The Supreme Court has ruled that a company that bleaches and dyes fabric received from powerloom and handloom units on job work cannot be made to pay textile cess. The Bench held that such work is not “manufacture” under the Textiles Committee Act, 1963. Justice S.V.N. Bhatti and Justice N.V. Anjaria dismissed the appeal of the Assessing Officer, Textiles Committee against M/s. Premium Suiting Pvt. Ltd. and another.
Background
The dispute began with an audit remark. In a letter dated 28.06.2001, the office of the Comptroller General of India noted that only one of 30 independent textile processors in Uttar Pradesh was paying the cess. A show cause notice followed on 20.08.2001, and an assessment order dated 21.11.2001 demanded Rs. 2,68,293 from the company.
The company said it was an independent processor working on job work for small powerloom units. It argued that fabric from such units was exempt from cess. The Textiles Committee Cess Appellate Tribunal rejected its appeal, relying on its own earlier ruling that processing amounts to manufacturing. The Allahabad High Court later quashed the demand, and the Committee came to the Supreme Court.
The Committee argued that the Central Excise Act, 1944 should be used to understand “manufacture”. That law covers processes incidental to completing a product, so bleaching and dyeing would qualify. The Bench did not agree and endorsed the High Court’s view. Citing earlier rulings, including Union of India v. R.C. Jain, it said a definition from one law cannot be imported into another unless the legislature provides for it.
Justice Anjaria, writing the judgment, observed:
“As already stated above, 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.”
The Court also noted that the proviso to Section 5A expressly exempts textiles manufactured by the handloom or powerloom industry. On the company’s role, it said:
“Respondent No.1 in its processing units does not manufacture. It only processes the fabric or textile received from the powerloom or handloom industry and, after dyeing and bleaching, returns the same to the powerloom industry.”
The Bench described the company as an “extended arm” of the powerloom manufacturers. It said the fabric was only upgraded, not “textile manufactured”.
The Court held that the company cannot be made liable for textile cess, as no “textile manufactured” emerges from its units.
It found the appeal meritless and dismissed it. Any pending interlocutory applications were closed.
