Full Judgement
Ujagar Prints Vs. Union of India & Ors [1988] INSC 345 (4 November 1988)
Venkatachalliah, M.N. (J) Venkatachalliah, M.N. (J) Rangnathan, S. Pathak, R.S. (Cj) Mukharji, Sabyasachi (J) Natrajan, S. (J)
CITATION: 1989 AIR 516 1988 SCR Supl. (3) 770 1989 SCC (3) 488 JT 1988 (4) 330 1988 SCALE (2)1115
CITATOR INFO : RF 1991 SC 999 (8) F 1991 SC1784 (7,9)
ACT:
Central Excises and Salt Act, 1944-Sections 2(f), 4 and Schedule Items 19 and 22--`Manufacture' meaning of-- Processors carry out operations on `grey fabrics' on job work basis--Whether `manufacture'--Central Excise and Salt Additional Duties Excise (Amendment) Act, 1980-Effect of.
% Taxation--Under the Act is the rule--Benefit and exemption--The exception--Excise duty of goods--Levied upon manufacturer--lmposed on production/manufacture/producer in accordance with the relevant rules.
Constitution of India, 1950, Article 245, 246 and Schedule VII Lists I Entries 84, 97, Lists 11 and 111--"With respect to"--Inter-pretation of--`ManuJacture'--Concept of Entries in legislative lists--Not sources of legislative power--Merely topics or fields of legislation--Legislation could be `composite legislation'--`Rag-bag' legislation-- Familiar in taxation--Competent legislature can always validate law---Retroactivity of legislation---Test of validity how applied.
Statutory Interpretation--Referential legislation--- Types of--Effect of--Legislation could be composite legislation--`Rag-hag' legislation--What is--Competent legislature can always validate a law.
Words and phrases---`Manufacture'--'In respect of-- Meaning of.
HEAD NOTE:
Section 2(f) of the Central Excise Act defines `manufacture', to include any process incidental or ancillary to the completion of a manufactured product.
The President of India promulgated an Ordinance called the Central Excises and Salt and Additional Duties of Excise (Amendment) Ordinance 1979, which was later replaced by Central Act VI of 1980, called the Central Excises and Salt and Additional Duties of Excise (Amendment) Act, 1980. The PG NO 770 PG NO 771 Amending Act became effective from 24th February, 1979. By section 2 of the Amending Act, Section 2 (f) of the Excise Act was amended by adding three sub-items in the definition of `manufacture' so as to include activities like bleaching, dyeing, printing etc. which were held not covered by two decisions of the Gujarat High Court. Similar amendments were made in items 19 and 22 of the First Schedule with retrospective effect. Section 5(2)(b) of the Amending Act provided that no suit or other proceedings shall be maintained or continued in any other Court for the refund of the duty collected and no enforcement shall be made by any Court of any decree or order directing the refund of such duties of excise which have been collected and which may have been collected, as if the provisions of Section 5 of the Act had been in force on and from the appointed day as defined in the Act.
Prior to the Amending Act, 1980, the levy an the processors, was challenged before the Gujarat High Court in the case of vijay Textiles Mills v. Union of India nd Real Honest Textile v. Union of India, [1979] 4 E.L.E.J. 181. The Gujarat High Court held that cotton fabric subjected to bleaching, dyeing and printing could not be subjected to excise duty under items 19 and 22 of the First Schedule to the Central Excises and Salt Act, 1944, and that processors were liable to pay duties under tariff-entry 68 only on the value added by that processor. Following this judgment a large number of similar claims of ,processing-houses were allowed by the High Court by its judgment dated 13.3 1979.
However, the Bombay High Court, took a different view and held that even under the concept of manufacture' envisaged in section 2(f) even prior to its amendment, the operations carried on by the professors amounted to `manufacture' and that, at all events, the matter was placed beyond any controversy by the Amendment Act of 1980.
The judgment of the Gujarat High Court in the case of Vijay Textiles and Real Honest Textiles was considered by a Bench consisting of three judges of this Court in Empire Industries v. Union of India [1985] Supp. 1 SCR 292 and it was held not to have been decided correctly. The view taken by the Bombay High Court in New Shakti Dye Works Pvt. Ltd. v. Union of India & Anr. [1983] ELT 1736. was approved.
The present appeals, by special leave, preferred against the judgments of the High Court of Gujarat and the High Court of Bombay, and the batch of writ petitions under Article 32 of the Constitution of India, involve common PG NO 772 questions of law concerning the validity of the levy of duties of excise under tariff-items 19 and 22 of the Schedule to the Central Excises and Salt Act 1944 ("Central Excise-Act") as amended by the Central Excises and Salt Additional Duties Excise (Amendment) 1980 Act ("Amending Act") treating as `manufacture' the process of bleaching, dyeing, printing, sizing, mercerising, water-proofing, rubberising, shrink-proofing, organdie processing etc. done by the processors who carry out these operations in their factories on job-work basis in respect of `cotton-fabric' and `Man-made fabric' belonging to their customers. The facts in all the cases are indenticl.
The petitioners/appellants carry out the operations of bleaching dyeing, printing sizing, finishing etc. of grey fabric on job-work against payment of processing charges to it by the customers who are the owners of the grey-fabric.
The machinery and equipment installed in the petitioners' factories are suited for and appropriate to the processing of grey-fabric and are not capable to manufacturing grey- fabric. The man-made grey-fabric, such as, Art Silk Grey- fabric is manufactured in mills and on power looms and that latter is exempt from excise duty on its manufacture. The Art Silk Grey-fabrics which are processed in the petitioners/appellants factories are those manufactured on power looms and not by the mills and that the Art Silk Grey- fabric received do not come from the manufacturers of the grey-fabric through the manufacturing-stream but from the various trader through the sales-stream.
The present writ petitions/appeals also include cases where the grey-fabric is also purchased by some of the processing houses and are sold by them, after processing. In some cases, the manufacturers of the grey-fabric subject it to captive consumption and process them in their own composite establishments.
At the time of hearing, the correctness of the view taken in the Empire Industries case on certain aspects having been doubted by another Bench of this Court, these appeals/writ petitions were referred to a Bench of five judges on two questions namely (1) whether the processing of grey-fabric amounted to `manufacture' within the meaning of Section 2(f) as it stood prior to its amendment, and (2) whether, even if such processing did amount to `manufacture' what should be the proper basis for determining the assessable value of the processed fabrics.
In the petitions and appeals, the following points arise for determination.
PG NO 773 A(i) Whether the process of bleaching, dyeing, printing, sizing, shrink-proofing etc. carried on in respect of cotton or man-made `grey-fabric' amount to `manufacture' for purposes, and within the meaning of Sect;on 2(f) of the Central Excises and Salt Act 1944 prior to the amendment of the said Section 2(f) by section 2 of the Amending Act VI of 1980.
