TMI Blog1988 (9) TMI 346X X X X Extracts X X X X X X X X Extracts X X X X ..... company incorporated under the Companies Act, 1956 engageded in the business of manufacture and sale on a very large scale of textiles generally and also of rayon yarn and staple fibre, both of which form species of what is known as man-made fibre i.e. artificial silk, there is a common question as to the constitutional validity of a fee imposed under r. 21 of the Textiles Committee Rules, 1965 made by the Central Government under s. 22 of the Textiles Committee Act, 1963, by the Textiles Committee constituted under s. 3 of the Act, on the production of rayon yarn and staple fibre i.e. man- made fibres manufactured by them. These appeals are against the various judgments and orders of the High Courts of Allahabad, Andhra Pradesh, Gujarat and Madras upholding the validity of the levy. The remaining appeal i.e. Civil Appeal No. 1281 of 1973 is preferred by the Textiles Committee against the judgment and order of the Kerala High Court taking the view to the contrary. The facts in all these cases are more or less similar. It would suffice for our purposes to notice the salient features thereof. To illustrate, the appellant company in Civil Appeal No. 869 of 1973, Messrs Sirsilk Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry of Commerce and the Textiles Commissioner and to lodge a strong protest against the illegal exaction of the fee by the Textiles Committee from its members when, in fact, no services of any kind were being rendered. Thereafter, the Accounts Officer, Textiles Committee by letter dated February 26, 1969 called upon the appellant to remit a sum of ₹ 33,343.62 p. towards the fee in respect of production of rayon or staple fibre for the period from March 1, 1966 to March 31, 1967. It was also advised to pay the fee upto April 1968. In response thereto, the appellant by its letter dated February 27, 1969 stated that the Association had on behalf of its members addressed a letter to the Secretary, Textiles Committee for certain clarifications and on receipt of the reply, the Association would advise its members as to the course of action. Eventually,.the Secretary, Textiles Committee by a letter dated March 11, 1970, called upon the appellant that it should remit an amount of ₹ 35,138.63 p. being the amount of fee outstanding within ten days failing which the said amount would be recovered as arrears of land revenue under s. 12(2) of the Act. Aggrieved, the appellant move ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that it was proposed to initiate immediate action to recover the outstanding fees from the petitioner as arrears of land revenue as contemplated under s. 12(2) of the Act. It was further stated that in order to avoid coercive proceedings the petitioner should pay up the arrears at least upto March 31, 1967 amounting to ₹ 3,19,977.11 p.; in any case before March 1, 1969 failing which the Textiles Committee would be constrained to advise the concerned Collector to enforce recovery of the outstanding fees as arrears of land revenue. The petitioner accordingly moved a petition under Art. 226 of the Constitution before the High Court of Bombay for quashing the impugned notice of demand dated February 20,1969 complaining that they had at no time made any application for inspection and/or examination of the yarn they manufacture nor did they ever approach the said Committee to inspect and/or examine yarn manufactured by them. They averred that neither the said Committee nor any one on its behalf had rendered any service whatsoever to them either at their instance or otherwise. Similarly, the petitioner Century Enka Limited moved a petition under Art. 226 of the Constitution the Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titution before the High Court of Gujarat. A Division Bench (S. Obul Reddy, CJ N.H. Bhatt, J.) by its judgment dated November 18, 1976 upheld the validity of the fee and accordingly dismissed the writ petitions. The appellant in Civil Appeal No. 1460/80 Messrs Modipon Limited, Meerut are manufacturers of nylon yarn. The Accounts Officer, Textiles Committee by his letter dated June 11, 1960 required the company to pay the arrears of fees for the period from March 1965 to May 1968. The company brought a suit being Original Suit No. 86/70 in the Court of the II Civil Judge, Meerut for a declaration and perpetual injunction. In the suit it applied for grant of a temporary injunction under Order XXXIX, r. 1 of the Code of Civil Procedure, 1908 restraining the Textiles Committee from recovering the fees on the ground that the nylon yarn manufactured by them did not fall within the definition of 'textiles' under s. 2(g) of the Act. The learned Civil Judge by his order dated May 12, 1972 granted ad-interim temporary injunction but later vacated the same. The appellant accordingly went up in appeal to the High Court. A Division Bench (M.N. Shukla N.N. Mithal, JJ) by its order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducts. They were, however, for a variety of reasons, unable to with- stand the severe international competition they had to face in foreign markets with the return of normal conditions after the war. Alive to the various problems faced by the Textile Industry in general and the Cotton Textile Industry in particular, the Government of India took timely steps to arrest the crisis by adopting various measures to safeguard production and export of cotton textiles and to assure the efficiency of the Cotton Textile Industry. It was in this context that the