Issues Involved: 1. Whether the processes of bleaching, dyeing, printing, sizing, shrink-proofing, etc., amount to "manufacture" under Section 2(f) of the Central Excises and Salt Act, 1944, prior to its amendment. 2. Whether the amendment to Section 2(f) and Tariff Items 19 and 22 by the Amending Act of 1980 is ultra vires Entry 84 List I. 3. Whether the levy of additional duties under the Additional Duties of Excise Act, 1957, is valid without a corresponding amendment to the definition of "manufacture" in that Act. 4. Whether the retrospective operation of the Amending Act is an unreasonable restriction on the fundamental rights under Article 19(1)(g) of the Constitution. 5. Whether the computation of the assessable value of processed grey fabric based on the wholesale cash selling price declared under Rule 173B is justified and legal.
Detailed Analysis:
Issue 1: Manufacture under Section 2(f) Prior to Amendment The processors contended that the processes like bleaching, dyeing, and printing do not amount to "manufacture" as they do not bring into existence a new article with a distinctive character and use. However, the court held that the processes of bleaching, dyeing, printing, etc., carried out by the processors on job-work basis amount to "manufacture" within the meaning of Section 2(f) of the Central Excises and Salt Act, 1944, even prior to its amendment. The court emphasized that the processed fabric emerges as a commercially different commodity with its own price-structure and commercial incidents, thus constituting "manufacture."
Issue 2: Validity of the Amending Act under Entry 84 List I The court held that the amendment to Section 2(f) and Tariff Items 19 and 22 by the Amending Act of 1980 is valid. The processes referred to by the amendment are not so alien to the concept of "manufacture" that they could not come within that concept. The court further stated that even if the expanded concept of manufacture introduced by the amendment is beyond the scope of Entry 84 List I, the impost can still be supported by Entry 97 of List I, which allows for the imposition of taxes not enumerated in any other entry.
Issue 3: Levy of Additional Duties under the Additional Duties of Excise Act, 1957 The court rejected the contention that the levy of additional duties under the Additional Duties of Excise Act, 1957, is invalid without a corresponding amendment to the definition of "manufacture" in that Act. The court held that Section 3(3) of the Additional Duties Act, which provides that the provisions of the Central Excise Act and the rules made thereunder shall apply in relation to the levy and collection of the additional duties, is sufficient to attract the definition of "manufacture" under Section 2(f) of the Central Excise Act as amended.
Issue 4: Retrospective Operation of the Amending Act The court found no merit in the contention that the retrospective operation of the Amending Act is an unreasonable restriction on the fundamental rights under Article 19(1)(g) of the Constitution. The court held that a competent legislature can always validate what has been declared invalid by courts, provided the infirmities are removed or cured. Such a validating law can also be made retrospective. The court emphasized that the retroactivity of the Amending provisions was not such as to incur any infirmity under Article 19(1)(g).
Issue 5: Computation of Assessable Value The court held that the assessable value of the processed fabric should include the value of the grey cloth in the hands of the processors plus the value of the job-work done plus manufacturing profit and manufacturing expenses. The court rejected the contention that the assessable value should be limited to the processing charges alone. The court emphasized that the correct assessable value must be the value at which the manufactured goods leave the factory and enter the mainstream.
Conclusion: The appeals preferred by the Union of India were allowed, and the judgment of the Gujarat High Court was set aside. The appeals preferred by the processors against the judgment of the Bombay High Court and the writ petitions filed by the processors directly in this court were dismissed. The court clarified that the assessable value of the processed fabric would include the value of the grey cloth, the job-work done, and the manufacturing profit and expenses. The Union of India and its authorities were entitled to recover the amounts due by way of arrears of excise duty and to enforce the bank guarantees for the recovery of the arrears.
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