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TMI Blog2010 (4) TMI 678X X X X Extracts X X X X X X X X Extracts X X X X ..... has been made applicable. Such being the intention of the legislature, we hold that the word ‘manufacturer’ used in sub-section (3) of Section 5A has the same meaning as that is defined in the Central Excises & Salt Act, 1944. Manufacture - exemption under the proviso to sub-section (1) of Section 5A is available to handloom and powerloom industries - petitioners manufacturing finished product and not grey fabrics (raw material) being not handloom or powerloom industries, cannot derive advantage of exemption on the basis of the raw material manufactured by other manufacturers - absence of any merit, no relief granted to the petitioners - 22419-22438 of 2005 - - - Dated:- 8-4-2010 - S.J. Mukhopadhaya, Akil Kureshi, JJ. REPRESENTED BY : S/Shri Sunit S. Shah, Uday Joshi with Abhishek Mehta for M/s. Trivedi Gupta and Dhaval K. Shah, for the Petitioner. S/Shri N.V. Solanki and P.S. Champaneri, ASG, for the Respondent. [Judgment per : S.J. Mukhopadhaya, C.J. (Common CAV)]. In all these cases, as a common question of law is involved, they were heard together and are being disposed of by this common judgment. 2. The petitioners are running their processin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demand of cess from the processing units working on job work basis. In view of the representation made by the Ahmedabad Textiles Association, the respondents, by their letter/circular dated 10-6-1997, intimated that the processing amounts to manufacturing and hence the processing units are manufacturers irrespective of the fact whether they process on powerloom or handloom fabrics or mill made cloth and accordingly the processing units are liable to pay cess. The respondents further requested to pay cess dues on the value of the material removed from their premises after processing for marketing, but clarified that if the processed material is returned back to the owner of the raw material, then the cess was payable on processing charges for the product. The Association was requested to direct its members to submit their required returns in the prescribed Form A . Technical opinion was also obtained from the technical exports of their office. 5. The respondents had demanded cess under Section 5A of the Textiles Committee Act, 1963 on total value of textiles fabric/cloth processed by them irrespective of the fact whether the same were processed on ownership basis or job work basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antial portion of its clearance is from textile fabric/cloth processed from out of powerloom industry and, therefore, the demand raised by the respondents in respect of textile fabric/cloth processed from out of powerloom industry is contrary to Section 5A(1) read with Section 5B of the said Act. The view of the Appellate Tribunal that cess can be levied at every stage of manufacturing and, therefore, independent processing units are liable to pay cess is incorrect and is liable to be set aside. If the intention of the legislature was to exempt textile fabric/cloth manufactured by powerloom industry only and not to the subsequent manufacturer of different kinds of textile fabric/cloth out of such product, in that event, the sentence from out of would be redundant. The sentence from out of indicates covering manufacturing of textiles in the subsequent stage also. The word out of goes with the manufacturing of textile fabric/cloth by powerloom industry and the word from refers to subsequent manufacturing of different textiles from the products of powerloom industry. Therefore, taking a view that subsequent manufacturing of different textiles by powerloom is over simplificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a large amount of cess not only resulting into discriminatory treatment, but would render counter to encouragement given by the Government to small industries. If cess is levied at every stage, it will amount to levy and collection of cess on cess and also collection of cess twice on the same value which would not be legal and would not be contemplated by the Act or the Rules framed thereunder. Therefore, it may be open to the respondents to levy cess either at the stage of manufacturing of yarn or fabric or cloth or garment or any other product, but cess cannot be levied at every stage i.e. at the stage of spinning yarn or fabric, thereafter at the stage of weaving and thereafter at the stage of processing. 10. Reliance was also placed on the letter dated 15-10-1997 whereby the experts opinion was communicated, which reads as follows :- Processed factories exclusively doing work of bleaching, dyeing, printing and finishing etc. are liable to pay cess on the products, for the raw material of which, no cess has been paid jointly or severally by either the processor or the supplier of the raw material. However, if cess has already been paid for which purpose proof will have to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the Appellate Tribunal holding that the dealers/merchants/job workers are jointly and severally liable is not supported by any valid reason. Such finding is against the objects of the Act and the Rules framed thereunder. The respondents have failed to show as to how the liability of the merchants/dealers/job workers can be regarded as joint and several liability either before the Tribunal or before this Court. 