TaxTMI 
TaxTMI 
EXEMPTIONS TO TEXTILES UNITS FROM THE LEVY OF ‘TEXTILE CESS’
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....XEMPTIONS TO TEXTILES UNITS FROM THE LEVY OF ‘TEXTILE CESS’<br>By: - DR.MARIAPPAN GOVINDARAJAN<br>Other Topics<br>Dated:- 2-11-2026<br>Textile Cess Section 5A of the Textiles Committee Act, 1960 provides for the levy of textile Cess. The said section provides that there shall be levied and collected as a cess for the purposes of this Act a duty of excise on all textiles and on all textile machinery manufactured in India at such rate, not exceeding one per cent. ad valorem as the Central Government may, by notification in the Official Gazette, fix. No such cess shall be levied on textiles manufactured from out of handloom or power loom industry. It is in addition to any cess or duty leviable on textiles or textile machinery under any ....
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....other law for the time being in force. The Cess shall be collected by the Committee, in accordance with the rules made in this behalf, from every manufacturer of textiles or textile machinery. The manufacturer shall pay to the Committee the amount of the duty of excise levied within one month from the date on which he receives a notice of demand therefore from the Committee. The Committee is to assess the Cess. Every manufacturer shall furnish to the Committee a return, not later than 15 days after the expiry of the period to which the return relates, specifying the total quantity of textiles or textile machinery manufactured by him during the said period and such other particulars as may be prescribed. If the assessee manufacturer fails....
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.... to furnish the return within the time specified therein, or furnishes a return which the Committee has reason to believe is incorrect or defective, the Committee may assess the amount of the cess in such manner as may be prescribed. Any manufacturer aggrieved by an assessment made under this section may appeal to the Tribunal, constituted under section 5B for cancellation or modification of the assessment. Case law for exemption In The Assessing Officer, Textiles Committee Versus M/s. Premium Suiting Pvt. Ltd. & Another. - 2026 (10) TMI 1683 - Supreme Court, the respondent No.1 is engaged in manufacturing of textiles. The said company is engaged in bleaching, dyeing and processing of 100% man-made fabrics, supplied by power loom and ....
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....handloom units. The Comptroller General of India, during the year 2001, reported to the Ministry of Textiles that they found out of 30 independent textiles processors, only one processor had been paying the cess during 2000-2001 in 5 Commissionerate of Central Excise of Uttar Pradesh and the remaining 29 did not pay the cess to the tune of Rs.39.64 lakhs during the year 1997 - 2000. In view of the above communications the Department issued a demand notice to the respondent company to the tune of Rs.2,68,293/- on 20.08.2001. The respondent company filed a reply with the Department on 28.08.2001. In the reply the respondent No.1 contended that its unit was an independent textile processor for the textiles manufactured received from the pow....
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....er loom industries and it was on job work basis. The Act provided and exempted all the products from the purview of applicability of the cess and the cess was not payable. The Department did not accept the contentions of the respondent No.1 company and passed the assessment order on 21.11.2001. The order conveyed the clarification of the Inspecting Officer that the power loom/handloom fabrics were exempted from cess only at the loom stage and not afterwards when they are further processed. Being aggrieved against this order, the respondent No.1 company filed an appeal before the Appellate Tribunal. The Appellate Tribunal held that the processing activity amounted to manufacturing under the Act and the job workers and the merchant dealers....
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.... were jointly and severally liable to pay cess under the Act. The processing fabrics out of power loom and handloom industries for further manufacturing were not exempted under the Proviso to Section 5A of the Act. The Appellate Tribunal dismissed the appeal on 05.12.2005. The Department issued another notice to the company making a demand of Rs.143176/- towards textile cess for the period from April 2001 to December 2023. The respondent No.1 company filed a writ petition before the High Court challenging the order of the Appellate Tribunal. The High Court allowed the writ petition holding that the activity of bleaching and dyeing and other processing of power unit or handloom textiles by job workers would not mean obliteration of the....
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.... status of textile as products of the power loom industry and since such power loom textiles are exempted from payment of textiles cess under Section 5A of the Act, the cess would not payable. Against the order of High Court, the Department filed the present appeal before the Supreme Court. The Supreme Court considered the arguments of both the parties. The Supreme Court observed that Section 5A of the Act is applicable to the respondent No.1 company. The text of Section 5A has at its several places the phrase 'textile manufactured', however, the word 'manufacture' is not defined in the Act. The Supreme Court also analysed the impugned order of the High Court. although the word 'manufacture' has not been defined in Act, the definition of....
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.... the word 'manufacture' found in Section 2(f) of the Central Excise Act, 1944 should be adopted and applied which inter alia contemplates that the concept of 'manufacture' includes any process incidental or ancillary to the completion of a manufactured product. Unless the particular word of section is included to be read by virtue of reference or incorporation from the other statute, such word cannot be readily taken as applicable in the statute where it is not defined. The whole stand on the part of the textile authorities in subjecting that the activity of the respondent-company was liable to be treated as 'manufacture', is that when the fabrics come from the power loom or handloom industry to the unit of respondent No.1, a process is ....
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....undertaken in the nature of bleaching, dyeing, etc. It is the case that when the process is undergone on the fabric, in view of the definition of manufacture in the other Acts, especially under the Excise Act such as the Central Excise Act, process of bleaching etc., would fall within the purview of 'manufacture'. The word 'manufacture' is not defined in the Act, and it is neither safe nor permissible in law to advert to and adopt the connotation 'manufacture' as defined in another statute, and on the basis of such alien definition, treat the activity undertaken by respondent No.1 to be the manufacturing activity. Therefore, while interpreting the word 'manufactured' which occurs in Section 5A of the Act in the present case, it has to be un....
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....derstood in its common parlance and not in any special sense by borrowing a special ingredient of the concept from other statute. The Supreme Court observed that the Act provides for imposition of cess on textiles and textile machinery 'manufactured'. The question is whether the dyeing, bleaching, and such processing on the fabric becomes 'textile manufactured' to attract the liability of cess. In this case the unit of the respondent No1. Company is an independent unit for processing of textiles. The company received the textiles from the power loom and handloom. The respondent company undertakes the work of bleaching, dyeing etc., from the respondent No.1 company on job work basis. No process of manufacturing is undertaken by the respon....
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....dent No.1 company. Therefore, the outcome of the product of the respondent No.1 company will not amount to manufacture of textiles. Further Section 5A of the Act provides that no such cess shall be levied on textiles manufactured out of handloom or power loom industry. The activity undertaken by respondent No.1 is an extended activity which refines the textile by applying dyeing and bleaching. It could be viewed as an activity supplementary and ancillary to the manufacturing of textiles which is performed by the power loom industry, which again is exempted from textile tax under Section 5A of the Act. In view of the above, the Supreme Court held that the respondent No.1 cannot be subjected to and cannot be made liable to pay the textile ....
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....cess, as there is no 'textile manufactured' in its units. The Supreme Court dismissed the appeal. =============<br> Scholarly articles for knowledge sharing by authors, experts, professionals ....