Cotton Textiles Fund Ordinance, 1944' was promulgated, establishing a `Fund' for supervising the exports of cloth and yarn and for develop- ment of technical education, research and other matters in relation to the Cotton Textile Industry. The Cotton Textiles Fund Committee which was appointed as the body to perform the various functions imposed under the Ordinance did very useful work during the period from 1945 to 1964 for the improvement of the said industry and so as to enable it to meet the competition of foreign textiles in international market. The Ordinance, promulgated in 1944 establishing the Cotton Textiles Fund Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iv) artificial silk or other fibre, and includes fibre. S. 3 of the Act provides for establishment of the Textiles Committee by the Central Government. S. 4 deals with the functions of the Committee. The functions of the Committee as stated in s. 4 generally are to ensure by such measures as it thinks fit, standard qualities of textiles both for internal marketing and export purposes and the manufacture and use of standard type of textile machinery. It reads follows: 4. Functions of the Committee--(1). Subject to the provisions of this Act, the functions of the Committee shall generally be to ensure by such measures, as it thinks fit, standard qualities of textiles both for internal marketing and export purposes and the manufacture and use of standard type of textile machinery. (2) without prejudice to the generality of the provisions of sub-section (1), the Committee may-- (a) undertake, assist and encourage, scientific, technological and economic research in textile industry and textile machinery, (b) promote export of textiles and textile machinery and carry on propaganda for that purpose; (c) establish or adopt or recognise standard specifications for-- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on with the manufacture of textiles or textile machinery in relation to which construction particulars, marks or inspection standards have been specified, (b) the samples of any article or of any material or substance used in any article or process in relation to which construction particulars, marks or inspection standards have been specified; (c) exercise such other powers as may be prescribed. (3) On receipt of the report referred to in sub-section (1), the Committee may tender such advice, as it may deem fit to the manufacturer of textiles the manufacturer of textile machinery and the applicant. S. 12 provides for levy of fees for inspection and examination and reads as follows: 12. (1). The Committee may levy such fees as may be prescribed-- (a) for inspection and examination of textiles, (b) for inspection and examination of textile machinery. (c) for any other services which the Committee may render to the manufacturers of textile and textile machinery: Provided that the Central Government may by notification in the Official Gazette, exempt from the payment of fees, generally or in any particular case. (2). Any sum payable to the Committee under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... June, 1966, the Table of Fee was revised to reads as under: Table SI.no TABLE: Description of textiles and textile machinery Fee 1 2 3 1 Cotton cloth where the average count of yarn used in the cloth is less than 35s 6 paise for every metres manufactured. 2 Cotton cloth where the average count of yarn used in the cloth is less than 35. or finer 10 paise for every square metres manufactured 3 Woollen yarn (excluding shoddy and carpet yarn) 2 paise per kg. manufactured Shoody and carpet yarn 1 paise per kg. manufactured 4 Man-made Cellulosic or non- cellulosic filament yarn( other than nylon filament yarn) 2 paise per kg. manufactured Nylon filament yarn 6 paise per kg. manufactured 5 Man-made cellulosic fibre cut to staple length ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poration Limited, Shri Vinod Bobde, learned counsel appearing, on behalf of Century Spg. Mfg. Co. Ltd. and Century Enka Limited, Shri N.K. Khaitan, learned counsel appearing for Sirsilk Limited, Dr. Dhananjaya Chandrachud, learned counsel appearing for Nirlon Synthetics Fibres and Chemicals Ltd. and Garware Nylons Ltd. and Shri Krishna Kumar, learned counsel for Modipon Limited. The learned counsel presented their respective points of view with much resource and learning. On behalf of the appellants and the petitioners, the learned counsel put forth in substance two main contentions, namely: (1) That rayon yarn and nylon yarn manufactured by the writ petitioners before the High Court i.e. appellants and the petitioners before us, are made wholly of filaments and not at all of fibres and therefore are not textiles within the meaning of the definition of `textiles' as contained in s. 2(g) of the Act accordingly are outside the purview of the Act and not liable to payment of any fee in accordance with r. 21 of the Rules as originally framed or as it existed after its amendment w.e.f. June 11, 1966. And (2) That the Textiles Committee rendered no service to the writ petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e approach of the High Court in Gwalior Rayon's case in adopting a literal construction of the definition of textiles' in s. 2(g) of the Act prior to its amendment was totally unsupportable. A literal construction of the definition of `textiles' in s. 2(g) of the Act prior to its amendment, it is said, would lead to a manifest absurdity. If that view of the Madhya Pradesh High Court were to prevail, it is urged that the whole