13. The learned counsel for the petitioner(s) submitted that the petitioners are not liable to pay any cess under the Act for the following reasons :- (i) The petitioners are not manufacturers within the meaning of Sub-section (3) of Section 5A of the Act since the term textile as defined in Section 2(g) of the Act does not include dyeing, bleaching and processing of fabrics. (ii) The petitioners cannot be brought within the ambit of Section 5A of the Act since they are not manufacturing textile for the purpose of sales. Majority of them are performing job work at the instance of other manufacturers. (iii) As 95% of the fabrics sent to the petitioners for processing belonged to powerloom/handloom industries which is specifically exempted from cess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19. The word manufacturer fell for consideration before the Supreme Court from time to time. In the case of Union of India v. Delhi Cloth and General Mills, AIR 1963 SC 791 = 1977 (1) E.L.T. (J199) (S.C.) the Supreme Court observed as follows :- According to the learned counsel, manufacture is complete as soon as by the application of one or more processes, the raw material undergoes some change. To say this is to equate processing to manufacture and for this we can find no warrant in law. The word manufacture used as a verb is generally understood to mean as bringing into existence a new substance and does not mean merely to produce some change in a substance , however minor in consequence the change may be. 20. The Supreme Court in the case of Pio Food Packers, reported in 1980 Supp. SCC 174 = 1980 (6) E.L.T. 343 (S.C.) held that at some point processing and manufacturing will merge. But where the commodity retains a continuing substantial identity through the processing stage we cannot say that it has been manufactured . In the aforesaid Pio Food Packers case, the Supreme Court further observed as follows :- .....manufacture is the end result of one or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pears in the light of the several decisions and on the construction of the expression that the process of bleaching, dyeing and printing etymologically also means manufacturing processes. In the said case, the Supreme Court further held as follows :- 43. On a consideration of the matter, we are persuaded to think that the view taken in the Empire Industries case that grey fabric after they undergo the various processes of bleaching, dyeing, sizing, printing, finishing, etc. emerges as a commercially different commodity with its own price structure, custom and other commercial incidents and that there was in that sense a manufacture within the meaning of Section 2(f), even as unamended, is an eminently plausible view and is not shown to suffer from any fallacy. Indeed, on this point the Referring Bench did not disagree or have any reservations either. It is to be noticed that if the amending law is valid, this aspect becomes academic. 23. The word manufacture also fell for consideration in the Supreme Court in Aspinwall Co. Ltd. v. CIT, (2001) 7 SCC 525 = 2001 (133) E.L.T. 18 (S.C.). In the said case, the Supreme Court noticed that the word manufacture has not bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that there was no double taxation as was alleged by the petitioners of the said case. The expression manufacturer having not defined under the Textiles Committee Act, 1963, the definition of other statute, namely Excises and Salt Act, 1944, was taken into consideration. The Court finally held as follows :- 24. From the above definition, it is clear that the expression manufacture includes any process incidental or ancillary to the completion of the manufactured product and the word manufacturer includes not only a person who employs hired labour in the production or manufacture of goods but also anyone, who engages in the production or manufacture on his own account, if those goods are intended for sale. It is thus clear that the word manufacturer does not merely include those persons who in common parlance are themselves engaged in the manufacturing of textiles but also includes those persons who engage themselves in getting the textiles, intended for export, produced or manufactured on their own account. In other words a person who brings into existence an article or a product even through the instrumentality of an agent or a servant has to be regarded as a manufacturer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty under the Central Excises and Salt Act, 1944, which reads as follows :- 3. Maintenance of registers. - Every manufacturer shall maintain a register of production indicating therein the total quantity of textiles or textile machinery manufactured by him during a month, the quantity (if any) used by him for the manufacturer of another commodity, the quantity removed on payment of duty under the Central Excise and Salt Act, 1944 (1 of 1944), the quantity removed for export without payment of such duty, the total value ad-valorem and the cess payable thereon at the rate for the time being in force. Submission of month returns is also dependent on the Central Excise authorities under Rule 54 of the Central Excise Rules, 1944 for the relevant month is apparent from Rule 4 as quoted hereunder : - 4. Submission of month returns - 1. Every manufacturer shall furnish to the Committee in duplicate, a return in Form A or in Form B, as the case may be, for each month duly signed by him or any other person authorized by him in this behalf so as to reach the Committee not later than Fifteen days after the expiry of the month to which the return relates, along with a certified copy ..... X X X X Extracts X X X X X X X X Extracts X X X X
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