2007 (3) TMI 788 - HC - Central Excise

Summary

Issues Involved:
1. Whether cess is payable under Section 5A of the Textiles Committee Act, 1963 by a manufacturer of textiles who neither paid duty of excise under the Central Excises and Salt Act, 1944, nor submitted returns and paid cess under the Textiles Committee Act, 1963.
2. Whether the Assessing Officer can assess cess based on figures obtained from sources other than those mentioned in Rule 8 of the Textiles Committee (Cess) Rules, 1975.
3. Whether hosiery goods are exempt from cess under the Textiles Committee Act, 1963.

Issue-wise Detailed Analysis:

1. Liability to Pay Cess under Section 5A of the Textiles Committee Act, 1963:
The court examined whether the cess under Section 5A is payable only by manufacturers liable to pay duty under the Central Excises and Salt Act, 1944. The petitioners argued that they were exempt from excise duty under the 1944 Act and thus not liable for cess. However, the court concluded that the liability to pay cess under the Textiles Committee Act is independent of the Central Excises and Salt Act. The court emphasized that the cess is an independent levy and the exemption from excise duty does not affect the liability to pay cess.

2. Assessment Based on Alternative Sources:
The petitioners contended that the assessment based on figures from sources other than those specified in Rule 8 of the Textiles Committee (Cess) Rules, 1975, was invalid. Rule 8 mentions two sources: the Central Excise Department or the average cess levied during the previous two quarters. The court held that the Assessing Officer is entitled to use other valid sources for assessment if the manufacturer does not submit returns or pay cess. The court supported this interpretation to advance the purpose of Section 5A, ensuring the cess is collected effectively.

3. Exemption of Hosiery Goods from Cess:
The petitioners claimed that hosiery goods, being exempt from excise duty, should not be liable for cess. The court referred to the definition of "excisable goods" and concluded that exemption from duty does not change the nature of the goods as excisable. The court noted that the exemption notification assumes hosiery to be excisable goods, and thus, they remain liable for cess under the Textiles Committee Act.

Judgment:
The court affirmed the findings of the learned Single Judge, holding that:
- The cess under Section 5A of the Textiles Committee Act is payable by manufacturers of textiles, including those exempt from excise duty under the 1944 Act.
- The Assessing Officer can assess cess using figures from sources other than those specified in Rule 8, provided the manufacturer is given an opportunity to dispute the figures.
- Hosiery goods are subject to cess under the Textiles Committee Act despite being exempt from excise duty.

The appeal by the writ petitioner was dismissed, and the court endorsed the view that the liability to pay cess is independent and not connected to the excise duty under the Central Excises and Salt Act, 1944. The court emphasized that the legislative intent was to levy cess in addition to any excise duty payable, ensuring comprehensive compliance with the Textiles Committee Act.