purpose and object of the Act would be frustrated. The definition of textiles in s. 2(g) prior to its amendment must be given a broad and liberal construction in furtherance of the object and purpose of the Act. The learned Additional Solicitor General also placed before us a wealth of material showing that a huge infra-structure has been built by the Central Government over the years and it has invested crores of rupees to make the establishment of the Textiles Committee under s. 3 of the Act meaningful with a view to maintain quality control on all textiles including man-made fibres or artificial silk which have a world market. Finally, the learned Additional Solicitor General strongly relied upon the decision of this Court in Sreeniwasa General ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facturing Co. Ltd.. Century Enka Ltd., M/s. Nirlon Synthetic Fibres Chemicals Ltd. and M/s. Garware Nylons Ltd. On their own showing, the appellants as well as the petitioners are actually engaged in the manufacture of rayon yarn and nylon yarn both of which they aver are species of what is known as man-made fibres . In view of this undisputed factual position, the contention that rayon yarn and nylon yarn manufactured by them are `filaments' and not fibre' or that they are not yarn' and therefore do not fall within the definition of textiles under s. 2(g) of the Act prior to its amendment, cannot be countenanced. The main thrust of the argument of learned counsel for the appellants and the petitioners that rayon yarn and nylon yarn manufactured by the appellants and the petitioners are not fibres but filaments, stems from the decision of the Madhya Pradesh High Court in The Gwalior Rayon Silk Manufacturing (Wvg.) Co. Ltd., Birlagram, Ujjain v. The Textile Committee, Bombay (supra). In the decision, the Madhya Pradesh High Court assumes that a fibre in order to answer the description of yarn, in the ordinary commercial sense must be a spun strand meant for use in weav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w Encyclopaedia Britannica, 15th Edition, Vol. 18, p. 173.) There was no explicable reason for the legislature to have excluded rayon yarn and nylon yarn from the purview of the definition of textiles in s. 2(g) of the Act prior to its amendment. The expression `textiles' has been defined in s. 2(g) of the Act in a way as to include not only yarn but also man-made fibres or artificial silk. In the premises, the expression `textiles' as defined in s. 2(g) of the Act has to be given a broad and liberal construction, in furtherance of the purpose and object of the Act. The Madhya Pradesh High Court was clearly in error in construing the expression `textiles' as defined in s. 2(g) of the Act, prior to its amendment in a narrow and restricted sense. The particular words used by the legislature i.e. the terms `yarn, man-made fibres, otherwise known as artificial silk' had to be understood according to the common commercial understanding of the terms used, and not in their scientific or technical sense. The High Court failed to bear in mind that the Act is not a scientific treatise on organic or inorganic chemistry but is an enactment by the Parliament for the benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g substance. The first group, of which rayon and acedate are examples, are produced by modifying natural fibre-forming materials such as cellulose. The second group, frequently called synthetics and including such fibres as nylon and polyester, are produced from synthetic chemicals ....... Again there occurs a passage at p. 260 of the same volume in the following terms: In man-made fibres, the importance of rayon is similar to that of cotton among the natural fibres. Under the heading Synthetic fibres sub-heading Polyamide fibres'' at p. 263 it is stated: Polyamides are polymers, or chain-like structure of linked molecular units, containing recurring amide groups as integral parts of the main polymer chains. Synthetic polyamide fibres form nylon, a major textile fibre. In Encyclopaedia Britannica, Vol. 18 under the heading Development of the textile industry sub-heading production of yarn', at p. 172, we notice the following passage: Yarn is a strand composed of fibres, filaments (individual fibres of extreme length), or other materials, either natural or man-made, suitable for use in the construction of interlaced fabrics. such as woven or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Emerging in the form of filament, a fibre of great length, the rayon is hardened by drying in air or by chemical means. The filament is sometimes out into shorter pieces having uniform length, called staple, and twisted together to make yarn. (Emphasis supplied) The passages quoted above clearly show that even in the sphere of textile technology distinction between `fibre' and `filament' has reached a vanishing point. They further show that both nylon and rayon are `artificial silk' yarn in contra-distinction to genuine silk. We accordingly uphold the view expressed by the High Courts of Allahabad, Andhra Pradesh, Gujarat and Madras and hold that rayon and nylon yarn are not only made of 'other fibre' but are also yarn of `artificial silk' within the meaning of s. 2(g) of the Act. The view to the contrary by the Madhya Pradesh High Court does not lay down correct law. Other considerations lead us to the same conclusion. The Industries (Development and Regulation) Act, 1951 enacted by Parliament received the assent of the President on October 31, 1951. In the Statement of Objects and Reasons appended