2010 (4) TMI 678 - HC - Central Excise

Processing of Grey Fabric - by processing such grey fabrics by bleaching, dyeing, printing, finishing, etc. the petitioner unit(s) not only improves the quality of fabric, but also changes the basic characters of a grey fabric to a finished product and by such transformation, a new and different article emerges having a distinctive name, character and use, which is irreversible. - the grey fabrics after undergoing such process is a different commodity with its own price structure, and other commercial incidents and there is in that sense a manufacture within the meaning of sub-section (3) of Section 5A of the Textiles Committee Act, 1963. Manufacturer - for the purpose of Textiles Committee (Cess) Rules, which defines manufacturer , as defined in sub-section (3) of Section 5A of the Textiles Committee Act, for maintenance of registers, submission of month returns and assessment when return is not furnished or furnished incorrectly, the duty paid under the Central Excise & Salt Act, 1944 and the return submitted under the Central Excise Rules, 1944 has been made applicable. Such being the intention of the legislature, we hold that the word manufacturer used in sub-section (3) of Section 5A has the same meaning as that is defined in the Central Excises & Salt Act, 1944. Manufacture - exemption under the proviso to sub-section (1) of Section 5A is available to handloom and powerloom industries - petitioners manufacturing finished product and not grey fabrics (raw material) being not handloom or powerloom industries, cannot derive advantage of exemption on the basis of the raw material manufactured by other manufacturers - absence of any merit, no relief granted to the petitioners

Summary

Issues Involved:
1. Whether bleaching, dyeing, and processing of grey fabrics amounts to manufacture under the Textiles Committee Act, 1963.
2. Whether the definition of 'manufacture' under Section 2(f) of the Central Excise Act applies to the Textiles Committee Act, 1963.
3. Whether job workers are liable to pay cess under the Textiles Committee Act, 1963.

Issue-Wise Detailed Analysis:

1. Whether bleaching, dyeing, and processing of grey fabrics amounts to manufacture under the Textiles Committee Act, 1963:
The court examined whether the activities of bleaching, dyeing, and processing grey fabrics constituted 'manufacture' under the Textiles Committee Act, 1963. The term 'manufacture' is not explicitly defined in the Textiles Committee Act. However, the court referenced several Supreme Court rulings, including Union of India v. Delhi Cloth and General Mills and Pio Food Packers, which indicated that 'manufacture' implies a change resulting in a new and different article with a distinctive name, character, or use. The court noted that processing grey fabrics by bleaching, dyeing, printing, and finishing transforms them into a new product with a different commercial identity, thus constituting 'manufacture' under the Act.

2. Whether the definition of 'manufacture' under Section 2(f) of the Central Excise Act applies to the Textiles Committee Act, 1963:
The court considered whether the definition of 'manufacture' under the Central Excise Act could be applied to the Textiles Committee Act. The Textiles Committee (Cess) Rules, 1975, rely on the Central Excise Act for defining 'manufacturer' and for maintaining registers, submitting monthly returns, and assessing cess. Given this reliance, the court concluded that the definition of 'manufacturer' in the Central Excise Act applies to the Textiles Committee Act. Thus, the activities of bleaching, dyeing, and processing grey fabrics fall within the scope of 'manufacture' as defined in the Central Excise Act.

3. Whether job workers are liable to pay cess under the Textiles Committee Act, 1963:
The court addressed whether job workers, who process fabrics on behalf of others, are liable to pay cess. The petitioners argued that they should not be liable for cess as they do not own the fabrics and only perform job work. However, the court noted that the Textiles Committee Act mandates cess collection from every manufacturer of textiles. Since job workers engage in processing activities that transform grey fabrics into finished products, they are considered manufacturers under the Act. The court also referenced the Delhi High Court's decision in M/s. Nath Brothers Exim International Ltd. v. Union of India, which held that the incidence of cess is on the manufacture of textiles, regardless of who manufactures them. Consequently, job workers are liable to pay cess on the processed fabrics.

Conclusion:
The court concluded that the activities of bleaching, dyeing, and processing grey fabrics constitute 'manufacture' under the Textiles Committee Act, 1963. The definition of 'manufacture' under the Central Excise Act applies to the Textiles Committee Act. Job workers are liable to pay cess on processed fabrics as they are considered manufacturers under the Act. The petitions were dismissed, and no relief was granted to the petitioners.