TMI Blog2010 (5) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent. [Judgment]. - The three Petitioners are companies engaged in the processing of man-made fabric and ploy vinyl fabric falling under Chapter 55 of the Schedule to the Central Excise Tariff Act, 1985. By these petitions they challenge the notices of demand of cess under the Textile Committee Act 1963 (TCA) and the Textile Committee Cess Rules 1975 (TCCR) made by the Textiles Committee, Ministry of Textiles, Government of India. Each of the petitioners also challenges the orders passed by the Textile Committee Cess Appellate Tribunal ('Tribunal') dismissing each of their appeals and confirming the demand of cess. 2. The Petitioners state that they receive grey cloth for processing on job work basis from various traders considered to be 'deemed manufacturers' in terms of the Central Excises Act 1944 (CE Act). The grey cloth so received is subjected to the processes of bleaching, printing or dyeing and are then returned to the traders on payment of excise duty on the declared value of the grey fabrics after adding the processing charges. The Petitioners therefore contend that they do not 'manufacture', cloth' or 'fabric' within the meaning of 'textiles' under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dge Bench decision in Empire Industries Ltd. v. Union of India (1985) 3 SCC 314 and held that processing activity by way of job work, i.e., bleaching, dyeing, printing, finishing etc. amounted to manufacturing. It is submitted that in CIT v. Benoy Roy AIR 1957 SC 768, the Supreme Court permitted the adoption of a word from one statute into another but has restricted such adoption to the facts and circumstances of a given case. It is submitted that the Tribunal in Chandok Textiles case borrowed the terminology in the Industries (Development Regulation) Act, 1951 [hereafter IDR Act] and CE Act to interpret the word manufacture' in the TCA. Reliance is also placed on the decision of the Supreme Court in Sirsilk Ltd. v. Textiles Committee AIR 1989 SC 317 and Aditya Mills Ltd. v. Union of India AIR 1988 SC 2237 where it was held that manufacture was complete as soon as the raw material underwent some change and a new substance or article was brought into existence. The new commodity must be commercially separate and distinct having its own character and use. It is submitted that the demand is not time barred and that Rule 10 TCCR has no application in the instant cases. 6. This Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such manner as may be prescribed. (7) Any manufacturer aggrieved by an assessment made under this section may appeal to the Tribunal, constituted under section 5B for cancellation or modification of the assessment." 8. The long title to the TCA states that it has been enacted "for the establishment of a Committee for ensuring the quality of textiles and textile machinery and for matters connected therewith". The word "textiles" has been defined in Section 2(g) TCA to mean: "(g) "textiles" means any fabric or cloth or yarn or garment or any other article made wholly or in part of -- (i) cotton; or (ii) wool; or (iii) silk; or (iv) artificial silk or other fibre, and includes fibre" Are the goods emerging from the petitioners' units, 'textiles'' 9. According to Dr. Singhvi, since no new cloth, fabric or yarn comes into existence as a result of the bleaching of the grey cloth the Petitioners cannot be said to be manufacturing textiles'. If the Petitioners did not manufacture any textile then the TCA would not apply at all. 10. The above submission of the learned counsel for the Petitioners is unacceptable. The grey cloth which undergoes change continues to be cloth mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... islature intended to give the word "manufacture" in the TCA the same meaning as in the CE Act. 13. Before embarking on an analysis of the relevant provisions and the above submissions, this Court would first like to observe that the TCA is for all purposes a fiscal statute levying a cess and the provisions of which therefore require to be strictly interpreted. If the common parlance test is to be applied for the purposes of construing whether a particular activity constitutes manufacture or not, a reference will have to be made to one of the earliest decisions in Delhi Cloth Mills Ltd. v. Union of India (1963) Supp 1 SCR 586. It was emphasized in the said case that not every process would amount to manufacture unless it is accompanied by totally new and different article having distinctive name, character and use. In CCE v. Rajasthan State Chemical Works 1991 (4) SCC 473, it was held in para 12 as under (SCC at p.478-79): "12. Manufacture implies a change but every change is not manufacture, yet every change of an article is the result of treatment, labour and manipulation. Naturally, manufacture is the end result of one or more processes through which the original commodities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l retaining its original identity." (emphasis supplied) 15. Whether bleached or printed or dyed grey cloth can be construed as an entirely new commodity is the question. In the context of the CE Act, this question directly arose for consideration first in Empire Industries and later in Ujagar Prints (II) v. Union of India. The challenge in the Empire Industries case was to the constitutional validity of the amendments made in 1980 to the CE Act and the Additional Duties of Excise (Goods of Special Importance) Act 1957 (ADE Act) whereby the processes of bleaching, dyeing and printing were included in the definition of the word 'manufacture'. Negativing the challenge a three-Judge Bench of the Supreme Court held that (SCC, p.332): "It appears in the light of the several decisions and on the construction of the expression that the process of bleaching, dyeing and printing etymologically also means manufacturing processes." It was also observed that (SCC, p.338): "processes of the type which have been incorporated by the impugned Act were not so alien or foreign to the concept of "manufacture" that these could not come within that concept." Later the correctness of the decision in