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<h1>Court rules mercerising yarn not 'manufacture' under tax law. License cancellation upheld due to mutual mistake.</h1> The court held that mercerising of yarn does not amount to 'manufacture' under the Central Excises and Salt Act, 1944. The cancellation of the license ... Manufacture - Mercerising Issues:1. Whether the process of mercerising of yarn amounts to 'manufacture' under the Central Excises and Salt Act, 1944.2. Validity of the cancellation of the license during its currency.Detailed Analysis:Issue 1:The petitioner, a spinning mill company, had a separate unit for processing yarn into mercerised yarn. The dispute arose when authorities differed on whether mercerising constitutes 'manufacture' under the Act. The petitioner argued that mercerising alters the yarn's identity, making it a manufactured product, while the authorities contended that the process does not change the yarn fundamentally. The court considered the definition of 'manufacture' under Section 2(f) of the Act and relevant provisions. The court examined the mercerising process, noting the treatment steps involved. The petitioner relied on judgments related to cotton fabric manufacture, but the court emphasized the specific exclusion of mercerising from the definition of 'manufacture' for cotton yarn. Ultimately, the court held that mercerising of yarn does not amount to 'manufacture' under the Act.Issue 2:Regarding the cancellation of the license, the court upheld the cancellation during its currency. The authorities justified the revocation based on a mutual mistake regarding the necessity of the license for mercerising. The license conditions allowed for rejection if the information in the application was false or if the purpose of the license changed. Since mercerising did not qualify as 'manufacture,' the court agreed that the license was not required as declared in the application. Consequently, the court found the cancellation valid and dismissed the writ petition, with no costs awarded.In conclusion, the court ruled that mercerising of yarn does not constitute 'manufacture' under the Central Excises and Salt Act, 1944. Additionally, the cancellation of the license during its currency was deemed valid based on the incorrect declaration in the application and the subsequent understanding of the manufacturing process.
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