2010 (4) TMI 499 - HC - Central Excise

Textile cess - Job Work - Textile cess not applicable to textile manufactured by handloom or powerloom industries. Job work of bleaching and dyeing of textile by power loom industry in present case. Product not ceased to be that of power loom industry even if manufacturer working at second stage. Product manufactured established as made out of power loom and handloom industry. Held that - exclusion from textile cess not dependent on stage of manufacture. Textile cess not liable to be paid in present case. Impugned order set aside.

Summary

Issues:
- Imposition of cess on the petitioner treating it as a manufacturer
- Interpretation of Section 5A proviso regarding benefits for Power Loom and Handloom Industry
- Entitlement of the petitioner to the benefit of the proviso
- Validity of the impugned order passed by the respondent

Analysis:

The High Court judgment deals with a petition challenging an order by the Cess Committee Appellate Tribunal imposing cess on the petitioner, considering them a manufacturer. The Tribunal relied on a previous judgment related to the case of M/s. Chandhok Textiles Exporter (Pvt.) Limited. The petitioner sought the benefit of Section 5A proviso, claiming to be engaged in job work of bleaching and dyeing textiles made by the Power Loom Industry. The Court examined the applicability of the proviso, emphasizing that the petitioner's products originate from the Power Loom and Handloom Industry, making them eligible for the proviso's benefits.

The judgment referenced a Delhi High Court case to establish the distinction between cases related to the Power Loom and Handloom Industry and those not entitled to Section 5A benefits. The Court clarified that even if the petitioner is considered a manufacturer at a later stage, the products remain linked to the Power Loom Industry, entitling them to the proviso's protection. The Court highlighted that the gray cloth processed by the petitioner retains its origin from the Power Loom Industry, reinforcing the petitioner's entitlement to Section 5A benefits.

The Court noted that the Union did not dispute the petitioner's job work involving textiles from the Power Loom Industry. Consequently, the Court concluded that the petitioner is entitled to the benefits under Section 5A, and the impugned order imposing cess was unjustified in the given circumstances. Therefore, the Court set aside the order, allowing the Writ Petition in favor of the petitioner.