{"id":31314,"date":"1985-05-06T00:00:00","date_gmt":"1985-05-05T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/empire-industries-limited-ors-vs-union-of-india-ors-etc-on-6-may-1985"},"modified":"2018-02-02T14:59:19","modified_gmt":"2018-02-02T09:29:19","slug":"empire-industries-limited-ors-vs-union-of-india-ors-etc-on-6-may-1985","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/empire-industries-limited-ors-vs-union-of-india-ors-etc-on-6-may-1985","title":{"rendered":"Empire Industries Limited & Ors. … vs Union Of India & Ors. Etc on 6 May, 1985"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Empire Industries Limited & Ors. … vs Union Of India & Ors. Etc on 6 May, 1985<\/div>\n
Equivalent citations: 1986 AIR 662, \t\t 1985 SCR Supl. (1) 292<\/div>\n
Author: A Varadarajan<\/div>\n
Bench: Varadarajan, A. (J)<\/div>\n
           PETITIONER:\nEMPIRE INDUSTRIES LIMITED & ORS. ETC.\n\n\tVs.\n\nRESPONDENT:\nUNION OF INDIA & ORS. ETC.\n\nDATE OF JUDGMENT06\/05\/1985\n\nBENCH:\nVARADARAJAN, A. (J)\nBENCH:\nVARADARAJAN, A. (J)\nFAZALALI, SYED MURTAZA\nMUKHARJI, SABYASACHI (J)\n\nCITATION:\n 1986 AIR  662\t\t  1985 SCR  Supl. (1) 292\n 1985 SCC  (3) 314\t  1985 SCALE  (1)1269\n CITATOR INFO :\n RF\t    1987 SC 874\t (1,3,5,6)\n R\t    1988 SC 113\t (4,5)\n RF\t    1988 SC 871\t (4)\n R\t    1988 SC2237\t (6)\n F\t    1989 SC 516\t (2,3,5,13,14,16,19,20,21,23,24\n R\t    1989 SC1019\t (6)\n E\t    1990 SC1893\t (5)\n R\t    1991 SC 407\t (6)\n F\t    1991 SC1784\t (7)\n\n\nACT:\n     Central Excise  and Salt  Act, 1944,  (Act I  of 1944),\nsection 2 (f) (v) (vi) and (vii)-Definition of `Manufacture'\nas amended  by the  Central Excise  and Salt  and Additional\nDuties\tof   Excise  (Amendment)  Act,\t(Act  vi  of  1980)-\nLegislative  competency\t  to  make   amendment-Whether\t the\nAmendment Act  is violative  of Articles  14,19(1)  (g)\t and\nEntry  84   of\tList  I\t of  the  Seventh  Schedule  of\t the\nConstitution-Concept of\t \"Manufacture\"-Whether\tthe  various\nprocesses of  bleaching, mercerising,  dyeing, printing etc.\nof cotton  fabrics and\twoolen fabrics\tman-made fabrics  as\nmentioned in  items 19 and 22 of the Schedule to the Central\nExcises and  Salt Act  amount to  \"Manufacture\", as  the Act\nstood prior  to the  Amendment Act, so as to attract levy of\nduty under section 4 of the Act-Whether the Amendment Act in\nany event  is valid  under Entry 97 of List I of the Seventh\nSchedule  of   the  Constitution-Retrospective\t legislation\nwhether permissible  - Evidence\t not produced clear but that\nsought to  be produced\tin the Supreme Court, acceptance of-\nPassing of  Interim orders, aviation\/vaction by the Court in\nfiscal matters, causing of.\n\n\n\nHEADNOTE:\n     In Vijay  Textile Mills  v. Union\tof India reported in\n(1979) 4  E.L.T.J.  181,  the  Gujarat\tHigh  Court  by\t its\ndecision dated\t21-1.1979 held that cotton fabrics subjected\nto bleaching,  dyeing and printing could not be subjected to\nexcise duty  under Item\t 19 (1) (b) of the First Schedule to\nthe Central Excises and Salt Act, 1944 is at twenty per cent\nad-valorem these  activities not  being taxable event in the\nlight of  section 3  read with\t2(d) of the Act. The Gujarat\nHigh Court  proceeded on  the footing  that the processes of\nbleaching, dyeing  and printing were manufacturing processes\nand held  that excise  duty would at least be leviable under\nresiduary Item\tNo. 68\tof the First Schedule and therefore,\nliable to  levy at eight per cent ad-valorem, the High Court\ndirected the \"Excise authorities to calculate the ad valorem\nexcise duty  during the\t period of  three years\t immediately\npreceding the  institution of each petition before the Court\nand calculate  the excise  duty payable\t by  each  of  these\npetitioners under Item 68 only in respect of the value added\nby each\t of the\t petitioners by the processing of the fabric\nconcerned. The excise duty paid in excess of such ad valorem\nduty  under  Item  68  during  the  period  of\tthree  years\nimmediately preceding  the  institution\t of  the  respective\nSpecial\t Application  is  ordered  to  be  refunded  to\t the\npetitioners concerned in each of their petitions.