Bleaching, Dyeing Of Handloom And Powerloom Fabrics By Job Workers Not 'Manufacture' Of Textiles To Attract Cess : Supreme Court

The Supreme Court has held that independent textile processing units engaged in bleaching, dyeing and other processing of handloom and powerloom fabrics on a job-work basis cannot be made liable to pay textile cess under Section 5A of the Textiles Committee Act, 1963, as such activity does not amount to manufacture under the Act.

A bench of Justice S.V.N. Bhatti and Justice N.V. Anjaria rejected the Revenue's contention that bleaching and dyeing constituted manufacture under Section 2(f) of the Central Excise Act, 1944, and therefore attracted textile cess. The Court held that the definition of 'manufacture' under the Central Excise Act could not be imported into the Textiles Committee Act, 1963 (“Act”), which neither defines the term nor incorporates the definition under the former Act.

“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 understood in its common parlance and not in any special sense by borrowing a special ingredient of the concept from other statute.”, the Court observed.

Respondent No.1-Premium Suiting is engaged in bleaching, dyeing and processing 100% man-made fabrics received from handloom and powerloom units. It processes the fabrics on a job-work basis and returns them to the original manufacturers.

In 2001, the Textiles Committee issued a show-cause notice demanding ₹2,68,293 as textile cess. The company argued that the fabrics were manufactured by small handloom and powerloom units, which were expressly exempted from cess under the proviso to Section 5A of the Act.

The assessing authority rejected the claim and confirmed the demand. The Textiles Committee Cess Appellate Tribunal upheld the assessment, reasoning that bleaching and dyeing amounted to manufacture and that the job worker and merchant dealers could be jointly and severally liable.

The Allahabad High Court subsequently quashed the demand, holding that processing fabrics on a job-work basis did not extinguish their status as products of the exempted handloom and powerloom industries, prompting the revenue to move to the Supreme Court.

Dismissing the appeal, the judgment authored by Justice Anjaria endorsed the High Court's view, which refused to read the definition of the word manufacture mentioned in the Central Excise Act to the Textiles Committee Act, noting that if a particular expression is not defined in an Act, its definition in another Act cannot be imported into the former Act.

“This Court endorses to the view taken by the High Court in the above count namely that 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 High Court was correct in relying on the decision of this Court in Union of India and Others vs. R.C. Jain and Others, in which it is held that if a particular expression is not defined in an Act, its definition in another Act cannot be imported into the former Act.”, the Court said.

“It is a settled principle of statutory interpretation that a particular word or a phrase or a section in any enactment has to be construed, interpreted and applied having regard to the context of the scheme, purpose and operational ambit of such statute. Every statute has in its subject matter as a distinguished context. Therefore, the same word occurring in the other statute cannot be bodily lifted and read as defined in the other statute for the purpose of applying the same, unless such word or definition or provision is provided to be read by the legislature by applying doctrine of reference or doctrine of incorporation.”, the Court added.

Noting that the Respondent No.1 did not manufacture new textiles but merely processed fabrics already manufactured by handloom and powerloom units. Its activities were supplementary to the original manufacturing process, the Court said.

“Respondent No.1 only works as an extended arm for the manufacturers of the textile of the powerloom industry. The fabric or textile which becomes material bleached and dyed is not 'textile manufactured.” the Court said, emphasizing that when no new textile was manufactured by the company, then it could not be subjected to textile cess under Section 5A.

The appeal was accordingly dismissed.

Appearance:

For Appellant(s) Mr. Chirag M. Shroff- 1525, AOR Mr. Sushant Dogra, Adv.

For Respondent(s) Mr. Tanmaya Agarwal, AOR Mrs. Aditi Agarwal, Adv. Ms. Astha Goyal, Adv. Mr. Jayesh Sharma, Adv. Mr. Muhammad Nomaan Khan, Adv. Mr. Neel Kamal Mishra, Adv.