Mercerisation of yarn not treated as manufacture where tariff notes distinguish yarn from fabrics under excise law

Mercerisation of yarn was held not to constitute manufacture under excise law because the statutory definition and tariff notes expressly treated mercerising as manufacture for fabrics but omitted yarn. That omission was treated as a deliberate legislative distinction, so the process could not be brought within section 2(f) by implication. On that basis, the licence granted for mercerising yarn had been obtained on an incorrect assumption and its cancellation was upheld. The writ petition failed.

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Issues: Whether mercerisation of yarn amounts to manufacture for the purpose of excise law, and whether the cancellation of the licence granted for that process was valid.

Analysis: The definition of manufacture under Section 2(f) of the Central Excises and Salt Act, 1944 was examined in its pre-1986 and post-1986 forms along with the relevant Chapter Notes to the Central Excise Tariff Act, 1985. The Notes treated mercerising as manufacture in relation to fabrics, but not in relation to yarn. The omission of mercerising from the yarn entry was treated as a deliberate legislative distinction. The authorities relied on the licence conditions and the incorrect basis on which the licence had been obtained, namely the assumption that mercerisation of yarn was manufacture.

Conclusion: Mercerisation of yarn does not amount to manufacture for the purpose of the excise law in question, and the cancellation of the licence was upheld. The writ petition failed.

Ratio Decidendi: Where the tariff notes expressly include mercerising for fabrics but omit it for yarn, mercerisation of yarn cannot be treated as manufacture under the statutory definition.

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