Factory removal, not intra-factory manufacture, triggers cess on jute twine and yarn under the governing levy.

Cess under section 9(1) of the Industries (Development and Regulation) Act, 1951 was held to arise only when manufactured goods are delivered at the place of manufacture and removed from the factory. The explanation to section 9(1) was treated as part of the charging provision, fixing the point of levy at removal rather than at intra-factory manufacture. Internal movement of intermediate goods within the same factory precincts was not treated as removal, so jute twine and yarn were not liable to cess at that stage. Rule 5 of the Jute Manufactures Cess Rules, 1976 was read consistently with that construction.

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Issues: Whether cess under section 9(1) of the Industries (Development and Regulation) Act, 1951 is leviable on jute twine and yarn at the stage of manufacture within the factory, or only when the goods are delivered at the place of manufacture and removed from the factory.

Analysis: The charging provision and its explanation were read together. The explanation to section 9(1) was treated as an integral part of the section and was held to fix the incidence of cess at the point when goods are delivered at the place of manufacture and removed therefrom. The definition of factory in section 3(c) was taken to mean the factory precincts as a whole, and internal movement of intermediate goods from one part of the same factory to another was held not to amount to removal for the purpose of levy. Rule 5 of the Jute Manufactures Cess Rules, 1976, which requires returns of goods manufactured in and removed from the factory, was relied upon as supporting the same construction. The distinction drawn from the Central Excises and Salt Act, 1944 was accepted, but only to show that the cess under that Act arose on manufacture, whereas under section 9(1) the levy arose on removal from the factory.

Conclusion: Cess was not leviable on the petitioner's twine and yarn at the intra-factory stage; it became payable only when the manufactured goods were delivered at the place of manufacture and removed from the factory.

Ratio Decidendi: Where a charging section expressly ties levy to the delivery and removal of manufactured goods from the factory, internal transfer of intermediate products within the same factory does not attract the cess unless the goods have been removed from the factory premises.

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