to the Bill which became the Act. it is stated: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of interpretating in the event of any doubt, the provisions of an earlier statute, the earlier statute cannot be made use of for the purpose of construing, in the event of ambiguity, the provisions of a later statute. For all these reasons the contention that rayon yarn and nylon yarn manufactured by the appellants and the petitioners are made wholly of filaments and not of fibres and therefore did not come within the purview of textiles as defined in s. 2(g) of the Act prior to its amendment and therefore they were not liable for payment of the fee levied under r. 21 of the Rules, cannot prevail. The various activities undertaken by the Textiles Committee for the development of the textile industry and the promotion of textile exports which have expanded considerably, and the duties entrusted to the Committee to ensure the quality of all textiles whether made wholly or partly of cotton wool, silk, artificial fibre or silk, particularly when Indian Textiles by and large and artificial silk or man-made fibres like rayon yarn, viscose staple fibres and nylon yarn as well as fabrics made of artificial silk, are facing ever increasing competition in the internati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s has to be credited to the Textiles Fund and the said income is utilised in defraying the expenditure of the Textiles Committee in carrying on its manifold duties. No part of the fee levied under r. 21 goes into the Consolidated Fund of India. It is only by s. 5F introduced by Act No. 51/73 which provides that proceeds of the duty of excise collected under s. 5A reduced by the cost of collection as determined by the Central Government, shall first be credited to the Consolidated Fund of India and the Central Government may, after due appropriation made by Parliament by law, pay to the Committee from out of such proceeds, such sums of money as it thinks fit for being utilised for the purposes of the Act. We are not here concerned with the duty of excise recovered as a cess under s. 5A but only with the question whether levy of the fee under r. 21 is sustainable as a fee. That is to say, whether- there is sufficient quid pro quo between the levy of the fee and the services rendered. It has not been suggested that any part of the fees levied under r. 21 can be diverted to any other purpose. When the entire proceeds of the fee are utilised in financing the various projects undertaken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different textile centres, namely, at Ahmedabad, Amritsar, Bangalore, Calcutta, Coimbatore, Indore, Kanpur, Ludhiana, Madras, Madurai, Nagpur, New Delhi, Sholapur and Surat. Besides these, wherever necessary, the Committee staff are also attached to the textile mills at other places to render immediate service to the mills and exporters on the spot. The learned Additional Solicitor General placed before us the counter-affidavit of Shri C.G. Shivdasani, Acting Secretary of the Textiles Committee. It is averred under the heading 'Inspection' that for ensuring standard qualities of textiles and to satisfy that they have the characteristics necessary for satisfactory performance, necessary tests such as identification of fibres, fibre composition, fibre finances, shrinkage, chemical degradation, resistance to milldew and fungus etc. are carried out quite often by the Committee. A statement showing the income and expenditure of the Textiles Committee for the period commencing from March l, 1965 and ending with March 31, 1971 as well as the estimated budget for the years 1971-72 to 1973-74 are set out to verify the ratio between the fee collected and the expenditure incurred for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s actually realised and the total expenditure of the Inspectorate during the period from April 1, 1965 to March 31, 1971: Period Fees realisable Fees Realised Total Expenditure On the Inspectorate , (In lakhs) 01.03.65 to 31.03.71 Rs.290.51 Rs.193.25 Revenue Rs.154.24 Capital Rs.8.44 Total Rs.162.68 (Actuals) 1.4.71 to 31.3.72 Rs.53.35 Rs.31.03 Revenue Rs.37.35 Capital Rs.22.66 Total Rs.60.61 (Revised Estimate) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sea change in the subsequent decisions. The distinction between a tax and a fee lies primarily in the fact that a tax is levied as part of a common burden, while a fee is for payment of a specific benefit or privilege although the special advantage is secondary to the primary motive of regulation in public interest. If the element of revenue for general purpose of the State predominates, the levy becomes a tax. In regard to fees there is, and must always be, correlation between the fee collected and the service intended to be rendered. In determining whether a livy is a fee, the true test must be whether its primary and essential purpose is to render specific services to a specified area or class; it may be of no consequence that the State may ultimately and indirectly be benefitted by it. The power of any legislature to levy a fee is conditioned by the fact that it must be by and large a quid pro quo for the services rendered. However, correlationship between the levy and the services rendered or expected is one of general character and not of mathematical exactitude. All that is necessary is that there should be a reasonable relationship between the levy of the fee and the serv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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