TMI Blog1984 (1) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... s, therefore, not manufacturing or producing textiles as envisaged by s. 33(1)(b)(B)(i) read with item 32 of V Schedule to the Act. On appeal by the assessee, the AAC was of the view that the operations carried on by the assessee in merely embroidering or stitching designs on to textiles purchased by it from others was neither manufacture nor production by the assessee of textiles. In that view, the AAC dismissed the appeal. On further appeal to the Tribunal, it looked at the operations of the assessee differential in that assessee started with the cloth manufactured by others and purchased from others, yet the end-product was textiles otherwise processed. In doing so, the Tribunal relied upon the dictionary meaning of the word " process ". In the result, the assessee was held entitled to a higher rate of development rebate at 35% as claimed. Aggrieved by the order of the Tribunal, the Revenue has obtained reference on the following two questions A " 1. Whether, on the facts and in the circumstances of the case, it has been rightly held by the Tribunal that the assessee was entitled to the higher rate of development rebate at 35% under section 33(1)(b)(B)(i) in respect of the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacture or production " of " textiles ". The operations carried on by the assessee on the cloth purchased by it are not in the nature of either manufacturing or production operations, nor do such operations relate to the manufacture or production of textiles. The cloth, which would be covered by the expression " textile ", had already been manufactured or produced by someone else, but merely purchased by the assessee. That cloth, even after being embroidered and dyed, is not transformed into any other different or distinct commercial article or product, but essentially retains its basic character and structure and is identifiable as cloth manufactured or produced by another and purchased by the assessee. There is, therefore, no production or manufacture of textiles by the assessee, inasmuch as the assessee has not brought into being or existence textiles by employing the processes and dyeing. The learned counsel for the assessee emphasised that the product in this case has resulted from the application of some processes and dyeing by the assessee and contended it would fall within item 32 of Schedule V. The words in brackets, following the word " textiles " in item 32 of Schedule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto pieces, printed and washed and calendered and again cut into smaller pieces and then calendered again to give a good finish and then made into bed-spreads, scarves and handicraft goods. Some garments were also stitched. It was in that context the court pointed out that as a result of undergoing these different processes, the end-product was different from the feed-in material and, therefore, the undertaking would be one engaged in the manufacture or processing of goods within the Explanation appended to clause (xxi) which would apply to clause (xxxii) also. Even assuming that the test is that the end-product should be different from the feed-in-material, that was satisfied in that case. The feed-in-material was only cloth, but as a result of the processes to which that cloth was subjected, bed-spreads, scarves, handicrafts and garments were brought into existence. In the manufacture of garments, for instance, though the feed-in-material is cloth, what comes out at the end of the line is finished garment, which are different and distinct commercial articles, though falling under " textiles ". In this case, but for the addition of embroidered designs and dyeing to match the hue o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was involved. The Board of Revenue accepted the stand of the assessee; but the Madhya Pradesh High Court pointed out, considering the definition of the word " manufacture " in s. 2(j) of the Madhya Pradesh General Sales Tax Act of 1958, that the word is very wide and includes any process and that the use of the end-product, dyed cotton yarn, was different from that of the uncoloured yarn and, therefore, it would involve a process of manufacture. That decision turned on the definition of " manufacture " which included any process or manner of producing or making any goods and on that definition, it was held that dyed cotton yarn would be goods made by a manufacturing process. No similar definition of the word I, manufacture " or " produce " in the Act has been brought to our notice and, therefore, those considerations would be inapplicable to this case. We may now refer to CST v. Harbilas Rai and Sons [1968] 21 STC 17 (SC). In that case, the assessee purchased pig bristles and got them cleaned with soap and other chemicals and thereafter they were sorted out according to their sizes and colours and tied in separate bundles of different sizes and exported. The question arose whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmercial article although it improves its performance and serviceability as tyre and that no new or distinct article emerges out of the retreading operations. The aforesaid decisions clearly establish that the claim of the assessee, on the facts and circumstances of this case, is unsustainable. Thus, on a careful consideration of the entire matter, we are of the opinion that on the facts and in the circumstances of this case, the assessee merely expended its labour on cloth which was purchased from somebody else by it and the result of that labour was that the commodity still continued to remain as cloth as before and had not become a distinct or different article or Commodity so as to label the process by which it becomes so, a process of " manufacture or production " of " textiles " within the meaning of s. 33(1)(b)(B)(i) read with item 32 of Schedule V to the Act. We hold that the assessee was not entitled to higher development rebate as the assessee was not engaged in the " manufacture or production " of " textiles ". We, therefore, answer questions Nos. 1 and 2 in the negative and in favour of the Revenue. There will, however, be no order as to costs. - - TaxTMI - TMITax - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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