A(ii) Whether the decision in Empire Industries Limited
that these operations amount to `manufacture' is wrongly decided and requires reconsideration.
(B) Whether the amendment brought about by the Act of 1980 of Section 2(f) and to tariff-items 19 and 22 of the Central Excise Act is ultra-vires Entry 84 List 1 and, therefore, beyond the competence of the Union Parliament.
Whether, at all events, even if the expended concept of manufacture introduced by the Amendment is beyond the scope of Entry 84 List 1, whether the impost is, at all events, referable to and supportable by the residual Entry 97 of List 1.
(C) Whether, at all events even if the amendments to Central Excise Act are valid, the levy under the Additional Duties Act is unsupportable and without the authority of law as there is no corresponding enlargement of the definition of `manufacture' under the Additional Duties Act.
(D) Whether the retrospective operation of the Amending Act is an unreasonable restriction on the fundamental right of the `processors' under Article 19(1)(g) of the Constitution.
(E) Whether, even if the levy is justified, at all events, the computation of the assessable-value of the processed grey-fabric on the basis of the whole-sale cash selling-price declared under classification list under Rule 173(b) is unjustified and illegal in respect of the assessable value of the processed grey-fabric done on job- work-basis.
Allowing the appeals preferred by the Union of India,
HELD: (Per Majority) The appeals preferred by the Union of India are allowed and the Judgment of the Gujarat High Court under appeal is PG NO 774 set-aside. The appeals preferred by the processors against the judgment of the Bombay High Court and the Writ Petition filed by the processors directly in this Court are dismissed. The Union of India and its authorities shall be entitled to take necessary steps to seek the enforcement of the bank guarantees, if any for the recovery of the arrears.
[810C-D] Per Sabyasachi Mukharji, J. (Concurring with Venkatachaliah. J.)
(1) A statutory charge should be measured by the method of its computation as laid down in the statute and not by any other method of computation. The circumstances that thereby the benefit of any computation granted by the legislation may be lost and that in some cases hardship might result are not matters which would influence courts on the Instruction of the statute. A tax payer is entitled only to such benefit as is granted by the legislature [811C-D]
(2) (i) Where a manufacturer sells the goods manufactured by him in wholesale to a wholesale dealer at the arms length and in the usual course of business, the wholesale cash price charged by him to the wholesale dealer less trade discount would represent the value of the goods for the purpose of assessment of excise. But the price received by he wholesale dealer who purchases the goods from the manufacturer and in his turn sells the same in wholesale to other dealers would be irrelevant for determination of the value of the goods and the goods would be charged on that basis. [812E-F]
(2) (ii) The valuation must be on the basis of wholesale cash price at the time when the manufactured goods enter into the open market. The value of the trade-marks is not to be taken into account in computing the assessable value as the affixation of the trade-marks of a particular brand was extraneous to manufacture. The values of such extraneous on additional factors do not enter into the computation of assessable value and as such the wholesale cash price at which the goods enter into the wholesale market would be independent of the value of the trade-marks. [812G-H:8134A- B]
(2)(iii) The assessable value would, therefore, include the value of the grey cloth in the hands of the processors plus the value of the job-work done plus manufacturing profits and manufacturing expenses whatever would be included in the price at the factory gate. The correct assessable value must be the value of the fabric at the factory gate, that is to say, the value at which the manufactured goods leave the factory and enter the main stream. [813E] PG NO 775
3. Computation of the assessable-value is one question and as to who should be liable for the same is another.
Duties of excise are imposed on production or on manufacture of goods and are levied upon the manufacturer or the producer in accordance with the relevant rules. This is quite independent of the ownership of goods. It is, there- fore, necessary to reiterate that the value for, the assessment under Section 4 of the Act will not be the processing charge along but the intrinsic value of the processed fabric which is the price at which the fabrics are sold for the first time in the wholesale market. The rules are clear on the computation of that value.[813F-H] Atic Industries Ltd. v. H.H. Dave, Asstt. Collector of Central Excise and Ors., [1975] 3 S.C.R. 563; Union of India & Ors. etc. etc. v. Bombay Tyre International Ltd. etc. etc., [1984] 1 S.C.R. 347 at 375; Union of India & Ors. v. Cibatul Ltd., [1985] Suppl. 3 S.C.R. 95 and Joint Secy. to the Govt. of India & Ors. v. Food Specialities Ltd., 11985] Suppl. 3 S.C.R. 165, followed.
Per Venkatachaliah, J. (for himself and on behalf of R. S. Pathak, and S. Natarajan, J.) 1(i) The prevalent and generally accepted test to ascertain that there is `manufacture' is whether the change or the series of changes brought about by the application of processes take the commodity to the point where, commercially, it can no longer be regarded as the original commodity but is, instead, recognised as a distinct and new article that has emerged as a result of the processes.
[797E-F] 1(ii) The view taken in the Empire Industries case that `grey-fabrics' after they undergo the various processes of bleaching, dyeing sizing, printing, finishing etc. emerges as a commercially different commodity with its own price- structure, custom and other commercial incidents and that there was in that sense a `manufacture' within the meaning of Section 2(f), even as unamended, is an eminently plausible view and is not shown to suffer from any fallacy.
[798A-B] Union of India v. Delhi Cloth & General Mills, [1963] Supp. 1 S.C.R. 536 at 597; Tungabhadra Industries Ltd. v. Commercial Officer Kurnool, [1961] 2 S.C.R. 14; Deputy Commissioner of Sales Tax v. Pio Food Packers, [1980] 3 S.C.R. 1271 at 1275; Sterling Foods v. State of Karnataka, PG NO 776 [1986] 3 S.C.C 469 at 475 & 476; Kailash Nath v. State of U.P., 8 S.T.C. 358; Deputy Commissioner sales Tax v. Sadasivan, 42 S.T.C. 2 (Kerala); Swastic Products Baroda v. Superintendent of Central Excise, [1980] E.L.T. 164 (Gujarat); Swan Bangle Stores v. Assistant Sales Tax Officer, 25 S.T.C. 122 (Allahabad); State of Andhra Pradesh v. Sri Durga Hardware Stores, 32 S.T.C. 322 (Andhra Pradesh); Extrusion Process Pvt. Ltd. v. N.R. Jadnav, Superintendent of Central Excise, [1979] E.L.T. 380 (Gujarat); In Health & Milligan Manufacturing Company, The Sherwin-Williams Company, etc. v. J.H. Worst Director of the North Dakota Government Agricultural Experiment Station;
Kailash Nath v. State of U.P., 8 S.T.C. 358; Commissioner of Sales Tax, U.P. (Lucknow) v. Harbilas Rai, 21 S.T.C. 17; Hiralal Jitmal v. Commissioner of Income-Tax, 8 S.T.C. 325 at 326 and Kores (India) Ltd. v. Union of India and Ors., [1982] 10 E.L.T. 253, referred to.
