Textiles Committee Act, 1963 — Section 5A and proviso; Sections 2(g), 2(da), 2(db) — Central Excise Act, 1944 — Section 2(f) — Interpretation of statutes — Textile cess — Independent processor bleaching and dyeing fabrics received from powerloom and handloom units on job-work basis and returning them — Whether “manufacture” — “Manufacture” not defined in the 1963 Act — Definition in the Central Excise Act, which includes processes incidental or ancillary to completion of a product, cannot be imported — A definition in one statute cannot be borrowed for another unless the statutes are in pari materia or the legislature provides for it by reference or incorporation — Word to be read in its common-parlance sense — Processing only upgrades the textile; there is no “textile manufactured” in the processor’s unit — Processor acts as an extended arm of the exempt powerloom industry — Cess demand of ₹2,68,293 quashed — High Court’s order affirmed.

Question for Consideration

Whether bleaching, dyeing and processing, by an independent job-work processor, of fabrics manufactured by the powerloom and handloom industry amounts to “textiles manufactured” attracting cess under Section 5A of the Textiles Committee Act, 1963. [Paras 5.1, 6.2]

Facts in Brief

Respondent No. 1 bleaches, dyes and processes 100% man-made fabrics supplied by powerloom and handloom units, on job-work basis, and returns them. Following an audit communication (28.06.2001) that 29 of 30 independent textile processors in Uttar Pradesh had not paid cess, a show-cause notice dated 20.08.2001 demanded ₹2,68,293 as textile cess. The respondent claimed exemption, saying the fabrics were woven by small household units with fewer than 50 powerlooms. The assessment order dated 21.11.2001 confirmed the demand, the department’s view being that powerloom/handloom fabrics are exempt only at the loom stage and not when processed further. The Textiles Committee Cess Appellate Tribunal dismissed the appeal (T.C.A. No. 223 of 2002), following its own decision in Chandok Textile Exporters that processing amounted to manufacture. The Allahabad High Court allowed the writ petition and quashed the demand. [Paras 2–3.5.2]

Contentions

Appellant (Textiles Committee): Although “manufacture” is not defined in the 1963 Act, the definition in Section 2(f) of the Central Excise Act, which covers any process incidental or ancillary to the completion of a manufactured product, should be applied; bleaching and dyeing are such processes, so the cess is leviable. [Paras 5.4, 6]

Respondent: It is an independent job-work processor for fabrics made by small powerloom units, which are exempt under the proviso to Section 5A; no cess is payable. [Para 3.2]

Held

1. No borrowing of definitions. Unless a word is made applicable by reference or incorporation from another statute, its definition there cannot be readily applied in a statute where it is undefined. A word must be construed in the context of the scheme, purpose and operational ambit of its own statute and cannot be “bodily lifted” from another. Union of India v. R.C. Jain, Jagatram Ahuja v. CGT and Maheshwari Fish Seed Farm v. T.N. Electricity Board followed; G.P. Singh’s warning that it is “hazardous” to interpret a statute by a definition in another, especially one not in pari materia, approved. [Paras 5.5–5.8.2]
2. Common-parlance meaning. It is neither safe nor permissible to adopt the Central Excise Act’s meaning of “manufacture”. The word “manufactured” in Section 5A must be understood in its common parlance, not in a special sense borrowed from another statute. [Para 6.1]
3. No manufacture by the processor. The respondent receives fabric from powerloom and handloom manufacturers, dyes, bleaches and processes it, and returns it. No manufacturing takes place in its unit; what comes out is not “textile manufactured”. [Paras 6.2–6.3, 6.5]
4. Extended arm of the exempt industry. The proviso to Section 5A expressly exempts textiles manufactured out of the handloom or powerloom industry. The respondent’s activity is supplementary and ancillary to that exempt manufacture; it works only as an extended arm of the powerloom manufacturers. [Paras 6.4–6.6]
5. Upgraded, not manufactured. At best the textile is upgraded; it does not become “manufacture” in the sense of Section 5A or the Act generally. The respondent cannot be made liable to pay textile cess. [Para 6.7]

Result

Note: The judgment gives two dates for the Tribunal’s order: 20.10.2005 (para 2) and 09.12.2005 (para 3.4). Para 3.3 refers to “the explanation of the appellant” where the respondent’s reply is meant, and para 3.1 refers to the “Comptroller General of India” (presumably the Comptroller and Auditor General). Para 6.3 says the manufacturers “do undertake” bleaching and dyeing by themselves; read with the High Court’s finding (para 3.5.1) and the rest of para 6.3, the sense is that they do not, and engage the respondent instead. The R.C. Jain citation is printed as “(1981) 2 SCS 308”.

Cases Referred

• Union of India v. R.C. Jain, (1981) 2 SCC 308 — followed
• Jagatram Ahuja v. Commissioner of Gift Tax, Hyderabad, (2000) 8 SCC 249 — followed
• Maheshwari Fish Seed Farm v. T.N. Electricity Board, (2004) 4 SCC 705 — followed
• Chandok Textile Exporters Pvt. Ltd. v. Assessing Officer, Textiles Committee, T.C.A. No. 222 of 2002 (Tribunal, 30.04.2004) — Tribunal’s basis, not approved

Statutes Referred

• Textiles Committee Act, 1963 — Sections 2(g), 2(da), 2(db), 3, 5A
• Central Excise Act, 1944 — Section 2(f)
• Factories Act, 1948 — Section 2(g)

Counsel

Mr. Chirag M. Shroff (for appellant); Mr. Tanmaya Agarwal (for respondent No. 1).