\"\n     In Real Honest Textiles and Ors. v. Union of India (now\nin appeal)  the Gujarat High Court passed similar directions\nafter declaring\t that the levy and collection of excise duty\nand additional duty on processed man-made fabrics\n293\nunder Tariff'  Item 22(1) of the Additional Duties of Excise\n(Goods of  Special Importance)\tAct, 1957  was ultra  vires.\nSince the decisions of the Gujarat High A Court on 24.1.1979\nin these  two cases,  the  petitioners\tand  the  processing\nhouses like the petitioners have been claiming refund.\n     The President  of India  promulgated an Ordinance being\nCentral ordinance  No. 12 of 1979 called the Central Excises\nand  Salt   and\t Additional  Duties  of\t Excise\t (Amendment)\nOrdinance 1979.\t The said  Ordinance was replaced by the Act\nVI  of\t 1980  called  the  Central  Excises  and  Salt\t and\nAdditional Duties  of Excise  (Amendment) Act,\t1980, giving\nretrospective effect  to the Act from 24th February 1979. By\nsection 2  of the  Act, section\t 2(f) of the Excise Duty Act\nwas amended  by adding\tthree sub  items in  the  definition\n\"manufacture\"  so   as\tto   include  the   activities\tlike\nbleaching,  dyeing,   printing\tetc.   covered\tby  the\t two\ndecisions of the Gujarat High Court. Similar amendments were\nmade in items 19(1), 21 (1) and 22 (1) of the First Schedule\nwith retrospective  effect. Section 5(2) (b) of the Amending\nAct  provided\t\"no  suit  or  other  proceedings  shall  be\nmaintained or continued in any other Court for the refund of\nthe duty  collected and\t no enforcement shall be made by any\nCourt of  any decree  or order\tdirecting the refund of such\nduties of  excise which\t have been  collected and  which may\nhave been  collected.\" as  if the provisions of section 5 of\nthe Act\t VI of\t1980 had  been in  force  on  and  from\t the\nappointed day as defined in the Act VI of 1980.\n     After the\tAct VI\tof 1980\t was passed,  the  same\t was\nchallenged before  the Bombay  High Court  by  several\twrit\npetitions. Dismissing  W.P. 623\/1979  titled New  Shakti Dye\nWorks Pvt.  and Mahalakshmi  Dyeing and\t Printing  Works  v.\nUnion of  India<\/a> along  with 24 other writ petitions on 16117\nJune, 1983,  the Bombay High Court upheld the Constitutional\nvalidity of  the impugned Act as well as the levy of duty on\ncertain goods.\tSpecial Leave was granted in this case as in\nthe two earlier Gujarat High Court's cases.\n     Empire Industries\tLimited also  filed a petition under\nArticle 226  of the  cases though  Indian Textile  Processor\nAssociation withdrew  it from  the file\t of the\t Bombay High\nCourt and  by the  writ petition  under Article\t 32  of\t the\nConstitution has  challenged the  Constitutional validity of\nthe Act\t VI of\t1980 and  the validity of the levy of excise\nduty under  section 4  of the  Act. Some  other\t petitioners\nsimilarly situated  have also  filed their  petitions  under\nArticle 32 of the Constitution.\n     In these  petitions  and  appeals\tthe  following\tmain\npoints fell for consideration:\n     1. Whether\t cotton fabrics\t subjected to the process of\nbleaching,  mercerising,  dyeing,  printing,  water-proofing\netc. specially\tthe processes  conducted and  carried out by\nthe petitioner\tcompany in  respect of\tcotton\tfabrics\t and\nwoolen fabrics\/man-made\t fabrics as mentioned under Items 19\nor 22  of the  Schedule to  the Central Excises and Salt Act\namount to  'manufacture' as  the  Act  stood  prior  to\t the\nimpugned Act  of 1980.\tIn other words whether these various\nprocesses carried out by the petitioners\n294\ncompany amount\tto bringing  into  existence  different\t and\ndistinct goods,\t A commercially\t known as  such, to  attract\nlevy of duty under section 4 of the Central Excises and Salt\nAct, 1944.