2(i) Entries in the legislative lists. are not sources of the legislative power but are merely topics or fields of legislation and must receive a liberal construction inspired by a broad and generous spirit and not in a narrow pedantic sense. The expression "with respect to" in Article 246 brings in the doctrine of "Pith and Substance" in the understanding of the exertion of the legislative power and wherever the question of legislative-competence is raised, the test is whether the legislation, looked at as a whole, is substantially `with respect to' the particular topic of legislation. If the legislation has a substantial and not merely a remote connection with the entry, the matter may well be taken to be legislation on the topic.
[799B-D] 2(ii) Competence to legislate flows from Articles 245.
246 and the other Articles following in Part XI of the Constitution. In defending the validity of a law questioned on ground of legislative-incompetence, the State can always show that the law was supportable under any other entry within the competence of the legislature. Indeed in supporting a legislation sustenance could be drawn and had from a number of entries. The legislation could be a composite legislation drawing upon several entries. Such a "rag-bag" legislation is particularly familiar in taxation.
[800F-G] Diamond Sugar Mills v. State of IJ.P., [1961] 3 S.C.R. 242 at 248; Statutory Interpretation, at page 644 and Hari Krishna Bhargav v. Union of India & Anr., [1966] 2 S.C.R. 22, referred to.
PG NO 777 2(iii) So far as, the exclusive competence of the Union Parliament to legislate is concerned, all that is necessary is to find out whether the particular topic of legislation is in List 11 or List 111. If it is not, it is not necessary to go any further or search for the field in List 1. Union Parliament has exclusive power to legislate upon that topic or field. Of course, it has concurrent power also in respect of the subjects in List 111. [801E-F] 2(iv) Even if the impost on process is not one under Entry 84, List 1, but Is an impost of `processing' distinct from `manufacture' the levy could yet be supported by Entry 97, List 1, even without the aid of the wider principle recognised and adopted in Dhillon's case AIR 1972 SC 1061. [799F]
3. Section 4 of the Amending Act VI of 1980 has amended the relevant items in the schedule to the Additional Duties Act, the expressions' `produce' or `manufacture' in Section 3(1) of the Additional Duties Act must be read along with the entries in the Schedules. What appears, therefore, clear is that what applies to the main levy, applies to the additional duties as well. [803F] Pandit Ram Narain v. The State of Uttar Pradesh and Ors.,[1956] S.C.R. 664 at 673; Macbath & Com. v. Chisletr, [1910] AC 220 at 224; Commissioner of Sales Tax, Madhya Pradesh v. Jaswant Singh Charan Singh, [19671 2 S.C.R. 720 at 725-26; Assistant Collector of Central Excise, Calcutta Division v. National Tobacco Co. of India Ltd., [1973] 1 S.C.R. 822 at 835; Att.-Gen. v. Lamplough [1878] 3 Ex. D. 214, 299; Interpretation of States, 11th ed. p. 156 and Bennion's Statutory Interpreation, p. 568-569, referred to.
4(i) A Competent legislature can always validate a law which has been declared by court to be invalid provided the infirmities and vitiating factors noticed in the declaratory-judgment are removed for cured. Such a validating law can also be made retrospective. If in the light of such validating and curative exercise made by the legislature---granting legislative--competence--the earlier judgment becomes irrelevant and unenforceable, that cannot be called an impermissible legislative overruling of the judicial decision. All that the legislature does is to usher in a valid law with retrospective effect in the light of which earlier judgment becomes irrelevant. Such legislative expedience of validation of laws is of particular significance and utility and is quit often applied, in taxing statutes. It is necessary that the legislature should be able to cure defects in statutes. No individual can PG NO 778 acquire a vested right from a defect in a statute and seek a wind-fall from the legislature's mistakes. [804G-H; 805A-C] Sri Prithvi Cotton Mills Ltd. & Anr. v. Broach Borough Municipality & Ors., [1970] 1 S.C.R. 388, referred to.
4(ii) Validity of legislations retroactively curing defects in taxing statutes is well recognised and courts, except under extraordinary circumstances, would be reluctant to override the legislative judgment as to the need for and wisdom of the retrospective legislation. [805C] 4(iii) In testing whether a retrospective imposition of a tax operates so harshly as to violate fundamental rights under article 19(1)(g), the factors considered relevant include the context in which retroactivity was contemplated such as whether the law is one of validation of taxing statute struck-down by courts for certain defects; the period of such retroactivity, and the decree and extent of any unforeseen or unforeseenable financial burden imposed for the past period etc. Having regard to all the circumstances of the present case, this court in Empire Industries' case rightly held that the retroactivity of the Amending provisions was not such as to incure any infirmity under Article 9(1)(g). [805E-G] 5(i) Section 4 of the `Central Excise Act' envisages that the value of an article for the purposes of duty shall be deemed to be; (a) the wholesale cash price for which an article of the like kind and quality was sold or was capable of being sold at the time of removal of the article from the factory or premises of manufacture for delivery at the place of manufactures or (b) where such price was not ,ascertainable the price at which an article of the like kind and quality as sold or capable of being sold al the time of removal of the article chargeable with duty [808F-G] 5(ii) Consistent with the provisions of Section 4 and the Central Excise (Valuation) Rules, 1975, framed under sec. 37 of the Act, it cannot be said that the assessable- value of the processed fabric should comprise only of the processing-charges. this extreme contention, if accepted, would lead to and create more problems than it is supposed to solve, and produce situations which could only be characterised as anomalous. The incidence of the levy should be uniform, uninfluenced by fortuitous considerations. The view taken in the matter in Empire Industries case does not call for reconsideration. [809C-D] PG NO 779 5(iii) The question whether the producer or the manufacturer is or is not the owner of the goods is not determinative of the liability. The essential and conceptional nature of the tax is to be kept clearly distinguished from both the extent of the power to impose and the stage at which the tax is imposed. Though the levy is on the production or manufacture of the goods, the imposition of the duty could be at the stage which the law considers most convenient to impose as long as a rational relationship with the nature of the tax is maintained.
[806B-D] 5(iv) The nature of the excise duty is not to be confused with, or tested with reference to, the measure by which the tax is assessed. The standard adopted as the measure of assessment may throw light on the nature of the levy but is not determinative of it. When a statutory measure for assessment of the tax is contemplated, it "need not contour along the lines which spell out the levy itself', and "a broader based standard of reference may be adopted for the purposes of determining the measure of the levy". Any statutory standard which maintains a nexus with the essential character of the levy can be regarded as a valid basis for assessing the measure of the tax. [808G-H; 809A-B] Atic Industries Ltd. v. H.H. Dave, Assn. Collector of Central Excise and Ors., [1975] 3 S.C.R. p. 563 and Union of India Ors. etc. etc. v. Bombay Tyre International Ltd. etc..
