TaxTMI 
TaxTMI 
2010 (4) TMI 678
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....chase textile fabrics/cloth and process the same and upon completion of the process, sell such finished textile fabrics/cloth into the markets raising invoices on its own name. Whereas, those processing units, working on job work basis, process fabric/cloth which is owned and supplied by the third party and upon completing the processing job, such petitioners return the processed textile fabric/cloth to such original owner/supplier and raise invoices for job charges only. Thus, according to the petitioners, they act as a bailee. 3. The petitioners hold requisite license under the provisions of the Central Excises & Salt Act, 1944 and the Rules framed thereunder. They have filed monthly returns of their respective clearances under the provisions of the Central Excise Act. The respondents computed and demanded cess under the provisions of the Textiles Committee Act, 1963 on the basis of the clearances shown in the monthly returns filed under the provisions of the Central Excise Act. According to them, presently the Central Excise is levied at the option of the assessee either at the stage of manufacturing yarn or at the stage of clearance of such textile fabrics with availabi....
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....ppellate Tribunal constituted under Section 5B, which was registered as Appeal No. 87 of 2002. The Appellate Tribunal, after hearing the parties, giving a reference to the order passed in another case of M/s. Chandok Textile Exporters Pvt. Ltd., by order dated 28-3-2005, rejected the appeal. 6. The learned counsel appearing on behalf of the petitioner(s) submitted that the Textiles Committee Act, 1963 was introduced to provide for establishment of a Committee for ensuring quality of textiles and textile machinery and for matters connected therewith. In exercise of the powers conferred by Section 22 of the said Act, the Central Government made the Rules known as 'Textiles Committee (Cess) Rules, 1975'. Section 5A(1) of the said Act empowers levy and collection of cess on all textiles and on all textile machinery manufactured in India at such rate not exceeding one per cent ad valorem as may be fixed by the Central Government. However, as per the proviso to the said Section 5A(1) of the said Act, cess cannot be levied on textiles manufactured from out of handloom or powerloom industry. As per Section 5A(3) of the said Act, cess is to be collected by the respondents in accorda....
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.... thereby that cess is to be levied at any one of such stages, if cess is levied on yarn, the same cannot be levied at a sage of weaving grey fabric/cloth or processing such woven grey fabric/cloth. The word 'or' appearing in the definition has to be assigned same meaning in consonance with the object of the said Act. Further contention made on behalf of the petitioner(s) is that no cess can be levied on textile fabric/cloth processed by the petitioner(s), if cess was earlier collected either on yarn or grey fabric/cloth as neither the Act nor the Rules contemplate collection of cess at every stage of manufacturing textiles, otherwise it would result into discriminatory treatment to the petitioner(s) qua composite textile mills where cess is levied and collected at one stage only i.e. either at the stage of sale of yarn or grey fabric/cloth or processed fabric, but not at all the three stages. In composite textile mills, yarn is manufactured/spinned and thereafter it is weaved into grey cloth and then the process is carried out to make it finished textile fabric/cloth. In other words, all the three activities viz. spinning, weaving and processing are carried out by one unit. The ces....
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....bric, powerloom weaver purchases yarn upon payment of cess because manufacturing of yarn is not exempted from payment of textile committee cess and as such mandatory cess is paid on the yarn. In case of the second category i.e. composite textile mills, they are also not exempted from payment of textile committee cess and, therefore, they make payment of textile committee cess on grey fabric supplied by them. Therefore, in case of powerloom weaver, textile committee cess is paid on yarn and in case of composite textile mills, textile committee cess is paid on grey fabric. Thus, it is absolutely clear that all goods coming to independent processing units had suffered payment of textile committee cess either at the yarn stage or at the grey fabric stage and, therefore, there is no need for asking proof of payment from the processor as payment of cess by yarn supplier or grey fabric was mandatory. 12. With regard to the units processing grey fabric/cloth on job work basis, it is contended that no cess can be levied and collected from such petitioner(s) on the value of the fabric/cloth. Such petitioners do not purchase grey fabric/cloth and after job work is done, they return te....
