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TMI Blog2014 (6) TMI 233X X X X Extracts X X X X X X X X Extracts X X X X ..... e same on job charge basis. In "Annexure 4" to the Memorandum of Appeal, the Appellants vide their letter dated 18th October, 2001 have gone on record to state that the Appellants undertake the job work of finishing and dyeing of man-made fabric and collect the processing charges. By doing job work, the Appellants are collecting job charges and thus, no such cess is payable on such processing as the same is on job charge basis in terms of Section 5A(1) of the Textiles Committee Act, 1963 (the said Act). The Appellants also submitted that they cannot be solely made liable as they are only job worker and it is the supplier of cloth who is liable to discharge such liability. The processed fabrics by the appellants is not the end product and, therefore, cannot be called a finished product for which cess liability accrues. 3. Mr. Alok Kothari, Chartered Accountant, appearing for the Appellants, submitted that the Appellants have only two fold arguments, viz., (i) that processing activities carried out by the Appellants on job charge basis do not fall within the scope of "manufacture" and (ii) since processing is not 'manufacture', question of levy of cess does not arise. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r cloth or yarn or garment or any other article made wholly or in part of cotton, wool, silk, artificial silk, or other fibre and includes fibre. 8. Dr. Sharma submitted that though the word "manufacture" is not defined in the said Act yet the definition of the word "manufacture" is found in the Central Excise Act which makes it clear that the expression "manufacture" includes any process ancillary to completion of a manufacture produced and the word "manufacturer" includes not only person who employs hired labour in the manufacture of goods but also anyone who engages in their production or manufacture on his own account, if those goods are intended for sale. It was further submitted that the important word in the proviso to Section 5A(1) is "manufactured" preceding "from out of handloom or powerloom industry". This clearly signifies that the manufactured textiles for being eligible for exemption must itself be in the finished form and directly coming out from the handloom or powerloom industry and should not be processed further from it. To put it differently, a bare reading of the proviso makes it evident that the cess envisaged in the Act is not to be levied only on such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was again reiterated by the Supreme Court in a later judgment in Kerala State Housing Board v. M/s. Ramapriya Hotels (P) Ltd. 1994 (5) JTSC 113 : (1994 AIR SCW 3297) 19. In our view the words in the proviso, from out of cannot be looked at in isolation but they have to be contextually construed. The important word in the proviso is "manufacture", preceding from out of handloom or powerloom industry. This clearly signifies that the manufactured "textiles" for being eligible for exemption must itself in the finished form, come out from the handloom or powerloom industry and not processed further from it. To put it differently, a bare reading of the proviso makes it evident that the Cess under the Act is not to be levied only on that particular "textiles" which by itself is manufactured by that handloom and powerloom industry which falls within the ambit of clauses (ca) and (da) of Section 2 of the Act and not on the textiles/products which are manufactured by a process other than or in addition to by the handloom or powerloom industry. The word manufacture would necessarily require a fabric cloth, yarn or garment itself to be a kind which itself can be said to come out of and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ishing of cotton fabrics and man-made fabrics, in unprocessed condition called grey fabrics which they purchase or receive from various customers for processing. The fabrics are then boiled in water mixed with various chemicals, washed and dyed. The next stage is printing process i.e. putting the required designs on the said fabrics by way of screen printing on hot tables. The final stage is the finishing process that is to give a final touch for better appearance. They do not carry on any spinning or weaving of the fabrics. Many of them do not sell the processed fabrics, but they merely collect from their customers charges only for the job work of processing done by them. From the aforesaid facts, it will be evident that by processing such grey fabrics by bleaching, dyeing, printing, finishing, etc. the petitioner unit(s) not only improves the quality of fabric, but also changes the basic characters of a grey fabric to a finished product and by such transformation, a new and different article emerges having distinctive name, character and use, which is irreversible. For the aforesaid reasons, we have no other option but to hold that the grey fabrics after undergoing such process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laborating his said contentions also drew my attention to para 15 of the said judgment of Hon'ble Delhi High Court to the effect whether bleached or printed or dyed grey cloth can be construed as an entirely new commodity. Contents of para 15 are reproduced hereunder : "15. Whether bleached or printed or dyed grey cloth can be construed as an entirely new commodity is the question. In the context of 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 Additional Duties of Excise (Goods of Special Importance) Act, 1957 (ADE Act) whereby the process of bleaching, dyeing and printing were included in the definition of the word 'manufacture'. Negativating 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) : "process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted by the ld. counsel for the respondents that the Circular No. 55(2)/73AC of 1975 issued by Textiles Committee is only applicable to the Textiles removed from mill premises and the same is not applicable to the independent processors/job workers like the Appellants. Hence the Appellants cannot take shelter of the said circular in order to avoid payment of cess to the Respondents. Under the Act every manufacturer of textile is liable to pay cess except those specifically exempted under the Act. 16. From the said submissions, it is culled out that the Appellants themselves admit that they hold Central Excise Registration for processing of man-made fabrics being independent processors and that they undertake the job work of finishing and dyeing of man-made fabrics and accordingly, they are doing job work and collect charges for processing on job charge basis. It has also been admitted by the Appellants themselves in para 3 of their Memorandum of Appeal that grey fabrics is received by the Appellants from various traders considered as deemed manufacturer in terms of Central Excise Act and Rules made thereunder for processing on job charge basis. The processed fabrics is retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would include mills, job workers/independent processor units, 100% export oriented units, garment dealers are liable to pay cess on the value of the total quantity of the textiles or the textile machinery removed (i) on the payment of duty under the Central Excise Act (ii) without payment of excise duty if exempted paid under Central Excise Act and (iii) for export. The only manufacturers exempted are those contemplated by the proviso to Section 5A(1) and Section 5(E) of the Act. As such, the circular itself is not applicable to appellants and the assessment has been done under the Act, the contention of the appellants that the said circular is binding and that Respondents cannot levy cess upon Appellants on the basis of the said circular is not applicable to the present case. 19. From the aforesaid various rulings and the submissions of the parties, this Tribunal comes to the conclusion that so far as the exemption under the proviso to sub-section (1) of Section 5A is concerned, the same is available to handloom and powerloom industries. The Appellants, who are manufacturing finished goods and not grey fabrics, i.e. the raw material, being not handloom or powerloom industri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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