[1984] 1 S.C.R. p. 347 at 375, referred to.
Per Ranganathan, J. (Concurring with Venkatatchlliah, J.
1(i) Hindustan Milkfood Manufacturers Ltd. v. Union, The HMM case) [1980] ELT 480, was based not on the scope of legislative entry 97 in List I but on the language and scope ot the amendment actually effected. It was considered not necessary or possible to stretch the language of the definition in S. 4 beyond the ambit of the provision as delineated in the earlier decisions. The question decided was not that the legislature could not, but that it did not make any redical change in the nature of the levy. [815F-G] 1(ii) There is nothing in the decision HMM case that supports the contention of the petitioners here that the amendment of the definition of `manufacture' cannot be sustained by reference to entry 97 of List 1 in the Seventh Schedule to the Constitution of India, if it cannot be upheld as falling under the purview of Entry 84. [816H; 817A] PG NO 780 2(i) The words `levied' is a wide and generic expression. One can say with as much appropriateness that the Income Tax Act levies a tax on income as that the Income Tax Officer levies the tax in accordance with the provisions of the Act. It is an expression of wide import and takes in all the stages of charge, quantification and recovery of duty, though in certain contexts it may have a restricted meaning. In the context of sub-section (I) the word 'levied' admittedly means `charged as well as assessed'. The words `levy and collection' in sub-section (3) cannot be construed differently from the words `levied and collected' used in sub-section (1). Section 3(3), therefore. also covers the entire gomut of s. 3(1) and cannot be construed as becoming operative at some what later stage. Its operation cannot be excluded in determining the scope of the charge. [818F-H] 2 (ii) Having regard to the nature and content of the levy indicated in s. 3(1), it is obvious that s. 3(3) has to have the effect of attracting not only the purely procedural and machinery provisions of the 1944 Act but also some of its charging provisions. It is, therefore, difficult to consider section 3(1) of the 1957 Act--in contrast to the Finance Act of 1965--as covering the entire ambit of the charge imposed. In short, the language of s. 3(3) has to be given a wider meaning than under the Finance Act, 1965. A provision similar to that in s. 80 of the Finance Act, 1965 is also found in other Finance Acts. On perusal of these provisions, it will be found that a like position exists there also. These provisions are all self-contained and completely specify the scope of the charge either as a percentage of the excise duty normally chargeable under the Central Excises & Salt Act, 1944 or as a percentage of the `assessable value determined under s. 4 of the 1944 Act.
This is very important reason why the observations in the Associated Cement Co. s, case [1985]2 S.C.C. 719 cannot be of application in the context of the 1957 Act. [821E-H] M/s Mahendra Pratap Rama Chandra v. Commercial Tax officer & Others. A.I.R. 1965 Cal. 203, referred to.
3(i) Legislatures sometimes take a short cut and try to reduce the length of statutes by omitting elaborate provisions where such provisions have already been enacted earlier and can be adopted for the purpose on hand. While, on the one hand, the prolixity of modern statutes and the necessity to have more legislations than one on the same or allied topics render such a course useful and desirable, the attempt to legislate by reference is sometimes overdone and brevity is achieved at the expense of lucidity. However this legislative device is quite well known and the principles applicable to it fairly well settled. [823C-D] PG NO 781 3(ii) Referential legislation is of two types. One is where an earlier Act or some of its provisions are incorporated by reference into a later Act. In this event, the provisions of the earlier Act or those so incorporated, as they stand in the earlier Act at the time of incorporation, will be read into the later Act. Subsequent changes in the earlier Act or the incorporated provisions will have to be ignored because, for all practical purposes the existing provisions of the earlier Act have been re- enacted by such reference into the later one, rendering irrelevant what happens to the earlier statute thereafter.
On the other hand, the later statute may not incorporate the earlier provisions. It may only make a reference of a broad nature as to the law on the subject generally or contain a general reference to the terms of an earlier statute which are to be made applicable. In this case any modification, repeal or re-enactment of the earlier statute will also be carried into in the later, for here, the idea is that certain provisions of an earlier statute which become applicable in certain circumstances are to be made use of for the purpose of the later Act also. [823E-H] 3(iii) Whether a particular statute falls into the first or second category is always a question of construction.
[824B] In the present case, the legislation falls into the second category. S. 3(3) of the 1957 Act does not incorporate into the 1957 Act any specific provisions of the 1944 Act. It only declares generally that the provisions of the 1944 Act shall apply 'so far as may be"'. that is, to the extent necessary and practical, for the purposes of the 1957 Act as well. [824B-C] Secretary of State v. Hindustan Cooperative Insurance Society A.I.R. 1941 P.C. 149; Solani Ores Ltd. v. State, A.I.R. 1975 S.C. 17; Mahindra and Mahindra Ltd. v. Union, A.I.R. 1979 S.C. 798; Bhajiva v. Gopikabai, [1978] 3 S.C.R. 561; Collector of Customs v. Nathella Sampathu Chetty, [1962] 3 S.C.R. 786; New Central Jute Mills Ltd. v. Assistant Collector, [1971] 2 S.C.R. 92; Special Land Acquisition Officer v. City Improvement Trust, [1977] 1 S.( referred to.
3(iv) The legislation presently in question is clearly in pari materia with the 1944 Act. It is also merely supplemental. While the 1944 Act imposes a general levy of excise duty on all goods manufactured and produced, and aim of the present Act is to supplement the levy by an additional duty of the same nature on certain goods.
PG NO 782 The duration of the applicability is underfined but the statute is clearly enforceable as long as it is in the statute book side by side with the normal excise duties. The clear intention is that the same provisions shall govern both the levies except that the duty under the later Act is confined to certain goods only und its distributability among the States may perhaps follow a different pattern from the principal duty. [825B-C] 3(v) The Finance Acts which levied special or regular or additional excise duties contained in themselves all the elements of charge or duty. T he goods were mentioned and the duty has to be levied either at a percentage of the normal excise duty payable under the 1944 Act or at a percentage of the value of the assessable goods as determined under the 1944 Act. All that was further needed was the applicability of the procedural provisions of the 1944 Act. However, the 1957 Act is incomplete as to the basis of the charge and its provisions would become totally unworkable unless the concepts of 'manufacture' and 'assessable value' as determined under the 1944 Act are carried into it. [825D-F] & ORIGINAL JURISDICTION: Writ Petition No. 12183 of 1985 etc. etc (Under Article 32 of the Constitution of India) K. Parasaran. Attorney General, Soli i Sorabjee A.J. Rana A.K Sen, S.K. Dholakia, Hari Swarup V.C.Mahajan, A. K. Ganguli, Mrs. Shashi Rana, Mrs. J Wad, Ms. Aruna Mathur, Subhash Parekh, Dushyant Dave, P.H Parekh E. K. Jose Ms. Rashmi Chandrachud, Sanjay Bharthri, Sarve Mitter, C.L. Beri, S.K. Beri R.C. Bhatia. Ravi P. Wadhwani. P C Kapur Sukumaran, D.N. Mishra, B.V. Desai, M.B Lal. Mukul Mudgal, B Kanta Rao, Mrs. H Wahi, Mrs. V D Khanna, Aruneshwar Gupta, Mrs. Anil Katiyar R.K.Kapur, B.R. Kapur. Anis Ahmed Khan.