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....ey fabrics and other at the stage of processing of the same grey fabric. 14. According to the respondent, the petitioners are manufacturers and, therefore, they are also liable to pay cess under Section 5A of the Act. Any change in the product amounts to manufacturing and in the present case as bleaching, dyeing and processing of grey fabrics amount to change in the product, such process of grey fabrics amounts to manufacturing. The petitioners being independent processing unit(s) concentrating in the activity of processing of textiles are thus covered under the assessment and collection of cess under the Act and the Rules. 15. It was also contended by the learned counsel for the respondents that in view of Rules 3 to 8 of the Textiles Committee (Cess) Rules, the word 'manufacturer' as defined in the Central Excise Act, 1944 to be relied for the purpose of the Textiles Committee Act, 1963. Reliance was also placed on different decisions of the High Court and the Supreme Court in support of such claim. They will be discussed at an appropriate stage. 16. The following questions arise for determination in the present case :- (i) ....
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.... original commodity and the processed article it is not possible to say that one commodity has been consumed in the manufacture of another. Although it has undergone a degree of processing, it must be regarded as still retaining its original identity." 21. In Delhi Cloth and General Mills case (AIR 1963 SC 791 = 1977 (1) E.L.T. (J199) (S.C.) the Supreme Court observed as follows :- " 'Manufacture' implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character or use." 22. All the aforesaid cases were noticed by the Supreme Court in Ujagar Prints v. Union of India, (1989) 3 SCC 488 = 1988 (38) E.L.T. 535 (S.C.). In the said case, other Supreme Court cases were also noticed and following observations were made by the Supreme Court :- "38. We, have carefully considered these submissions. In the Empire Industries case (1985) 3 SCC 314, this Court considered similar submissions in an almost identical context and situation. Learned Judges refe....
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.... parlance meaning was applied by the Supreme Court and held as follows :- "13. The word 'manufacture' has not been defined in the Act. In the absence of a definition of the word 'manufacture' it has to be given a meaning as is understood in common parlance. It is to be understood as meaning the production of articles for use from raw or prepared materials by giving such materials new forms, qualities or combinations whether by hand labour or machines. If the change made in the article results in a new and different article then it would amount to a manufacturing activity. 14. This Court while determining as to what would amount to a manufacturing activity, held in CST v. Pio Food Packers [1980 Supp SCC 174] that the test for determination whether manufacture can be said to have taken place is whether the commodity which is subjected to the process of manufacture can no longer be regarded as the original commodity, but is recognized in the trade as a new and distinct commodity. It was observed : (SCC p. 176, para 5) 'Commonly manufacture is the end result of one or more processes through which the original commodity is made to pass. The nature and extent of proces....
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....sence of the definition of the word manufacturer. For instance, a person who supplies yarn to a handloom or power loon owner for weaving cloth according to his specifications/design/pattern on payment of labour charges is a 'manufacturer'." 25. Averting to the facts of the present case, we find that the petitioner units are processing grey fabrics which is the raw material. In the case of Empire Industries Ltd. v. Union of India, (1985) 3 SCC 314 = 1985 (20) E.L.T. 179 (S.C.), the Supreme Court dealt with what is grey fabric. The Court noticed that the processing units are carrying on job activities of dyeing, printing and finishing of cotton fabrics and man made fabrics, in unprocessed condition called grey fabrics which they purchase or receive from various customers for processing. The fabrics are then boiled in water mixed with various chemicals, washed and dyed. The next stage is printing process i.e. putting the required designs on the said fabrics by way of screen printing on hot tables. The final stage is the finishing process, that is to give a final touch for better appearance. They do not carry on any spinning or weaving of the fabrics. Many of them do not sell t....
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....tral excise authorities under Rule 54 of the Central Excise Rules, 1944 for the relevant month. 2. A return referred to in sub-rule (1) shall be sent by registered post with acknowledgment due." The assessment when return is not furnished or furnished incorrectly, as stipulated under Rule 8 is also dependent on Rule 4, which relates to submission of return submitted to the Central Excise authorities under Rule 54 of the Central Excise Rules, 1944, as quoted hereunder :- "8. Assessment when return is not furnished or furnished incorrectly etc. - If any manufacturer fails to furnish the return referred to in Rule 4 within the period specified therein, or furnishes a return which the Committee has reason to believe is incorrect or defective, the Assessing Officer may, after giving the manufacturer an opportunity of being heard, assess the amount of cess on the basis of figures obtained from the Central Excise Department or on the basis of the average of the cess levied during the previous two quarters immediately proceeding the quarters for which assessment is being made." 27. From the aforesaid Rules, it will be evident that for the purpose of Textiles Comm....