Handloom cess on dyed fabric was not chargeable again where duty had already been paid on the grey cloth.

Handloom cess was not leviable a second time on dyed or processed cloth where cess had already been paid on the grey fabric. The applicable provision levied cess on cloth manufactured after the appointed day, but dyeing did not amount to manufacture because no new product came into existence and the Act contained no provision treating dyeing as a fresh manufacture. The Department also failed to prove that differential duty was payable, so the demand for additional cess on processed fabric was unsustainable.

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Issues: Whether handloom cess was leviable on processed or dyed fabrics when cess had already been paid on the grey fabrics.

Analysis: Section 3 of the Khadi and other Handloom Industries Development (Additional Excise Duties on Cloth) Act, 1953 levies cess on cloth manufactured on or after the appointed day. The decisive question was whether dyeing of received grey cloth amounted to manufacture for purposes of a fresh levy. In the absence of any provision treating dyeing as manufacture under the Act, and since no new product came into existence after dyeing, the cloth remained the same commodity though in a processed form. The Department also failed to substantiate its contention that differential duty was payable.

Conclusion: Cess was not leviable again on dyed cloth where cess had already been paid once on the grey cloth.

Final Conclusion: The demand for differential cess on processed fabrics was unsustainable and the departmental appeal failed.

Ratio Decidendi: Where cess is levied on cloth and no statutory provision treats dyeing as manufacture, processing that does not bring into existence a new product does not attract a second levy once cess has already been paid on the same cloth.

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