Ms. Abha Jain, R. Karanjawala, Mrs. Karanjawala, Ms. Meenakshi. Vishnu Mathur, Kailash Vasudev P.D.Shah, Shri Narain, Sandeep Narain, M.N. Shroff. Mrs P S. Shroff, R. Sasprahbu, S.A.Shroff, S.S Shroff, Praveen Kumar, M.N Chowdhary M.D. Chowdhary, N. Das Gupta, Rajesh Chibber, K.K Bhaduri, Rajiv Dutta. E.C. Agarwala, Harjinder Singh, R.K. Nambiar P Paremeswaran, Ms. Bina Gupta, K.Swami and V.N. Ganpule for the appearing parties.
The following Judgments of the Court were delivered PG NO. 783 VENKATACHALIAH J. These appeals, by Special Leave, preferred against the Judgments of the High Court of Gujarat and the High Court of Bombay and the batch of writ-petitions under Article 32 of the Constitution of India are heard together and disposed of by this common judgment as they all involve questions--common to them--concerning the validity of the levy of duties of excise under tariff-items 19 and 22 of the Schedule to the Central Excises and Salt Act 1944 ("Central-Excise-Act") as amended by the Central Excise and Salt Additional Duties Excise (Amendment) 1980 Act ( '"Amending Act") treating as "Manufacture" the process of Bleaching. Dyeing, Printing, Sizing, Mercerising, water- proofing, rubberising, Shrink-Proofing Organdie, Processing, etc done by the processor who carry out these operations in their factories on Job-work basis in respect of Cotton- fabric' and 'Man-made fabric belonging to their customers The Amending Act which became effective from 24.12.1979 sought to render the processes of Bleaching, Dyeing, Printing Sizing, Mercerising etc "Manufacture within the meaning of the Section 2(f) of the Central Excise Act The amendment was necessitated by the Judgment of the High Court of Gujarat which has declared the levy on such 'processing as illegal as, according to the High Court the processing did not bring into being a new and commercially different article with a distinctive character and use and did not therefore constitute 'manufacture' for purposes, and within the meaning, of the charging section.
The processors who carry-out these operations on cotton fabrics or "man-made fabrics which are popularly go by the name 'Grey-fabric in the particular trade also challenged the levy of the additional duties of excise under the provisions of the additional Duties of Excise goods (of special importance) Act 1957 (Additional Duties Act) on the ground, first. that if the processes carried on by them do not amount to "manufacture" under Section 2(f) as it originally stood, then, consistent with the impermissibility of main impost. the levy of additional duties also fails and, that at all cvents, even after the amendment the concept of manufacture under the said Additionl Duties Act had not been correspondingly widened by an appropriate amendment.
2. The present hatch of appeals and writ-petitions comprise of a large number of cases It is not, having regard to the questions requiring to be decided in these matters, necessary to go into, in any particular detail, the fact- situation of each individual case. The processors in these PG NO 784 cases, who may conveniently be referred to as the processors" or "jobbers ', mainly carry out these operations of Bleaching, Dyeing, Printing, Sizing, Finishing etc. of 'Grey-fabric' on 'job-work' against payment of processing charges to them by the customers who are the owners of the Grey-fabric. The ownership of the cloth rests with the customers who get these processes done to their specifications from these processing-houses on payment of processing charges. The Grey-fabric, after processing, is returned by the processing-house to the customers.
The facts of W P. No. 12 183 of 1985 'M/s. Ujagar Prints v. Union of India and Ors.), in which the petitioner has challenged the levy by a petition under Article 32 of the Constitution are typical and representative of all other similar cases The petitioner is a firm of partners with its Head Office at 51, Sheikh Memon Street, Bombay. It has a factory at Sunder Baug, Deonar, Bombay, which is equipped with machinery and plants for processing of man-made grey- fabric The machinery and equipment installed in the petitioners factory? it is averred---and that is not disputed either--are suited for and appropriate to the processing of Grey-fabric and are not capable of manufacturing Grey-fabric The man-made grey-fabric such as Art Silk Grey--fabric, it is stated, is manufactured in mills and on power looms and that letter- is exempt from excise duty on its manufacture Petitioners further over that the Art Silk (Grey-fabrics which are processed in the petitioner' factory are those manufactured on power looms and not by the mills and that the Art Silk (Grey-fabric received do not come from the manufacturers of the grey- fabric through the manufacturing-stream but from the various traders through the sales stream. The point that the petitioners seek to made is that the processing of the grey-fabric is not a part, a continuation, of the process of manufacture in the manufacturing-stream, but is an independent and distinct operation carried out in respect of the Grey-fabric, after it has left manufacturing-stage and has become part of the common-stock of goods in the market.
It is also averred that the firm M/s. Ujagar Prints does not purchase the Grey-fabric but is only engaged in processing it for charges and that in many cases the Grey-fabric would have passed on from trader to trader with the attendant increase in the prices with each successive change of hands and is entrusted to the petitioner by the last purchaser for processing against stipulated processing-charges on job work basis.
It is contended that these job work processing operations do not amount to "manufacture" as the petitioners do not carry out any spinning or weaving operations; that what they receive from their customers for processing is PG NO 785 therwise fully manufactured man-made fabric and that what is returned to the customers after processing continues to remain man-made fabric. The imposition of excise duty on the processor on the basis of the full-value of the processed material, which reflects the value of grey-fabrics, the processing-charges, as well as the selling profits of the customers is, at once unfair and anamolous, for, in conceivable cases the duty itself might far exceed the processing-charges that the processors stipulate and get.
3. The batch of cases also includes cases where the grey-fabric is also purchased by these processing-houses and are sold by them, after processing In some cases the manufacturers of the grey-fabric subject it to captive consumption and process them in their own composite establishments .
The essential question is whether these situational- differences have a bearing on the principles of determination of the assessable-value of processed grey- fabric and whether the assessable value could be different in the different fact-situations which would be the logical corollary if the contention of the processing-houses which do not processing work for charges on the goods not their own, is accepted and the assessable value determined on the basis of mere processing-charges.
