TMI Blog1971 (12) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... transport charges. Under these circumstances, unable to agree with contention that you ceased to employ looms from the individual factories after December, 1956. The conclusions of the Assistant Collector and of the Collector which are identical that one out of the 16 units of factories manufacturing cloth on behalf of the appellant was a licensed one are amply supported by evidence on the record and have not been shown to be vitiated by any legal error nor has any grave injustice been shown to have resulted thereby to the appellant. On these conclusions there can be no doubt that appellant is a manufacturer within the contemplation of the Act and the exemption under item (10) of the notification dated March 1, 1956 or under item (7) of the notification dated Januray 5, 1957 is not available to the appellant. Appeal dismissed. - 1790/66 - - - Dated:- 15-12-1971 - (CONSTITUTION BENCH) S.M. Sikri, C.J., J.M. Shelat, I.D. Dua, H.R. Khanna and G.K. Mathur, JJ. [Judgment per : I.D. Dua, J.]. - This is an appeal by special leave from the order of the Central Government, dated April 15, 1966 dismissing the appellant's revision against the order of the Collector of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not honoured the demand which was a condition precedent to the hearing of the appeal under the then Section 189 of the Sea Customs Act, 1878 as applicable to Central Excise, the Collector rejected the appeal without going into the merits. The appellant thereupon filed a writ petition in the Bombay High Court under Art. 226 of the Constitution but the same was dismissed on July 12, 1961 both on the ground of inordinate delay in approaching the High Court and on the merits. The appellant thereafter filed revision petition with the Government of India requesting that the appeal preferred against the order of the Assistant Collector be heard by the Collector of Central Excise, Poona, on the merits, at the same time offering to pay a part of the demand. After certain correspondence between the appellant and the Government, the latter directed the appellant to deposit a sum of Rs. 10,000 and to furnish a security bond for the balance of the duty. On compliance by the appellant with this condition, the Government directed the appeal to be considered on merits after hearing the appellant. The Collector, after hearing the parties at length, accepted the case of the department according to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. 136 of the Constitution. 6. In order to understand the real core of the controversy and to appreciate the arguments addressed in this Court we may briefly refer to the relevant statutory provisions. The words "manufacture" and "manufacturer" are defined in Section 2(f) of the Act as follows :- "(f) "manufacture" includes any process incidental or ancillary to the completion of a manufactured product; and (i) in relation to tobacco, includes preparation of cigarettes, cigars cheroots, biris, cigarette or pipe or hookah, tobacco chewing tobacco or snuff; and (ii) in relation to salt, includes collection, removal, preparation, steeping, evaporation boiling or any one or more of these processes, the separation or purification of salt obtained in the manufacture of saltpetre these separation of salt from earth or other substance so as to produce elementary salt, and the excavation or removal or natural saline deposits or efflorescence. (iii) in relation to patent or proprietary medicines as defined in Item No. 14B of the First Schedule and in relation to cosmetics and toilet preparations as defined in item No. 14F of that Schedule includes the conversion of powder into tab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which less than 5 powerlooms in all are installed." 8. By virtue of the notification, dated March 1, 1958 the Central Government has exempted cotton fabrics described therein from the whole of the duty leviable thereon under the Act. Item (10) in that notification reads :- "Cotton fabrics produced in factories known as powerlooms (without spinning plants)". 9. To complete the picture, this item was amended on May 18, 1955, the new substituted item being : "(10) Cotton fabrics produced in factories commonly known as powerlooms without spinning plants, provided that the number of powerlooms producing cotton fabrics in such factories does not exceed four". Thereafter came the notification of March 1, 1956. On January 5, 1957 another notification under Rule 8 (1) was issued by the Central Government in supersession of the notifications of March 1, 1955, and August 10, 1956 whereby several items of cotton fabrics were exempted from the whole of the duty leviable thereon under the Act and item (7) reads :- "Cotton fabrics produced in factories commonly known as powerlooms (without spinning wheel) provided that the number of powerlooms producing cotton fabrics in such fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were continued to them by M/s. Shree Agency. Shri Kulkarni was asked to state as to how much amount Messers Shree Agency could afford to give on credit to the small factory owners without settling the accounts at any stage, to which he replied that he has been doing business on moral hazard only. I am unable to believe that any genuine trader will enter into such a transaction on moral hazard unless he has got definite interest on the goods produced at these factories. It was very interesting to note that even upto the date of personal hearing Messrs Shree Agency was not in a position to know what amount was recoverable from the powerloom factories to whom they say they have supplied yarn on credit and advanced money every week during the period. 11. Investigations were undertaken by the Superintendent, Central Excise, Jaisinghpur (Rural) with the owners of all the powerloom factories separately to ascertain if they know the amount of transaction and if they had any account to show the amount payable by them to Messrs Shree Agency on account of yarn and cash payments received by them. The enquiry conclusively revealed that none of the owners of the powerloom factories were in a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce in these accounts Messrs Shree Agency has not taken into consideration the cloth received by them after December, 1956 on the plea that the cloth was sold by the factory owners direct in Bombay, the quantity of cloth shown in the enclosures to their application will definitely be less than the quantity that would be calculated from the yarn supplied. Surely the yarn supplied towards the later part of December, 1956 was manufactured in January, 1957. As I have already shown above, the transaction in respect of the period from January to April, 1957 has remained the same as it was during the year 1956. 16. This conclusion was never disturbed by the higher authorities. In order to check up if these conclusions are based on material on the record we went into the statements of K. Abdulkhan of Hanuman Weaving Mills on which reliance was placed by the Assistant Collector. That statement, in our view, fully supports the conclusion of the Assistant Collector and indeed it is impossible to read that statement to make out a case of K. Abdulkhan being an independent manufacturer who used to buy yarn from the applicant and sell cloth to them also to transact through the appellant as comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the cloth to your firm upto the end of December, 1956, only. The quantities have also been mentioned. In this regard the main question for consideration is whether your firm continued to employ the looms in the factories after December, 1956 when direct purchases by you of the manufactured cloth were suspended. For this purchase an examination of the factors which will categories the dealings of a particular firm or an individual as these of a master weaver have to be examined. It is necessary for a master weaver that the cloth manufactured should necessarily be purchased or supplied directly to them? In my opinion the employment of looms is the vital factor for consideration in such case. The question is whether you continued to employ the looms from the 16 factories for manufacture of cloth on your behalf or not after December, 1956. This is an issue of facts and has to be examined from the nature of your dealings with these factories during the period under review. 21. During the course of personal hearing I had an occasion to examine in detail your dealings with a powerloom factory of M/s. Chintamani Wvg. Mills, Ichalkaranji. It was admitted by you that your dealings with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to indicate that the individual factory owners were charged for any expenditure on account of baling or for transport. It passes comprehension why a commercial concern engaged with profit taking motive should first advance large sum of monies to the individual factory owners, receive their entire production supply sized beams of yarn, get the cloth processed at Bombay, make sales and charge no forwarding commission, on baling expenses and no transport charges. Under these circumstances, I am unable to agree with your contention that you ceased to employ looms from the individual factories after December, 1956. 23. The Assistant Collector, after coming to this conclusion agreed that one out of the 16 units of factories manufacturing cloth on behalf of the appellant was a licensed one. On this point and on the point of units of number of yards as production one loom per shift, the appellant's grievance was upheld and the Superintendent was directed to revise the demand. The revised demand, as already noticed, was for Rs. 43,020. Against the order of the Assistant Collector, as already noticed earlier, an appeal was presented to the Collector which was finally directed by the Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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