TaxTMI 
TaxTMI 
2017 (10) TMI 20
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....pondents are the Union of India, the Textile Committee Cess Appellate Tribunal and the Assessing Officer of the Textile Committee. 4. The petitioners were earlier known as M/s. Indian Rayon & Industries Limited. The Division of the petitioners= company, namely, "Madurai Garments" was earlier belonging to M/s. Coats Viyella India Limited. M/s. Indian Rayon & Industries Limited purchased this Division from M/s. Coats Viyella India Limited and now that entity is known as Aditya Birla Nuvo Limited. Aditya Birla Nuvo Limited was demerged and the same was merged with Pantaloons Fashion & Retail. Subsequently, Pantaloons Fashion & Retail has changed its name to Aditya Birla Fashion & Retail Limited. 5. There is a Textile Committee Act, 1963, and there have been Rules made thereunder. 6. On 27th January, 1994, the petitioners were asked to submit returns to the Assessing Officer, Textile Committee and pay the applicable textile cess. The petitioners were informed in terms of section 5A of the Textile Committee Act, 1963 (for short TC Act) that cess on textiles and textile machinery manufactured in India is leviable. It should be levied and collected as a du....
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....itioners dated 24th June, 1999, to which the petitioners replied on 14th July, 1999. The petitioners reiterated some of the contentions which we have noted above. 11. The Assessing Officer, however, disagreed with the petitioners and passed an order dated 7th April, 2000. 12. The petitioners carried the matter in appeal and it was urged that during the course of appeal as well, that there are job workers who are independently manufacturing the garment. It is that garment which is received from the job workers by the petitioners, branded and then sold in the market. However, the Appellate Authority, according to the petitioners, insisted that they must provide all the details and having allegedly failed to point out such details of the job workers and their activities, the order of the Assessing Officer came to be confirmed. 13. It is this order of the Appellate Authority which is challenged before us on various grounds. 14. Mr. Sridharan, learned senior counsel appearing for the petitioners would submit that the show cause notice itself is premised on the fact that the petitioners activities, as enumerated hereinabove, are undisputed. If the show cause....
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....clusive finding that the arrangement, based on which the petitioners are selling the garments in their brand in the market, is sham and bogus. It is in these circumstances that he would submit that being owner of the goods does not attract levy. The levy is attracted only on the manufacturer and which the petitioners cannot be termed as one. It is in these circumstances that Mr. Sridharan criticizes the appellate order and submits that there was no need to have been critical of the petitioners' conduct during the proceedings. The remarks are not only adverse, but wholly unjustified. In such circumstances, he would submit that the impugned order be quashed and set aside. 17. During the course of arguments, Mr. Sridharan has fairly brought to our notice that the understanding of the levy and its justification by the authorities is based on a Division Bench judgment rendered by the Delhi High Court. Mr. Sridharan submits that the assessment order concludes that the definition of the term "manufacturer" in section 2 clause (f) of the Central Excise Act, 1944, has no application to the Textile Committee Act, 1963. That is even reiterated in the affidavi....
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....ion to the series of judgments rendered on section 2 clause (f) of the Central Excise Act, 1944, by the Hon'ble Supreme Court. 21. Then, Mr. Sridharan would submit that there is no allegation that the job work arrangement in the case of the petitioners is tainted or can be termed as an agency or principal - agent relationship. On the other hand, the show cause notice itself is based on the understanding that the relationship is on principal to principal basis. 22. It is in these circumstances that once the show cause notice itself styles the petitioner as owners of the garments and not manufacturers, the entire proceedings are without jurisdiction and ab initio void. 23. Similarly, our attention was also invited to the fact that those job workers/manufacturers having not been proceeded against or proceeded against, but no recovery possible therefrom means the petitioner becomes liable for the levy is the other incorrect understanding of the levy. Therefore, Mr. Sridharan would submit that looked at from any angle, the levy is not imposable and recoverable. Consequently, on this short ground alone, the orders be quashed and set aside. 24. Alternatively an....
