2010 (5) TMI 257 - HC - Central Excise

Cess- Textile cess- Petitioners are companies engaged in the processing of man-made fabric and ploy vinyl fabric falling under Chapter 55 of the Schedule to the Central Excise Tariff Act, 1985. By these petitions they challenge the notices of demand of cess under the Textile Committee Act 1963 (TCA) and the Textile Committee Cess Rules 1975 (TCCR) made by the Textiles Committee, Ministry of Textiles, Government of India. Each of the petitioners also challenges the orders passed by the Textile Committee Cess Appellate Tribunal ( Tribunal ) dismissing each of their appeals and confirming the demand of cess. Held that- Process of dyeing, printing, and bleaching bring about change to grey clothe and amounts to manufacture. Impugned order affirming demand of textile cess, sustainable. Writ petition dismissed.

Summary

Issues Involved:
1. Whether the petitioners can be considered manufacturers of textiles under the Textile Committee Act, 1963 (TCA).
2. Whether the processes of bleaching, printing, and dyeing amount to manufacture for the purposes of the TCA.
3. Whether the demands for cess are time-barred under Rule 10 of the Textile Committee Cess Rules, 1975 (TCCR).
4. Determination of the assessable value for the purposes of cess.

Detailed Analysis:

1. Whether the petitioners can be considered manufacturers of textiles under the TCA:

The petitioners argued that they do not manufacture cloth or fabric within the meaning of 'textiles' under Section 2(g) TCA since they only process grey cloth received from traders. The court rejected this argument, stating that the grey cloth which undergoes bleaching, printing, or dyeing continues to be cloth made wholly or in part of cotton, silk, or artificial silk. The court held that the end product from the petitioners' units is indeed 'textiles' as per Section 2(g) TCA.

2. Whether the processes of bleaching, printing, and dyeing amount to manufacture for the purposes of the TCA:

The petitioners contended that their activities do not amount to 'manufacture' as defined in the TCA. The court referred to the charging section, Section 5-A TCA, which imposes a duty of excise on all textiles manufactured in India. The court noted that 'manufacture' is not defined in the TCA but can be interpreted using the common parlance test and relevant case law. Citing Supreme Court decisions in Empire Industries and Ujagar Prints (II), the court concluded that processes like bleaching, dyeing, and printing do amount to manufacture since they bring about a commercially distinct and new article. The court also mentioned that the TCA, being a fiscal statute, should be strictly interpreted.

3. Whether the demands for cess are time-barred under Rule 10 TCCR:

The petitioners argued that demands for the years 2002-03 and 2003-04 were time-barred as per Rule 10 TCCR, which stipulates a one-year period for recovery of cess that has been short levied or erroneously refunded. The respondents contended that Rule 10 did not apply as this was the first levy made by the impugned demand notice. The court agreed with the respondents, stating that the limitation under Rule 10 applies only if there was a levy in the first place. Since this was the initial levy, the limitation period did not apply, and the demands were not time-barred.

4. Determination of the assessable value for the purposes of cess:

The petitioners contended that the cess should be limited to the value of the job work done. The court referred to the Supreme Court's order in Ujagar Prints (III), which clarified that the assessable value includes the value of the grey cloth, the job work done, and manufacturing profit and expenses. The court noted that no such plea was raised before the Appellate Tribunal, and no factual foundation was laid for determining this issue in the current proceedings. Therefore, the court could not entertain this contention at the stage of the writ petitions.

Conclusion:

The court found no merit in the petitions and dismissed them with costs of Rs. 10,000/- to be paid by each petitioner to the respondents within four weeks. The processes of dyeing, bleaching, and printing were held to amount to manufacture for the purposes of Section 5-A TCA, and the demands were not time-barred. The court also upheld the Tribunal's orders affirming the demands raised on the petitioners for payment of cess.