E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Industries case that Grey fabric' after they undergo the various processes of bleaching, dyeing, sizing printing, finishing etc. emerges as a commercially different commodity with its own price-structure, custom and other commercial incidents and that there was in that sense a manufacture' within the meaning of Section 2(f), even as unamended, is an eminently plausible view and is not shown to suffer from any fallacy. Indeed, on this point the Referring bench did not disagree or have any reservations either. It is to be noticed that if the amending law is valid, this aspect becomes academic." (emphasis supplied) 18. What is important to note is that the Supreme Court in Ujagar Prints (II) reaffirmed that even de hors the amendment made in 1980 to Section 2 (f) of the CE Act which defined 'manufacture in its well accepted legal sense - nomen juris - the said word included within its ambit the processes of bleaching, dyeing, printing etc. 19. Turning to Section 5-A of the TCA, the taxable event is 'manufacture' of textiles and the cess is levied as 'a duty of excise' on such manufacture. Even if the petitioners' submission is accepted and the meaning of the word 'manufacture' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... times overdone and brevity is achieved at the expense of lucidity. However, this legislative device is quite well known and the principles applicable to it fairly well settled." 22. It was held that the ADE Act was intended to supplement the levy under the CE Act by an additional duty "of the same nature on certain goods". It was pointed out that by itself ADE Act was incomplete as to the basis of the charge and its provisions would become totally unworkable unless the concept of "manufacture" and "assessable value" as determined under the CE Act are carried into it. Thereafter the Supreme Court discussed the two types of 'referential legislation': one where an earlier Act or some of its provisions are incorporated into the later Act and the second where the later Act made only a reference of a broad nature as to the law on a subject generally, or contained a general reference to the terms of an earlier statute which are to be made applicable. It was held that the ADE Act fell in the latter category. 23. Under Section 5-A TCA unless the words "duties of excise" are understood as carrying the same meaning as in the CE Act, the TCA which is supplemental to the CE Act, would be u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch specified in relation to any goods in the Section or Chapter Notes of the Schedule to the Central Excise Tariff Act, 1985 as amounting to manufacture, and the word "manufacture" shall be construed accordingly and shall includes not only a person who employs hired labour in the production or manufacture of excisable goods. but also any person who engages in their production or manufacture on his own account: (ia) to (ix)..... and the word "manufacture" shall be construed accordingly and shall include not any a person who employs hired labour in the production of manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account;" "From the above definition it is clear that the expression manufacture includes, any process incidental or ancillary to the completion of the manufactured product and the word manufacturer includes not only a person who employs hired labour in the production or manufacture of goods hut also am one, who engages in their production or manufacture on his own account, if those goods are intended for sale. It is thus clear that the word manufacturer does not merely include those persons who in common parla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to discuss the word manufacture' as occurring in Section 5-A of the TCA did not arise on the facts of that case. Therefore, the said judgment in Sirsilk Ltd. v. Textiles Committee is not of much assistance in deciding the issues in the present case. 28. In view of the above discussion, it is held that that the processes of dyeing, bleaching and printing undertaken by the Petitioners amount to 'manufacture' for the purposes of Section 5-A TCA. Are the demands time barred' 29. The next issue is whether under Rule 10 TCCR the Respondents can recover at any time cess that has been short levied or erroneously levied. Rule 10 TCCR reads as under: "10. Recovery of cess short levied erroneously levied. When the cess has been short levied through inadvertence or otherwise, or when it is erroneously refunded; the manufacturer chargeable with the cess so short levied or to whom refund has been erroneously made on a notice of demand from the Committee made within one year from the date on which the cess has been paid, shall pay the deficiency or, as the case may be refund the amount paid to him in excess within a month from the date of receipt of such notice." 30. Learned couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plus manufacturing profit and manufacturing expenses whatever these may be, which will either be included in the price at the factory gate or deemed to be the price at the factory gate for the processed fabric. The factory gate here means the "deemed" factory gate as if the processed fabric was sold by the processor. In order to explain the position it is made clear by the following illustration: if the value of the grey-cloth in the hands of the processor is Rs.20 and the value of the job-work done is Rs.5 and the manufacturing profit and expenses for the processing be Rs.5, then in such a case the value would be Rs.30, being the value of the grey-cloth plus the value of the job-work done plus manufacturing profit and expenses. That would be the correct assessable value. 2. If the trader, who entrusts cotton or manmade fabric to the processor for processing on job-work basis, would give a declaration to the processor as to what would be the price at which he would be selling the processed goods in the market, that would be taken by the Excise authorities as the assessable value of the processed fabric and excise duty would be charged to the processor on that basis provided that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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