But the main questions that arise are whether "processing" of the kind concerned in these cases amounts to manufacture", whether the provisions of section 2 of the Amending Act which impart an artificial-dimension to the concept of "manufacture" is ultra-vires Entry 84 List l;
whether at all events, the imposition of a tax on such 1processing is referable to Entry 97 List l; and if the import on the processors is justified under tariff-items 19 and 22, according as whether the Grey-fabric is cotton or 'man-made, what should be the assessable-value for purposes of levy of duty so far as processors are concerned.
4. Prior to the Amending Act of 1980, the levy on the processors was challenged before the Gujarat High Court The Gujarat High Court by its judgment dated 24.1.1979 in the cases of Vijaya Textiles Mills v. Union of India and Real Honest Textiles v. Union of India held that the processes that the processing-houses imparted to the Grey-fabric did not amount to 'manufacture' and did not attract ad-valorem duty under tariff-items 19 and 22, and that processors were liable to pay duty under tariff-entry 68 only on the value added by the processing.
PG NO. 786 Following this judgment a large number of similar claims of processing-houses were allowed by the High Court by its judgment dated 13.3.1979. Civil Appeals 1685 to 1766 of 1979 are preferred by the Union of India challenging this view of the High Court.
5. The Bombay High Court on the contrary by its judgment,dated 16th June, 1983 in writ petition 1623 of 1979 New Shakti Dye Works Pvt. Ltd. v. Union of India and Anr.
took a view different from the one that commended itself to the Gujarat High Court. Bombay High Court held that even under the concept of "manufacture' envisaged in Section 2(f) even prior to its amendment, the operations carried on by the processors amounted to "manufacture" and that, at all events, the matter was placed beyond any controversy by the mending Act i.e. Act of 1980. The aggrieved processors have come up in appeal by Special Leave in Civil Appeal No 6396 of 1983.
6. Some of the processors have, as stated earlier, filed writ-petitions under Article 32 directly in this court challenging the impost on grounds that commended themselves for acceptance to the Gujarat High Court.
7. Before its amendment by the Amending Act Central Act VI of 1980) Section 2(f) of the Central Excise ACt, defined 'manufacture' in its well accepted legal-sense--nomen-- juris--and not with reference to an artificial and statutorily expanded import "2(f) 'manufacture ' includes any process, incidental or ancillary to the completion of a manufactured product; and (i) ] (ii) ] Omitted as unnecessary" The reasoning of the Gujarat High Court was on these lines "In the instant case, the excise duty claimed on the basis of the market value of the processed cotton fabrics or manmade fabrics cannot be levied because, assuming that process amounts to manufacture, all that they have done is to manufacture processed cloth, processed fabric, either cotton or man-made and that not being a taxable event in the light of Section 3 read with section 2(d) of the Act and PG NO 787 Items 19 and 22 levy of excise duty on this basis was ultra vires and contrary to law .. " This view, according to the Revenue, was incorrect and caused serious prejudice to the legitimate financial interests of the State. Accordingly the President of India promulgated an Ordinance called the 'Central Excise and Salt and Additional Duties of Excise (Amendment) Ordinance', 1979 (Central Ordinance No. 12 of 1979)--sub-sequently replaced by Central Act VI of 1980 of the same name with retrospective effect from 24.2.1979--amending Section 2(f) of the Central Excise Act and tariff-items 19(1) and 22(1).
The relevant entries in the Schedule to the 'Additional Duties Act' were also amended. So far as amendment to Section 2(f) was concerned, Section of the Amending Act introduced three sub-items in the definition of 'manufacture'. Two of them are material for the present purpose:
"(v) in relation to goods comprised in Item No. 19(1) of the First schedule, includes bleaching, mercerising, dyeing, printing, water-proofing, rubberising. shrink-prcofing, organdie processing or any other process or any one or more of these processes. ' "(vii) in relation to goods comprised in Item No 22(1) of the First Schedule, includes bleaching. dyeing, printing, shrink-proofing, tentering, heat-setting, crease resistant processing or any other process or any one or more of these processes." Similarly, amendments were affected by Section 3 of the Amendment Act which amended the original tariff-items 19 and 22 by sub-stituting the following provisions in their respective places:
" 1 Cotton fabrics other than (i) embroidery in the piece. strips or in motifs, and (ii) fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials (a) cotton fabrics. not subjected to any process Twenty per cent ad-valorem (b) cotton fabrics, subjected to the process of bleaching, mercerising, dyeing, printing, water-proofing, rubberising, shrink-proofing, organdie processing or any other process or any two or more of these processes. Twenty per cent ad-valorem PG NO 788 XXX XXX XXX" "22(1) Man-made fabrics other than (i) embroidery in the piece, in strips or in motifs, (ii) fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials-- (a) man-made fabrics, not subjected to any process:
Twenty per cent ad-valorem plus rupees five per square metre.
(b) man-made fabrics, subjected to the process of bleaching, dyeing, printing, shrink-proofing, tentering, heat-setting, crease resistant processing or any other process or any two or more of these processes Twenty per cent ad-valorem plus rupees five per square metre." Section 4 of the Amending Act amended the relevant entries in the Schedule to the Additional Duties Act.
Section-5(2) of the Amending Act provided:
"5 Special provisions as to duties of excise on cotton fabrics, woollen fabrics, man-made fabrics, etc during a certain past period and validation:- (1)....................
(2) Any rule or notification or any action or thing made issued, taken or done or purporting to have been made.
issued, taken or done under a Central Act referred to in sub-section (I) before the date of commencement of this Act, with respect to or in relation to the levy of duties of excise on-- (a) 'cloth", "cotton cloth" or, as the case may be.
cotton fabrics," (b) woollen fabrics", (c) "rayon or artificial silk fabrics" or, as the case may be, "man-made fabrics", shall for all purposes be PG NO 789 deemed to be and to have always been, as validly and effectively made, issued taken or done as if the provisions of this section had been in force at all material times and, accordingly, notwithstanding any judgment, decree or order of any court, tribunal or other authority-- (a) all duties of excise levied, assessed or collected or purported to have been levied assessed or collected before the date of commencement of this Act, on-- (i) "cloth", "cotton cloth" and "cotton fabrics" subjected to any process, (ii) "woollen fabrics" subjected to any process, (iii) "rayon or artificial silk fabrics" and "man-made fabrics" subjected to any process, under any such Central Act shall be deemed to be, and shall be deemed always to have been, as validly levied, assessed or collected as if the provisions of this section had been in force on and from the appointed day;
(b) no suit or other proceeding shall be maintained or continued in any court for the refund of, and no enforcement shall be made by any court of any decree or order directing the refund of, any such duties of excise which have been collected and which would have been validly collected if the provisions of this section had been in force on and from the appointed day;
(c) ....................
