and 22, and in each of these two cases the Legislature has taken special care to point out that fabrics, whether man-made or cotton, on which embroidery in piece or strips or motifs is worked out when they are impregnated, coated or laminated with preparations of cellulosic derivatives or other plastic materials, they are deemed to be cotton fabrics if the base fabric is cotton and man-made fabric if the base fabric is man-made fabric. The whole argument before us turns upon the question whether grey cloth in the case of cotton fabrics which comes out from the production by powerlooms or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving employed, woven fabric would be `textile'. What is necessary s no more than weaving of yarn and weaving would mean binding or putting together by some process so as to form a fabric. In the course of the same judgment, it was pointed out "But there the word 'textiles' is not sought by the assessee to be given a scientific or technical meaning in preference to its popular meaning. It has only one meaning, namely, a woven fabric and that is the meaning which it bears in ordinary parlance." 5. So far as the word `fabric' is concerned, the Oxford English Dictionary, Vol. IV, at page 2 defines 'fabric' to mean "A manufactured material; now only a textile fabric, a woven stuff. Therefore, a fabric must always be a woven stuff. Meaning 7 under the word 'fabric' means "Of a textile article, the woven substance; tissue, fibre". It is therefore clear that when one speaks of manufacturing a fabric, what is meant is manufacture or production of a woven stuff or woven substance, and the only meaning which can be attributed to the words "manufacture of a cotton fabric or a man-made fabric. If fabric brings in the concept of woven stuff or woven substance, manufacturing a woven substance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst Schedule to the Act. Processed fabrics, whether cotton fabrics or man-made fabrics, are not specifically mentioned in these two Items 19 and 22 of the First Schedule to the Act, and the question is whether, as was urged by Mr. Shelat, processing of grey powerloom cloth means production of a variety of fabric. If fabric means woven material or woven substance or woven stuff, such substance or stuff may be woven out of cotton or man-made fabric or yarn. Processing of cotton fabrics or man-made fabrics does not bring into existence any new woven stuff or substance. It is merely processing in the sense of bleaching, dyeing or printing fabric which was already in existence. 8. In this connection, two decisions, one by our High Court and another of the Court in England, should be borne in mind. In Extrusion Processes Pvt. Ltd. v. N R. Jadhav, (1974) 15 G L.R. 161, a Division Bench of this High Court consisting of J B Mehta and S.H. Sheth JJ. dealt with the question of excise duty levied on manufacture of extruded aluminium collapsible tubes and the question was whether printing and lacquering of aluminium tubes involved extrusion process. The Division Bench held: "Sub-item (3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mind and it has to be borne in mind in the case before us that fabric means woven stuff or woven substance the question that we have to ask ourselves is whether processing fabrics involves manufacture of woven stuff or woven substance. The contentions of the excise authorities were therefore rejected and the conclusion that we have set out hereinabove was reached by the Division Bench. 10. In Monical v. Pinch, (1906) 2 KB 352, the question before the Court in England was whether enhancing the sweetness of sachharin already in existence amounted to manufacture of sachharin within the meaning of the Finance Act, 1901 and the Revenue Act, 1903. It was held by the Court that manufacture of sachharin meant bringing into being as sachharin. The appellants before the Court subjected a certain '330 sachharin' (that is sachharin 330 times as sweet as sugar) to a chemical process, the result of which was that in some cases '550 sachharin' (that is, sachharin 650 times as sweet as sachharin) was produced, in others a mixture sweeter than 330, but not so sweet as 550 sachharin, it was held by the Court, per Bray and Darling JJ., Bidley J. dissenting, that the appellants, were not manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sachharin under S.9 is doing the same thing as is called the making of sachharin under S. 5 the ........... appellants did not make sachharin, because they began and ended with sachharin. They did not 'make' sachharin, and in my opinion, from the way in which the word is used by the statute, they did not manufacture sachharin, and therefore did not require a licence". Using the phraseology of the Court in England in the instant case, it can be said that the petitioners began with cotton fabrics or man-made fabrics before they started processing, and ended with cotton fabrics or man-made fabrics. No specified item, as in the case of embroidery or coated or laminated fabrics is to be found so far as processed cloth is concerned and therefore, processing of cotton fabric or manmade fabric cannot amount to manufacturing of any variety of cotton fabric or manmade fabric. 11. Mr. Shelat relied on certain decisions in the context of sales tax law in support of his argument. Of course, it must be borne in mind as pointed out by the Supreme Court, that under the Excise Act, it is the manufacture which is the taxable event and not the sale thereof and therefore the decisions rendered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that a printed or dyed cloth is commercially a different article from the cloth which is purchased and printed or dyed." Thus, approval accounted by the Supreme Court to the decision of the Madhya Pradesh High Court in Hiralal Jitmal's case was on the footing of bringing into existence a new commercial article. In Commissioner of Sales Tax v. Hastimal Ratanlal (1972) 30 S.T.C. 484, the Court dealt with the case of an assessee who purchased white cotton yarn, dyed it into colours and then sold the coloured yarn and it was held that the dyeing of white cotton yarn was a process of manufacture within the meaning of Section 2(j) of the Act. In paragraph 5 at page 486, Bishambhar Dayal C.J. speaking for the Division Bench of the Madhya Pradesh High Court, observed: "A very similar question arose in this Court in Hiralal Jitmal v. Sales Tax Commissioner. Where cotton was coloured by the assessee and sold as coloured cloth. It was held that it was a