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TMI Blog1983 (12) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... "Any industry engaged in the manufacture or production of any of the articles mentioned under each of the following headings or sub-headings." Item 23, which deals with textiles reads as follows : "23. Textiles (including those dyed, printed or otherwise processed) : (1) made wholly or in part of cotton including cotton yarn, hosiery and rope; (2) made wholly or in part of jute, including jute, twine and rope; (3) made wholly or in part of wool, including wool tops, woollen yarn, hosiery, carpets and ruggets; (4) made wholly or in part of silk, including silk yarn and hosiery; (5) made wholly or in part of synthetic, artificial (man-made) fibres, including yarn and hosiery of such fibres." Explanations 1 and 2 to the First Schedule read as follows :- "Explanation 1. - The articles specified under each of the headings Nos. 3, 4, 5, 6, 7, 8, 10, 11 and 13 shall include their component parts and accessories. Explanation 2. The articles specified under each of the Headings Nos. 18, 19, 21 and 22 shall include the intermediates required for their manufacture." 3. The relevant statutory provision under which cess is levied is Section 9, which reads as follows : "9(1). There m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be specified for different or different class of goods. But the proviso to the said section imposes a restriction on the rate of cess to be levied under Section 9(1) that the rate shall not exceed 13 paise per cent of the value of the goods. The explanation to the said section provides for the method of ascertaining the value of the goods for imposing the cess at the rate notified by the Central Government in the notified order. 5. In exercise of the powers conferred by sub-section (1) of Section 9 of the Act, the Central Government issued trade notice No. 35/80, dated 4-3-1980 with regard to jute manufacturers specifying the class of goods manufactured or produced wholly or in part of the jute in the scheduled industry of textiles on which duty of excise shall be levied and collected as a cess at the rates mentioned in Column (3). The said notice reads as follows :- "Trade Notice No. 35/80-Jute Manufactures No. 1/80, dated 4-9-1980. S.O. 102 (E). - In exercise of the powers conferred by sub-section (1) of Section 9 of the Industries (Development and Regulation) Act, 1951 (65 of 1951), the Central Government hereby specifies the classes of goods manufactured or produced wholly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cises and Salt Act, 1944 (1 of 1944) and the rules made thereunder, including those relating to refund of duty, shall, so far as may be, apply in relation to the levy and collection of the duty of excise on the jute manufactures under the Act." 8. Rule 5 provides for filing of monthly Returns in the specified form of all stocks of jute manufactured in and removed from the factory during the previous month. Rule 6 provides that the proceeds of the cess shall first be credited to the Consolidated Fund of India and the Central Government, may after due appropriation made by Parliament in that behalf, hand over to the Development Council such sums as it may consider necessary. 9. Sri V. Jagannadha Rao, the learned Counsel for the petitioners submitted that Item 23(2) of the First Schedule to the Act refers only to textiles made wholly or in part of jute, including jute, twine and rope and it does not specify jute yarn and, therefore the Central Government has no power to levy cess on jute yarn, and that the notification issued by the Central Government under Section 9(1) imposing cess on jute yarn in ultra vires the powers of the Central Government. But, we are unable to agree with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss shall be levied and collected for the purposes of the Act on all goods manufactured or produced in any of the industries mentioned in the First Schedule at the rates notified by the Central Government in the notified order. Therefore, cess can be levied on all goods manufactured or produced by the industries mentioned in the Schedule and the articles mentioned in the headings and sub-headings cannot be read as imposing any restriction or limitation on the powers of the Government to levy cess under Section 9(1) of the Act on all goods manufactured or produced by any industry engaged in the manufacture or production of the articles mentioned in the headings and sub-headings in the items mentioned in the said Schedule. The expression "all goods manufactured or produced in any such Scheduled industry" takes in not merely the articles mentioned in the headings and sub-headings of the First Schedule but also all goods manufactured or produced by the industry engaged in the manufacture or production of the articles mentioned in the headings or sub-headings in the First Schedule. In the instant case, it cannot be disputed that jute yarn is produced by the petitioners who are engaged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1956 and in Item 18(d) of Schedule I of the Central Excises Act and, therefore, jute yarn are goods which can be marketed or sold and, therefore, cess can be validly levied under Section 9(1) of the Act on jute yarn manufactured or produced by the petitioners who are engaged in the manufacture or production of jute textiles or the articles mentioned in the sub-heading (2) of Item 23. 