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....vy has been understood to be a levy on manufacture of textiles and textile machinery. However, there may be a few articles of textiles manufactured by parties on job work basis. If the article is liable to cess, then cess should be paid jointly and severally by the job workers or the supplier of raw material on the value of the product manufactured. Therefore, a simultaneous or joint proceeding against both is permissible and when there is an arrangement which is clearly demonstrating that the petitioners and parties like them were the manufacturers, then, appropriate apportionment can be also made. 30. Mr. Shetty, therefore, would submit that the writ petition has no substance and ought to be dismissed with costs. 31. For properly appreciating these contentions, we would have to make a reference to the Act and the Rules. 32. As is evident, the Act is enacted by the Parliament on 3rd December, 1963. The Act contains definitions in section 2. The term "Committee" is defined in section 2 clause (b) to mean the committee established under section 3. The words "handloom industries", "power loom" and "power loom industry" are defined in secti....
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.... of manufacture and also while it is in use at millheads; (iii) packing materials used in the packing of textiles or textile machinery; (f) establish laboratories and test houses for the testing of textiles; (g) provide for testing textiles and textile machinery in laboratories and test houses other than those established under clause (f); (h) collect statistics for any of the above mentioned purposes from - (i) manufacturers of, and dealers in, textiles; (ii) manufacturers of textile machinery; and (iii) such other persons as may be prescribed; (i) advise on all matters relating to the development of textile industry and the production of textile machinery; (j) provide for such other matters as may be prescribed. (3) In the discharge of its functions, the Committee shall be bound by such directions as the Central Government may, for reasons to be stated in writing, give to it from time to time." 34. A perusal of this section would indicate that by sub-section (1), subject to the provisions of this Act, the functions of the Committee shall generally be to ensure by such measures, as it thinks fit....
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....e shall be levied and collected a cess for the purposes of the TC Act, a duty of excise on all textiles and on all textile machinery manufactured in India. Sub-section (3) of section 5A says that the duty of excise levied under sub-section (1) shall be collected in accordance with the rules made in this behalf, from every manufacturer of textiles or textile machinery. Once it is conceded before us that this duty of excise levied under sub-section (1) of section 5A of the TC Act is in addition to any fees and duty leviable on textiles or textile machinery under any other law for the time being in force, then, there is no double taxation. 36. However, what is running throughout the section 5A and prior sections together with the sub-sections thereof so also the Act as a whole is a common thread, namely, that this duty shall be levied and collected as a cess and as a duty of excise on all textiles and on all textile machinery manufactured in India. It is the manufacturer who shall pay to the Committee the amount of duty of excise levied under section 5A(1) within one month from the date he receives a notice of demand therefor from the Committee. It is the Committee, the....
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....d, 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. 40. Mr. Shetty heavily relied on the object of the TC Act to submit that is laudable and we must give a meaning to the words and expressions consistent with it. In that regard, he relied upon the judgment of the Hon'ble Supreme Court in the case of The Sirsilk Ltd. & Ors. vs. The Textiles Committee & Ors. reported in AIR 1989 SC 317. He would submit that the following paragraphs of this judgment are relevant : "10 In order to appreciate the rival contentions, it is necessary to set out the background in which the Textiles Committee was constituted, the object and purpose of the Textiles Committee Act as also the relevant provisions of the said Act and the Rules made thereunder. The history of the legislation has been set out in the counter-affidavit filed on behalf of the Textiles Committee and is as follows. 11. The Second world war gave a completely sheltered market for Indian Textiles and created an unprecedented....
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.... the same applicable to all textiles including all synthetic fibres i.e. rayon yarn, staple fibre, nylon yarn, man-made fibre commonly known as artificial silk. 13. The avowed object and purpose of the Act, as reflected in the long title, is to provide for the establishment of a Committee for ensuring the. quality of textiles and textile machinery and for matters connected therewith. S. 2(f) of the Act defines `textile machinery' to mean the equipment employed directly or indirectly for the processing of textile fibre into yarn and for the manufacture of fabric therefrom by weaving or knitting and to include equipment used either wholly or partly for the finishing, folding or packing of textiles. ... ... ... ... 29. For all these reasons the contention that rayon yarn and nylon yarn manufactured by the appellants and the petitioners are made wholly of filaments and not of fibres and therefore did not come within the purview of textiles as defined in S. 2(g) of the Act prior to its amendment and therefore they were not liable for payment of the fee levied under r.21 of the Rules, cannot prevail. 30 The various activities undertaken by the Textiles Committee for the deve....