process of manufacture. This case was approved by their Lordships of the Supreme Court in Commissioner of Sales Tax v. Harbilas Rai Sons." 14. It is undoubtedly true that, according to these three decisions in the context of sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sification was issued in connection with the residuary item under Article 19, namely, cotton fabrics not otherwise specified. It was observed by the Division Bench : "Admittedly in this case, duty of excise is claimed against the petitioner Company on the basis that the goods processed by the petitioner Company were cotton fabrics not otherwise specified thus falling in Sub-item (5) of Item 19. The goods are the same as have been subjected to payment of excise duty when they were released from the factories of the manufacturers. In respect of the goods which have already borne excise duty and do not fall into a different item of excisable goods in the First Schedule, it is impossible that duty, could come again to be levied and/or recovered." 17. We agree with the reasoning of the learned Judges of the Bombay High Court because our conclusion arrived at on the wording of Items 19 and 22 as they now stand does not permit of any other meaning except that the goods which were received by the petitioners before us remain the same, speaking in terms of excisable goods, namely, cotton fabrics or man-made fabrics. Processing did not involve any further manufacture of the woven stuff o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be pointed out that so far as Item 22 is concerned, in the case of man-made fabrics, the Government has issued similar notifications. Mr. Shelat for the respondents urged that it was open to the petitioners in this group of matters to apply for the refund of excise duty after paying excise duty on the footing of the value of the material as it comes out from the processing house instead of paying duty under Article 68 only on the value which they added by the processing of the cloth. He contended that elaborate machinery has been laid down under the Act and therefore the petitions should not be entertained. Alternatively, he contended that there is an alternative remedy for refund under Rule 11 and there is complete procedure for refund under the Act and therefore the petitions should not be entertained. He relied in this connection on the observations of the Supreme Court in Suganmal v. State of Madhya Pradesh, AIR 1965 S.C. 1740. There it was pointed out by the Supreme Court : "Though the High Courts have power to pass any appropriate order in the exercise of the powers conferred on them under Art. 226 of the Constitution, a petition solely praying for the issue of a writ of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Article 226 of the Constitution. In the Writ Petitions under Article 226, the legality of the excise duty levied against them was challenged by the petitioners. In this case also, the question of the alternative remedy under the machinery of Excise Act was not held to be a bar to the maintainability of the petitions. Hence, in our opinion, when excise levy is challenged as illegal and an application, under Article 226 is made, it is open to the High Court to examine the legality of the proposed levy or the demand notice issued under the Excise Act for the levy of excise duty and if the High Court finds that the proposed levy is illegal and not justified by the law relating to excise, it is open to the High Court to quash and set aside the same. The question of alternative remedy in such a situation does not arise. It was next contended, that from 1958 onwards, the different petitioners had been paying excise duty on the processed cloth on the basis of the value of the cloth sold by them and they have never challenged the excise duty in the past, nor have they raised any protest against the same. In M/s. D. Cawasji and Co. v. State of Mysore, 1978 E.L.T. (J 154) - AIR 197 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... look at the question from the point of view of customs duty ... Since the orders of assessment in any view of the matter were ultra vires and de hours the statute were not attracted to them. Even without exhausting those remedies it was open to the petitioners to claim the refund of what they had paid by instituting a civil suit. In our opinion, they could have filed a civil suit within three years from the date on which they came to know that they had paid some amount under mistake of law. It was not only the petitioners who were ignorant of the exact position of law in that behalf. The decision of the Central Board of Excise and Customs recorded on 18th Sept., 1967 to which we have referred herein above goes to show unmistakably that even that body was completely ignorant until that date of the correct position of law. Obviously, therefore, the payment which the petitioners were called upon to make was the payment made by them, under a mistake of law with which was intermixed the misconception of law on the part of the customs authorities........... We are, therefore, of the opinion that in the instant case there was no statutory levy and there was no statutory assessment so far ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on prescribed, i.e. within 3 years of the knowledge of the mistake, would also lie. For filing a writ petition to recover the money paid under a mistake of law, this Court has said that the starting point of limitation is from the date of which the Judgment declaring as void the particular law under which the tax was paid was rendered, as that would normally be the date on which the mistake becomes known to the party. If any writ petition is filed beyond three years after that date, it will almost always be proper for the Court to consider that it is unreasonable to entertain that petition though, even in cases where it is filed within three years, the Court has a discretion, having regard to the facts and circumstances of such cases, not to entertain the application. 22. Under these circumstances, we respectfully agree with the observations of the Division Bench of J.B. Mehta and S.H. Sheth JJ. in the High Court judgment cited above and we hold that refund can be granted in respect of excise duty paid by the processors within three years immediately preceding the institution of the Special Civil Applications. In the instant case, the excise duty claimed on the basis of the marke ..... X X X X Extracts X X X X X X X X Extracts X X X X
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