1997 (4) TMI 502 - HC - Customs

Summary

Issues Involved:
1. Validity of the public notice issued by the Textiles Committee.
2. Levy of cess on textiles manufactured from handloom and powerloom industry.
3. Allegation of double taxation due to customs duty on imported silk.
4. Imposition of cess on exporters under the Textiles Committee Act.

Summary:

1. Validity of the Public Notice:
The petition challenges the public notice issued on 30 April 1994 by the Textiles Committee u/s 12 of the Textiles Committee Act, 1963, directing manufacturer-exporters of silk ready-made garments to pay cess at 0.05% ad valorem from 1975 based on the FOB value of shipping bills. The notice also warned that failure to pay the duty would result in recovery as arrears of land revenue u/s 5D of the Act.

2. Levy of Cess on Handloom and Powerloom Textiles:
The petitioners argued that u/s 5A(1) of the Act, textiles manufactured from handloom and powerloom industries are exempt from cess, but the notice did not provide such an exemption. The court held that the proviso to Section 5A(1) exempts only those textiles which, in their finished form, come directly from handloom or powerloom industries. Textiles processed further are not exempt. The court emphasized that the term "manufactured from out of" must be contextually construed, meaning the finished product must come directly from the handloom or powerloom industry to qualify for exemption.

3. Allegation of Double Taxation:
The petitioners contended that since a basic duty is levied on imported silk under the Customs Act, 1962, further cess under the Textiles Committee Act would amount to double taxation. The court rejected this argument, stating that the cess under the Textiles Committee Act and the customs duty are independent levies with different incidences. The former is levied at the time of manufacture, while the latter is levied at the time of import. Additionally, u/s 5A(2) of the Act, the cess is in addition to any other duty leviable under any other law.

4. Imposition of Cess on Exporters:
The petitioners argued that u/s 5A(3) of the Act, the duty of excise can only be collected from manufacturers, not exporters. The court held that an exporter who manufactures textiles either directly or through an agent or contractor falls within the definition of "manufacturer" u/s 5A of the Act. The court referred to the definition of "manufacture" under the Central Excise and Salt Act, 1944, which includes any process incidental or ancillary to the completion of a manufactured product. Therefore, an exporter who engages in the production or manufacture of textiles on his own account is considered a manufacturer under the Act. The inclusion of "exporters" in Section 12 of the Act further supports this interpretation.

Conclusion:
The court dismissed the petition, upholding the validity of the public notice and the levy of cess on the petitioners. The petitioners were ordered to pay costs quantified at Rs. 5,000.