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.... Fund shall be applied for (a) meeting the pay and allowances of the officers and other employees of the Committee and administrative expenses of the Committee, and (b) carrying out the purposes of the Act. Sub-s. (3) of S. 7 provides that all moneys in the Fund shall be deposited in the State Bank of India or be invested in such securities, as may be approved by the Central Government. 31... ... ... ... It is not in dispute that the Textiles Committee has over the years built up a huge infrastructure and the Central Government has spent crores of rupees to make the legislation effective and meaningful and to bring about an overall improvement in the quality and standard of the textiles including man-made fibres or artificial silk so that our country may continue to retain its rightful place in the world market in a fiercely competitive international trade." 41. While it is true that there is a law and arming this Committee with the power to levy, assess and recover the cess, what we find is that preceding the adjudication and the impugned orders, there was a correspondence. The whole correspondence commenced when the Textile Committee on 27th January, 1994, invited the atten....
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....proceeded to assert and as noted above. However, the Committee's opinion appears to be founded on the communication dated 6th April, 1994, copy of which is at pages 84 and 95 of the paper book. It makes interesting reading : "... ... ... ... As pointed out by you, the garments might have been manufactured through some independent job contractors which does not mean that the ownership o the materials lies with them. Since the garments manufactured on your behalf and on account of enjoyment of ownership the garment material, you are liable to pay the cess to the Textiles Committee as required under the Act. You are therefore requested to submit the returns and pay cess from the date of inception of your firm. In case you require any clarification you may call on the undersigned on any working day between 9:15 a.m. to 5:30 p.m. to clarify any doubt." 43. When the petitioners predecessor approached the High Court of Karnataka at Bangalore, it was clarified before that Court that there are specific objections and there is a denial of the liability. The levy cannot be thrust upon the petitioners, save and except in accordance with law.&nbs....
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....kers have been engaged by the petitioners strictly for the purpose of making garments as per the required quality specifications and other requirements of the petitioners. Therefore, there is a degree of control and supervision though not limited to the actual production of garments. The Assessing Officer holds that it is not the case of Madura Garments, the predecessor of the petitioners, that the garments so manufactured by independent job workers / contractors, once they are so manufactured, are directly sold by the job workers/manufacturers and the sale proceeds are appropriated by them. There are no details or factual materials referred to support the finding. Pertinently the petitioners asserted that it is not only one job worker but several parties are undertaking the said job for the petitioners. Thus, the initial duty and obligation of the respondents before seeking to recover the cess from the petitioners has not been discharged. We are, with greatest respect, confused by such an approach. We do not see how the cess can be levied once the petitioners have been marketing the garments manufactured by persons who are styled as job workers merely....
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....e petitioners. 49. As held above by us, there is absolutely no material referred in the Assessing Order or in the show cause notice which would enable the Assessing Officer to conclude that the petitioners can be brought within the purview of the Act and the cess can be recovered from them on the foundation that the process of manufacturing may be by independent persons, but under the control and supervision of the petitioners. A mere statement by the petitioners in their reply to the show cause notice or in the preceding correspondence that they gave specifications to the garment manufacturers to manufacture a specific garment which is capable of being then branded by the petitioners and sold under its popular name, is not enough to hold and conclude as above. That statement, without anything more, will not mean that there is such degree of supervision as is ordinarily expected and envisaged in law which would enable the authorities to conclude that it is really the petitioners including in such activities. The degree of control and supervision is so pervasive and deep that it is none other than the petitioners who manufacture the goods can be the conclusion o....
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.... was fabrication of garments out of duty paid fabrics does not amount to manufacture of textiles. Secondly, as the fabrics are duty paid, levying of Textile Committee cess amounts to recovery of tax on the same article twice over. 56. The second contention was dealt with first and we have no hesitation in agreeing with the Division Bench that there is no question of any double taxation. 57. That is not the issue before us. 58. Secondly, the Division Bench was justified in relying upon the language of section 5A(1). The language being plain, unambiguous and clear, there was no difficulty in rejecting the primary argument of the petitioners before this Court that the cess was leviable once it is held that they are manufacturers. The petitioners had only contended that though the cess is leviable on manufacture of textiles and textile machinery, but their activity demonstrating that they are manufacturers of garments out of duty paid fabrics, there was nothing by which they could escape the levy. They, therefore, made another desperate attempt to avoid making payment of cess by urging that their activities are not confined to manufacture, but sales, an....