2013 (8) TMI 449 - HC - Central Excise

Levy of Textile Cess - Textile Cess was demanded from the petitioner which had been further confirmed Petitioner contended that the job work undertaken by them was not a process of manufacturing textile Held that - The petitioners were job workers and were doing bleaching, dyeing etc. on the textile so supplied to them, they will be treated as extended hand of hand-loom and power-loom textile manufacturers - The hand-loom and power-loom textile manufacturers instead of getting work of bleaching etc. done by themselves, have engaged the petitioner on job work basis - The petitioner received the textile and after doing the needful return the textile to such manufacturers - Section 5A imposes cess for the purposes of the Act, 1963, a duty of excise on all textiles and on all textile machinery manufactured in India -The word manufacture is not defined in the Act, 1963 - The Textile Committee had been set up to carry on inspection to enable the exporters to claim replacement entitlements under the registered exporter policy as finds mention in the statement of objects to Amending Act No.51 of 1973 order of Demand was quashed. The textile manufactured out from hand-loom and power-loom industry had been exempted under section 5A, obviously no inspection in respect of textile manufactured by such industry was required and therefore, it was reasonable to conclude that the activity undertaken by an extended hand of these manufacturers will also be not liable to pay the impost of cess under the Act. - Decided in favor of assessee.

Summary

Issues Involved:
1. Liability to pay cess under the Textile Committee (Cess) Act, 1963.
2. Definition and scope of 'manufacture' under the Act.
3. Applicability of proviso to section 5-A of the Act.

Detailed Analysis:

1. Liability to pay cess under the Textile Committee (Cess) Act, 1963:
The petitioner, engaged in bleaching, dyeing, and processing of man-made fabrics, contested the demand notices issued by the Assessing Officer, Textile Committee, New Delhi, for cess payment amounting to Rs. 2,68,293/- for the assessment years 1997-1998 to 2000-2001. The petitioner argued that their activities did not constitute manufacturing of textiles and thus, they were not liable to pay cess under the Act. The matter was carried unsuccessfully in appeal before the Textile Committee, Cess, Appellate Tribunal, Mumbai, leading to the present writ petition.

2. Definition and scope of 'manufacture' under the Act:
The petitioner claimed that the job work they performed did not amount to manufacturing textiles as defined under the Act. The Act does not define 'manufacture,' and the petitioner argued against importing the definition from the Central Excise Act, 1944, which includes 'processing' in 'manufacturing.' The respondents, however, contended that the activities of processing, dyeing, printing, and bleaching amounted to manufacturing and justified the cess levy.

The court examined the background and objectives of the Textile Committee Act, which aims to ensure the quality of textiles for internal and external markets. It was noted that the Act's purpose differed from the Central Excise Act, which levies duty on the production of goods. The court ruled that it was inappropriate to import the definition of 'manufacture' from the Central Excise Act into the Textile Committee Act due to their different purposes and objectives. The word 'manufacture' should be understood in its common parlance, where textiles remain textiles even after processes like dyeing and bleaching.

3. Applicability of proviso to section 5-A of the Act:
The petitioner argued that their activities were exempted from cess under the proviso to section 5-A, which exempts textiles manufactured by handloom and powerloom industries. The court agreed, noting that the petitioner, as a job worker for handloom and powerloom textile manufacturers, should be considered an extended hand of these manufacturers. The court concurred with the view of a learned Single Judge in a similar case, stating that the proviso to section 5-A extends the benefit to manufacturers at any stage, including job workers like the petitioner.

The court concluded that since the petitioner's activities were on textiles supplied by handloom and powerloom industries, they were exempt from cess under section 5-A. The impugned order and demand notices were quashed, and the writ petition was allowed without any order as to costs.