Manufacture under excise law includes fabric processing that creates a commercially distinct product; retrospective validation upheld.

Bleaching, dyeing, printing and similar processing of cotton and man-made fabrics can amount to manufacture for excise purposes when the process produces a commercially distinct article with a different name, character or use. The retrospective amendment deeming such processing to be manufacture and validating past levies was held within legislative competence and not violative of Articles 14 or 19(1)(g), as a curative fiscal measure. Duty on processed fabrics was chargeable on the assessable value of the processed goods, with credit available for duty already paid on grey fabrics to prevent double incidence.

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Issues: (i) whether bleaching, dyeing, printing and similar processing of cotton and man-made fabrics amounted to manufacture under the unamended excise law; (ii) whether the retrospective amendment deeming such processing to be manufacture and validating past levies was within legislative competence and offended Articles 14 and 19(1)(g) of the Constitution; and (iii) whether duty on processed fabrics was to be levied on the intrinsic value of the processed goods with credit for duty already paid on grey fabrics.

Issue (i): Whether bleaching, dyeing, printing and similar processing of cotton and man-made fabrics amounted to manufacture under the unamended excise law.

Analysis: Manufacture, for excise purposes, is not confined to a merely etymological or mechanical sense. The controlling test is whether the process results in a new and distinct commercial commodity having a different name, character or use. Applying that test, processing that changes grey cloth into commercially distinct processed fabric can constitute manufacture, even if the fabric remains fabric in a broad sense.

Conclusion: The processes in question were capable of constituting manufacture and the contrary view taken by the Gujarat High Court could not be sustained.

Issue (ii): Whether the retrospective amendment deeming such processing to be manufacture and validating past levies was within legislative competence and offended Articles 14 and 19(1)(g) of the Constitution.

Analysis: Parliament was competent to expand the statutory definition of manufacture for the purposes of excise, and the impugned amendment operated as a curative measure to remove the effect of prior litigation and validate the existing levy structure. Retrospective fiscal legislation is not per se unreasonable, and the amendment neither created arbitrary discrimination nor imposed an unconstitutional restriction on business.

Conclusion: The amendment was valid and did not infringe Articles 14 or 19(1)(g).

Issue (iii): Whether duty on processed fabrics was to be levied on the intrinsic value of the processed goods with credit for duty already paid on grey fabrics.

Analysis: Excise is attracted by manufacture, not by ownership. Once processed fabrics fall within the tariff entries as amended, the assessable value is the wholesale price of the processed goods, not merely processing charges. Where duty has already been paid on grey cloth, credit is available under the relevant rules to avoid double incidence.

Conclusion: Duty was chargeable on the processed fabrics on the basis of their assessable value, with credit for duty already paid on the inputs as permitted by the rules.

Final Conclusion: The validity of the retrospective excise amendment was upheld, the challenge to the levy failed, and the revenue's position on classification and valuation prevailed, subject to the statutory credit mechanism.

Ratio Decidendi: For excise purposes, a process amounts to manufacture when it produces a commercially distinct article with a different name, character or use, and Parliament may retrospectively validate and classify such processes for levy of duty if the amendment is curative and non-arbitrary.

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