2007 (3) TMI 249 - HC - Central Excise

Imposition of Textile Cess under the provisions of Section 5A of the Textiles Committee Act, 1963 - job contracts of bleaching and dyeing whether it amounts to manufacture or not since this issue can be decided only at appellate authority level, petitioner should avail alternative remedy available to it impugned petition is premature hence it is not maintainable - petitioner is directed to exhaust the appeal remedy

Summary

Issues Involved:
1. Applicability of Cess under Section 5A of the Textiles Committee Act, 1963, to job contracts of bleaching and dyeing.
2. Definition and interpretation of "manufacturer" under the Textiles Committee Act.
3. Maintainability of the writ petition without exhausting alternative remedies.
4. Necessity of a personal hearing before issuing a demand notice.
5. Financial impact of levying Cess on the petitioner's members.

Issue-wise Analysis:

1. Applicability of Cess under Section 5A of the Textiles Committee Act, 1963, to job contracts of bleaching and dyeing:
The petitioner association argued that its members, who carry out bleaching and dyeing on a job work basis, are not manufacturers of textiles as defined under the Textiles Committee Act, 1963. They contended that the job work does not transform the yarn into a new product and thus should not attract Cess. The respondents, however, maintained that the processes of bleaching and dyeing constitute manufacturing as per the Act and cited a Supreme Court judgment supporting their stance.

2. Definition and interpretation of "manufacturer" under the Textiles Committee Act:
The petitioner association claimed that their members are not manufacturers since they only process yarn and do not produce any new textile product. The respondents countered this by referring to the Supreme Court decision in Sirsilk vs. Textiles Committee, which treated processing activities like bleaching and dyeing as manufacturing. The respondents argued that, in the absence of a specific definition in the Act, the broader interpretation should include these processes as manufacturing.

3. Maintainability of the writ petition without exhausting alternative remedies:
The petitioner association sought to bypass the statutory remedy of appeal provided under Section 5A(7) of the Act by directly filing a writ petition. The respondents argued that the petitioner should have exhausted the alternative remedy before approaching the Court. The Court noted that the writ petition had not been pending for an excessively long time and involved disputed facts, making it more appropriate for the appellate authority to decide. Consequently, the Court directed the petitioner to prefer an appeal, highlighting that the writ petition was premature.

4. Necessity of a personal hearing before issuing a demand notice:
The petitioner association contended that the demand notices were issued without affording a personal hearing, which is obligatory under the Act and Rules. The respondents did not directly address this issue in their counter. The Court did not explicitly rule on this matter but implied that procedural fairness should be adhered to by directing the petitioner to seek redress through the appellate process.

5. Financial impact of levying Cess on the petitioner's members:
The petitioner association argued that the imposition of Cess would significantly impact their income and cause hardship. They highlighted that the Cess had not been levied since 1975 and that its sudden imposition was unjust. The Court did not delve deeply into the financial implications but acknowledged the petitioner's concerns by leaving the substantive issues open for determination by the appellate authority.

Conclusion:
The Court directed the petitioner association to exhaust the appeal remedy available under Section 5A(7) of the Textiles Committee Act, 1963, and excluded the period of pendency of the writ petition from the limitation period for filing the appeal. The Court also noted the absence of a definition for "manufacture" in the Act and suggested that the Union of India consider defining the term to avoid future litigation and complications. The writ petition was disposed of without costs, and the connected W.P.M.P. was closed.