(d) ...................."
8. Indeed, the correctness of the judgment of the Gujarat High Court in the cases of Vijaya Textiles and Real Honest Textiles were considered by a Bench consisting of three judges of this court in Empire Industries v. Union of India, [1985]SUPP. I SCR 292 by the judgment dated 6.5.1985, one of us (Sabyasachi Mukharji J ) speaking for the Court upheld the validity of the impost Vijaya Textiles Mills v. Union of India, (1979] 4 ELTJ 181, was held not to have been PG NO 790 decided correctly. The view taken by the Bombay High Court in New Shakti Dye Works Pvt. v. Union of India & Anr. was approved.
The pronouncement of this court in Empire Industries case otherwise covers, and is a full answer to, the contentions raised in this batch of cases. However, the correctness of the view taken in the Empire Industries' case on certain aspects was doubted by another Bench of this court and the matter was, accordingly, referred to a Bench of five judges.
9. It is, perhaps, necessary to refer to the order dated 9.12.1986 made by the Division Bench referring the cases to a larger bench. What came before the Division Bench were WP 12183/1985 (M/s. Ujagar Prints v. Union of India & Ors.) and CA Nos. 1685-1766/1979 (Union of India & Ors. v. Narendra Processing Industries & Ors.). Two questions arose before and were examined by the Referring Bench. The first was whether the processing of Grey-fabric amounted to 'manufacture' within the meaning of Section 2(f) as it stood prior to its amendment. The second question was whether, even if such processing did amount to 'manufacture' what should he the proper basis for determining the assessable- value of the processed fabrics. Both these questions had earlier been examined and answered in the Empire Industries case. It is necessary to ascertain as to the precise points on which the Empire Industries' decision was required to be reconsidered. The Referring Bench did not disagree with the decision in Empire Industries' case on the question whether processing' did amount to 'manufacture'. Indeed, the Referring Bench appears to have proceeded on the premise that the view taken in Empire Industries case on the point was the correct one. Referring Bench said this on the point:
".... So far as the first question is concerned it was agitated before this Court in Empire Industries Ltd. v Union of India and this Court held that the processes of bleaching, mercerising, dyeing, printing. water-proofing.
etc. carried out by the processors on job-work basis amount to manufacture both under the Act as it stood prior to the amendment as also under the Act subsequent to the amendment and the processed fabrics are liable to be assessed to excise duty in the hands of what may be called jobbers'.
Since this was a decision given by a Bench of three Judges, the petitioners and appellants who are carrying on business of processing on job-work basis could not contend that these PG NO 791 processes do not amount to manufacture and that the processed fabrics are not liable to be assessed to excise duty in the hands of the jobbers. But, it was the second question which provoked serious controversy before us . .
It is only on the second question touching valuation that it expressed some doubts. Nevertheless, in par. 6 of the order, the Referring Bench made a further observation to this effect:
".... Of course, when. ,n se writ petitions and appeals are referred to the larger Bench it will be open to the larger Bench to consider not only the question of determination of the assessable value but also the other question, namely, whether processing of grey fabric by a processor on job work basis constitutes manufacture, because the judgment in Empire Industries case which has decided this question in favor of the revenue and against the processor is a judgment of a Bench of only three Judges and now the present writ petitions and appeals will be heard by a Bench of five Judges ."
10. This is how the first question which is, otherwise concluded by the pronouncement in Empire Industries case is sought to be reagitated before us Out of deference to the learned counsel who vigorously argued this aspect at great length and we though we should examine the submission on this point also, though, the matter could by no means be considered to have been referred to a larger bench.
On the second question also the matter is within a short compass. The Referring Bench clearly excluded any possibility of the assessable-value being limited to the mere processing-charges. It contemplated the alternative possibilities of valuation thus:
"It was common ground between the parties that the procedure followed by the Excise authorities was that the trader, who entrusted cotton or man made fabrics to the processor for processing on job-work basis would give a declaration to the processor as to what would be the price at which he would be selling the processed goods in the market and that would be taken by the Excise authorities as the assessable value of the processed fabrics and excise duty would be charged to the processor on that basis. This may be illustrated by giving the following example:
PG NO 792 (i) Value of grey cloth in the hands of the processor:
Rs. 20.00 (2) Value of job-work done: Rs.5.00 Value of finished cloth returned to the trader ( 1+2): Rs.25.00 (3) Trader's selling price inclusive of his selling profits, etc.: Rs.30.00 The assessable value in the case given in this example would be taken by the Excise authorities at Rs.30 which was the sale price of the trader . . .'' The view of the Referring Bench on the point was this:
"We cannot accept the contention of the learned counsel on behalf of the petitioners and the appellants that the value of the grey cloth which is processed by the processor should not be included in the assessable value of the processed fabric since the grey cloth is one of the raw materials which goes into the manufacture of the processed fabric and the value of the processed fabric cannot be computed without including the value of the raw material That goes into its manufacture. The assessable value of the processes fabric cannot therefore be limited merely to the value of the job-work done but it must be determined by reference to the wholesale cash price of the processed fabric gate of the factory of the processor . . .
The Referring Bench was of the view that the correct assessable-value should be:
"..... Thus in the example given above the assessable value of the processed fabric must be taken to be Rs. 20 + 5 that is Rs. 25 and the profit of Rs.5 which the trader may make by selling the processed fabric cannot be included in the assessable value. The element of selling profit of the trader would be entirely an extraneous element and it cannot be taken into account for the purpose of determining the assessable value of the processee fabric which would comprise the value of the grey cloth and the PG NO 793 job-work charges but exclude the profit at which the trader may sub-sequently sell the processed fabric." 11. We have heard Sri A.K Sen, Sri Soli J. Sorabjee, Dr. Chitale and Sri Dholakia, learned Senior Advocates in the appeals and writ-petitions preferred by the processors; and Sri K. Parasaran, learned Attorney-General and Sri A.K.
Ganguli, learned Senior Advocate for the Union of India and its authorities. On the contentions urged, the points that fall for determination are:
(a) (i) Whether the processes of Bleaching, Dyeing, Printing, Sizing, Shrink-proofing etc. carried on in respect of cotton or man-made 'Grey-fabric' amount to 'manufacture' for purposes, and within the meaning of Section 2(f) of the Central Excises and Salt Act 1944 prior to the amendment of the said Section 2(f) by Section 2 of the Amending Act VI of 1980.
(a) (ii) Whether the decision in Empire Industries Limited & Ors. v. Union of India, [1985] Suppl. 1 SCR 282 holding that these operations amount to a manufacture is wrongly decided and requires reconsideration.
