Job-Work Bleaching and Dyeing of Handloom or Powerloom Fabric Isn’t “Manufacture” for Textile Cess, Supreme Court Holds

In brief

The question

Whether bleaching, dyeing and other processing of handloom or powerloom fabrics by a job worker constitutes “manufacture” under Section 5A of the Textiles Committee Act, 1963, so as to attract textile cess.

The court held

The Court held that respondent No. 1’s job-work processing did not constitute manufacture attracting cess under Section 5A, and the company was not liable for the demand.

It also directed

The appeal was dismissed, leaving the High Court’s order quashing the cess demand undisturbed.

01Facts

Respondent No. 1 processed fabrics received from handloom and powerloom manufacturers by bleaching, dyeing and other job-work, then returned the fabrics to those manufacturers.

pp. 3–4, 14–15

The Assessing Officer demanded textile cess of Rs. 2,68,293, treating the processing as manufacture; the Textiles Committee Cess Appellate Tribunal upheld the demand.

pp. 3–5

The Allahabad High Court allowed the company’s writ petition, holding that the processing did not remove the fabrics’ status as products of the powerloom or handloom industry and that the cess exemption applied.

pp. 5–6

The Assessing Officer appealed to the Supreme Court.

p. 1

02Issues

i.Whether bleaching, dyeing and other processing of handloom or powerloom fabrics by a job worker constitutes “manufacture” under Section 5A of the Textiles Committee Act, 1963, so as to attract textile cess.

pp. 13–16

ii.Whether the definition of “manufacture” in the Central Excise Act, 1944 could be imported to determine liability under the Textiles Committee Act, 1963.

pp. 9–13

03Law Applied

Section 5A of the Textiles Committee Act, 1963 imposes cess on textiles and textile machinery manufactured in India, but its proviso exempts textiles manufactured from the handloom or powerloom industry; the Act defines “textiles” and “powerloom” but does not define “manufacture”.

pp. 7–10

A definition from another statute cannot ordinarily be imported unless the enactment provides for its application or the statutes are pari materia.

pp. 10–13

The Court relied on Union of India v. R.C. Jain, Jagatram Ahuja v. Commissioner of Gift Tax, Hyderabad and Maheshwari Fish Seed Farm v. T.N. Electricity Board for that principle.

pp. 10–13

Provisions in the judgment · 3 · Linked ones open on LawLens

Textiles Committee Act, 1963 Section 3 Section 2

Central Excise Act, 1944 Section 2

04Reasoning

Because the Textiles Committee Act neither defined “manufacture” nor incorporated the Central Excise Act’s definition, the Court rejected the Committee’s reliance on that definition.

pp. 9–13

It instead construed “manufactured” in Section 5A in the context of the Act. The powerloom and handloom manufacturers had already manufactured the fabrics; respondent No. 1 merely performed bleaching, dyeing and related processing on their behalf and returned the fabrics to them. That work refined or upgraded the fabric but did not produce a new “textile manufactured” by respondent No. 1. The fabrics therefore remained products of the exempt handloom or powerloom industry.

pp. 14–17

05Holding

The Court held that respondent No. 1’s job-work processing did not constitute manufacture attracting cess under Section 5A, and the company was not liable for the demand.

pp. 16–17

The appeal was dismissed, leaving the High Court’s order quashing the cess demand undisturbed.

p. 17

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