14. Sri K. Nagaraja Rao has produced before us a supplementary manual of departmental instruction on excisable manufactured products on jute manufacture, which describes the manufacture, packing and storage of jute in Chapter 2. The relevant portion at page 12 reads as follows :- "2.1. Manufacturing Process :- Basic material for jute manufacture are jute, mesta and hemp. Fine yarn is spun and then from it fabric is woven. Essentially the jute yarn manufacturing process is designed to separate the individual fibre filaments; to arrange these filaments in parallel order; to blend them for uniformity of colour, strength and quality; and to twist them into yarns that derive their strength in tension partly from the fibres themselves and partly from the frictional forces between them." 15. Thus, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture of any other commodity in or outside such place, until the excise duty leviable thereon has been paid at such place and in such manner as is prescribed in these rules or as the Collector may require and except on presentation of an application in the proper form and on obtaining the permission of the proper officer on the form : Provided that such goods may be deposited without payment of duty in a store-room or other place of storage approved by the Collector under Rule 27 or Rule 47 or in a warehouse appointed or licensed under Rule 140 or may be exported under bond as provided in rule 13 : Provided further that such goods may be removed without payment or on part payment of duty leviable thereon if the Central Government by notification in the Official Gazette, allow the goods to be so removed under Rule 49 : Provided also that the Collector may, if he thinks fit instead of requiring payment of duty in respect of each separate consignment of goods removed from the place or premises specified in this behalf, or from a store-room or warehouse duly approved, appointed or licensed by him keep with any person dealing in such goods an account-current of the duties payab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch and the manner in which the cess leviable under Section 9 shall be payable and the rules made by the Central Government under Section 30 cannot impose any further restrictions or limitations with regard to the levy of cess under Section 9(1) of the Act. The provisions of the Central Excise Act and Rules, in particular, Rule 49 cannot override the statutory provisions of Section 9(1) with regard to levy and collection of cess on the goods manufactured or produced by industries engaged in the manufacture of textiles, under Rule 3 read with sub-item (2) of Item 23 of the First Schedule to the Act. 20. Sri V. Jagannadha Rao did not therefore rightly pursue the contention that Rules 9 and 49 of the Central Excise Rules as amended by Section 51 of the Finance Act, 1982 can be invoked in the case of levy or collection of cess on jute yarn under Section 9 of the Act. It is contended by Sri Jagannadha Rao that even assuming without conceding that jute yarn are goods, as the said goods are consumed within the factory for manufacture of other products, no cess can be levied on jute yarn which is so consumed or utilised in manufacturing an end-product. The learned counsel submits that Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein, a public limited company, was engaged in the manufacture of jute products consisting of carpet backing, hessian sacking, bagging cloth including jute yarn and jute twine. With regard to the levy of cess under the Act on jute twine and yarn consumed within the factory for conversion into jute manufactures, the Central Government issued a clarification stating that jute twine and jute yarn consumed within the factory for manufacturing of jute goods though exempted from payment of Central Excise Duty were liable for levy of cess under the Jute Manufacturers Cess Rules, 1976. When the department required the petitioner therein to pay the cess on jute twine and jute yarn utilised for captive consumption within the factory, the petitioner challenged the said levy. On behalf of the petitioner therein, it was contended that under Section 9(1) of the Act, the Central Government had no competence or authority to levy cess on jute twines, thread, rope or yarn inasmuch as the said articles were not `textiles' within the meaning of Item No. 23(2) of the First Schedule, and that the said articles were not included in the Explanations to the First Schedule, either as components or interm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saged a notional sale and, therefore, if the goods were delivered at the place of manufacture and removed from the factory, although the goods were not actually sold to the transferee, such removal would also come within the purview of the levy of cess. In that case, it was conceded on behalf of the petitioner therein that if the jute twine and yarn admittedly manufactured by their factory were intended to be sold, and for that purpose, goods were delivered and removed from the factory, cess could be levied on the goods. But, it was contended that as the said goods were put into the process of manufacturing sacking goods in their plant within the precincts of the same factory, such goods were not leviable for cess as such goods would not come within the purview of the Explanation to Section 9(1) of the Act. That contention was accepted by the learned Judge G.P. Jha, J. The learned Judge M.P. Varma, J. observed as follows : "Nobody disputed the proposition that twines and yarns manufactured are also subject to imposition of cess, provided such products are finished goods capable of being sold and at the time of their removal from the place of manufacture for marketability." 24. Bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Section 9 of the Industries (Development and Regulation) Act with regard to levy of cess on goods manufactured or produced by a scheduled industry. Therefore, the principles laid down in the aforesaid rulings with regard to levy of excise duty under the Central Excise Act and the Rules made thereunder cannot be applied to the cases of levy of cess under Section 9 of the Industries (Development and Regulation) Act. 26. In Union of India v. Delhi Cloth and General Mills - (6) AIR 1963 S.C. 791, their Lordships of Supreme Court held that : "As the raw oil though purified in the process of manufacturing vanaspati, is not deodorised before its hydrogenation, it does not become at any stage `refined oil' as is known to the consumers and the commercial community and no excise duty is leviable on it under Item 12 (old Item 23) of Schedule I as `refined oil'." In that case, their Lordships further observed as follows : "Moreover, the definition of `goods' make it clear that to become `goods' an article must be something which can ordinarily come to the market to be bought and sold." In that case, their Lordships held that the processed raw oil was not covered by the expression ..... X X X X Extracts X X X X X X X X Extracts X X X X
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