(b) Whether the amendment brought about by the Amending Act of 1980 of Section 2(f) and to tariff-items 19 and 22 of the Central Excise Act is ultra-vires Entry 84 List I and, therefore, beyond the competence of the Union Parliament.
Whether, at all events, even if the expanded concept of manufacture introduced by the Amendment is beyond the scope of Entry 84 List l, whether the impost is, at all events, referable to and supportable by the residual Entry 97 of List I.
(c) Whether, at all events, even if the amendments to Central Excise Act are valid, the levy under the Additional Duties Act is unsupportable and without the authority of law as there is no corresponding enlargement of the definition of 'manufacture' under the Additional Duties Act.
(d) Whether the retrospective operation of the Amending Act is an unreasonable restriction on the fundamental right of the 'processors' under Article 19(1)(g) of the Constitution.
PG NO 794 (e) Whether, even if the levy is justified, at all events, the computation of the assessable-value of the processed Grey-fabric on the basis of the whole-sale cash selling-price declared under classification list under Rule 173(b) is unjustified and illegal in respect of the assessable-value of the processed Grey-fabric done on job- work-basis.
12. Re: Contention (a) The essential condition to be satisfied to justify the levies, contend counsel, is that there should be 'manufacture' of goods and in order that the concept of 'manufacture' in Entry 84 List I is satisfied there should come into existence a new article with a distinctive character and use, as a result of the processing. It is contended that nothing of the kind happens when 'Grey fabric' is processed; it remains 'grey fabric'; no new article with any distinctive character emerges.
A number of authorities of this Court and of the High Courts were cited. Particular reference was made to Union of India v. Delhi Cloth & General Mills, [1963] Supp. ( I) SCR 586 at 597; Tungabhadra Industries Ltd. v. Commercial Officer Kurnool, L 1961] ? SCR 14; Deputy Commissioner of Sales Tax v. Pio Food Packers, [1980] 3 SCR 1271 at 1275; Sterling Foods v. State of Karnataka, [1986] 3 SCC 469 at 475 & 476; Kailash Nath v. State of U.P., 8 STC 358; Deputy Commissioner Sales Tax v. Sadasivan, 42 STC 201 (Kerala); Swastic Products Baroda v. Superintendent of Central Excise, [1986] E.L.T 164 (Gujarat). Swan Bangle Stores v Assistant Sales Tax Officer, 25 STC 122 '(Allahabad); Stale of Andhra Pradesh v. Sri Durga Hardware Stores, 32 STC 322 (Andhra Pradesh) and Extrusion Process Pvt. Ltd. v. N.R. Jadhav, Superintendent of Central Excise, [19791 ELT 380 (Gujarat ).
13. The following observations of this Court in Union of India v. Delhi Cloth and General Mills, AIR 1963 SC p. 791 at 794 were emphasised:
"According to the learned counsel "manufacture is complete as soon as by the application of one or more processes. the raw material undergoes some change. To say this is to equate "processing to manufacture and for this we can find no warrant in law. The word "manufacture" used as a verb is generally understood to mean as "bringing into existence a new substance ' and does not mean merely to produce some change in a substance. however minor in consequence the change may be. ' PG NO 795 These observations in Health & Milligan Manufacturing Company, the Sherwin-Williams Company, etc. v. J.H. Worst, Director of the North Dakofa Government Agricultural Experiment Station which were referred to with approval by this Court in the case of Pio Food Packers' supra, was relied upon:
"At some point processing and manufacturing will merge.
But where the commodity retains a continuing substantial identity through the processing stage we cannot say that it has been "manufactured".
(Emphasis Supplied) The following observations of Bhagwati J. in Pio Food Packers case were cited:
" ..... manufacture is the end result of one or more processes through which the original commodity is made to pass .... Where there is no essential difference in identity between the original commodity and the processed article it is not possible to say that in one commodity has been consumed in the manufacture of another. Although it has undergone a degree of processing, it MUSt be regarded as still retaining its original identity." (Emphasis Supplied) The observations of this ('court in Kailash Nath v. State of U. P., 3 STC 358 made while repelling the contention of the revenue urged in that case that when cloth is printed and coloured it gets transformed to sorne other material and that therefore when such printed and coloured cloth is exported what was exported was not the same cloth and that by such printing and dyeing the original cloth got transformed into different material were relied on:
The cloth exported is the same as the cloth sold with this variation or difference that the colour has change by printing and processing. In view which we take the cloth exported is the same as the cloth sold by the petitioners, there can be no question above the exemption clause not applying to it . .
(Emphasis Supplied) The following passage in the permanent Edition of 'Words and Phrases' referred to with approval in Delhi Cloth and General Mills' AIR 1963 SCp. 791 at 795 case was referred to:
PG NO 796 "Manufacture implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character or use." Further, learned counsel placed reliance upon Tungabhadra Industries' case where it was held that ground- nut oil after the process of hydrogenation which improved its keeping-qualities and shelf life yet remained basically ground-nut oil and that the quality of the oil had been improved by the processes it was subjected to, did not detract from its continuing identity as ground-nut oil. The change brought about in the oil, it was observed by this Court, rendered it more acceptable to the customers by improving its quality, but did not render the oil a commodity other than ground-oil which still continued to be "groundnut oil" notwithstanding the processing which was merely for the purpose of rendering the oil more stable thus improving its keeping qualities for those who desire to consume ground-nut oil. Likewise the processing such as bleaching, dyeing. printing, finishing etc., it was urged, merely improved the quality of Grey-fabric and rendered it more acceptable to the customers while not shedding its basic character as 'cotton fabric' or 'man-made fabric'. It was also urged that the affidavits filed by person engaged in and familiar with the textile-trade indicated that the finished fabric was not a commercially different commodity.
14. We have carefully considered these submissions. In the Empire Industries case, this court considered similar submissions in an almost identical context and situation.
Learned judges referred to the observations of this Court in Commissioner of Sales Tax UP (Lucknow) v. Harbilas Rai, 21 STC 17 in which the view expressed by the Division Bench of the Madhya Pradesh High Court in Hiralal Jitmal v. Commissioner of Income-tax, 8 STC 325 at 326 was held supportable on the reasoning that:
" . . . The decsion of the Madhya Pradesh High Court might perhaps be justified on the ground that a printed or dyed cloth is commercially different article from the cloth which is purchased and printed or dyed." PG NO 797 The Division Bench also referred to, with approval, the decision of the Bombay High Court in Kores (India) Limited v. Union of India and Ors., [1982] 10 ELT 253. The Division Bench noticed the question arising for decision:
"Fabric itself means woven materials. It was contended that processing the manufactured fabric does not bring into existence any new woven material but the question is: does new and different goods emerge having distinctive name, use and character?" Answering, the Bench said:
"It appears in the light of the several decisions and on the construction of the expression that the process of bleaching, dyeing and printing etymologically also me
