Manufacture of processed grey fabrics attracts cess; job workers cannot rely on the handloom or mill-based exemption.

Processing grey fabrics on a job-charge basis by an independent processor was treated as manufacture for cess purposes because bleaching, dyeing, finishing and similar operations bring into existence a distinct textile article. The Tribunal held that the levy under Section 5A(1) of the Textiles Committee Act extends to textiles manufactured in India, and that the term "textiles" is broad enough to cover fabrics, cloth, yarn, garments and related fibre-based articles. The proviso to Section 5A(1) was held to be a limited exemption for textiles manufactured from handloom or powerloom industry, not processed fabrics handled by job workers. The departmental circular applicable to mill-removed textiles was held inapplicable, so the processor was liable to cess and the demand was sustained.

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Issues: Whether processing of grey fabrics on job-charge basis by an independent processor amounts to manufacture for the purposes of levy of cess under the Textiles Committee Act, 1963, and whether such processor can claim exemption under the proviso to Section 5A(1) or rely on the departmental circular applicable to mill-removed textiles.

Analysis: The levy under Section 5A(1) extends to all textiles manufactured in India, while the term "textiles" in Section 2(g) is wide enough to cover fabrics, cloth, yarn, garments and other fibre-based articles. The Tribunal applied the settled meaning of manufacture, namely, a process that brings into existence a new or different article with a distinct name, character or use, and held that bleaching, dyeing, finishing and similar processing of grey fabrics by an independent processor constitutes manufacture. The proviso to Section 5A(1) was construed as an exemption confined to textiles manufactured out of handloom or powerloom industry, not to processed fabrics returned by job workers. The circular relied upon by the appellant was held inapplicable because it was confined to textiles removed from mill premises and did not exempt independent processors.

Conclusion: The appellant was held liable to cess as a manufacturer of textiles, the exemption claim failed, and the demand was sustained.

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