\n     2. Whether and in any event after the impugned Act, the\nlevy is valid. In connection with the said contention it has\nto be examined whether the impugned Act is intra vires entry\n84 of List I of the Seventh Schedule to the Constitution and\nif not,\t whether the  said impugned  Act can  be said  to be\nvalid in  any event  under entry 97 of List I of the Seventh\nSchedule to the Constitution.\n     3. Whether\t the impugned  Act violates  Article  14  or\nArticle 19(1)(g) of the Constitution.\n     Allowing the Revenue appeals in C.A. Nos. 586 to 592 of\n1979 and dismissing all the petitions and other appeals, the\nCourt,\n^\n     HELD: 1. In view of the amendments made in section 2(f)\nof the Central Excises and Salt Act, 1944 by Amending Act VI\nof 1980\t as well  as the  substitution of new Item 19(1) and\n22(1) in  Excise Tariff\t in place of the original items, the\nactivities  of\t the  petitioner   company,  namely,  as  an\nindependent processing\tunit engaged  in job  activities  of\ndyeing, printing  and finishing\t of man\t made\/cotton fabrics\nattract the exigibility to excise duties under section 3 and\n4 of  the Act.\tExcise duty  will be  charged  on  processed\nprinted material.\n\t\t\t\t\t\t   [328 D-E]\n     Section 3\tof the\tCentral Excises and Salt Act clearly\nindicates that\tthe object  of\tthe  entries  in  the  First\nSchedule is  firstly excisable goods and secondly to specify\nrates at  which excise duty will be levied. Under sub-rule 2\nof Rule 56A, a manufacturer will be given credit of the duty\nwhich  is   already  paid   on\tthe  articles  used  in\t the\nmanufacture, subject  to certain  conditions. Therefore, the\nprocessors will\t be entitled  to credit for the duty already\npaid on\t the grey  cloth by  the manufacturers\tof the\tgrey\ncloth. [328 E-P]\n     New Shakti\t Dye Works  (Pvt.) Ltd v. Mahalakshmi Dyeing\nand Printing  Works v.\tUnion of India & Anr. (W.P. Nos. 622\nand 623 of 1979 dated 16 and 17 June 1983 Bombay) approved.\n     2.1 Excise\t duty is  a duty on the manufacture of goods\nand not\t on sale.  Manufacture is complete as soon as by the\napplication  of\t one  or  more\tprocess,  the  raw  material\nundergoes some\tchange. If  a new  substance is brought into\nexistence  or  if  a  new  or  different  article  having  a\ndistinctive name,  character or\t use result  from particular\nprocesses,  such   process  or\tprocesses  would  amount  to\nmanufacture. Therefore,\t the taxable  event under the Excise\nLaw is\t`manufacture'. The  moment there  is  transformation\ninto a\tnew commodity  commercially known  as a distinct and\nseparate commodity  having its\town character, use and name,\nwhether be it the result of one process or several processes\n`manufacture'  takes  place  and  liability  to\t duty  under\nsection 4 is attracted. [312 C-D; 316 B-C]\n295\n     Union of India v. Delhi Cloth & General Mills,<\/a> [1963] 1\nSupp. S.C.R. 586; Union of India v. H.U.F. Business<\/a> known as\nRamlal Mansukhnai,  Rewari &;  Anr. A  [1971] 1\t S.C.R. 937;\nAllenburry Engineers  v. Ramakrishna Dalmia & Ors.,<\/a> 11933] 2\nS.C.R. 257;  Deputy Commissioner,  Sales Tax  (Law) Board of\nRevenue (Taxes)\t Ernakulam v.  Pio Food\t Packets,<\/a>  [1980]  3\nS.C.R. 1271 and Chowgule and Co. Pvt. Ltd. and Anr. v. Union\nof India and Ors.<\/a> 11981] I S.C.C. 653 referred lo.\n     Commissioner of Sales Tax, U.P. Lucknow v. Harbilas Rai\nand Sons [1968] S.T.C. Vol. 21 p. 17 (S.C.) followed.\n     Hiralal Jitmal  v. Commissioner  of Sales\tTax,<\/a>  [1957]\nS.T.C. Vol.  VIII 325  (MP); East India Cotton Manufacturing\nCompany Pvt. Ltd. v. The Assessing Authority- cum-Excise and\nTaxation Officer, Gurgaon and Anr., [1972] S.T.C. Vol. 30 p.\n489 (Punjab  and Haryana);  Kores (India)  Ltd v.  Union  of\nIndia and  Ors., [19821\t E.L.T.\t Vol.  10,  p.\t253  and  K.\nVenkataraman and  Company and  Ors. v. Deputy Commercial Tax\nOfficer, Coimbatore IV and Ors., [1972] S.T.C. Vol. 10 p. 57\n(Mad) approved.\n     Extrusion\t Process   Pvt.\t  Ltd.\t v.   N.R.   Jadhav,\nSuperintendent of  Central Excise,  119791 4 F.. L.T. J. 380\n(Gujarat); Swastik  Products, Baroda  v.  Superintendent  of\nCentral Excise,\t [1930] 6  E.L T.  164 (Gujarat) and Kailash\nNath and  Anr. v.  The State of U.P. and Ors.,<\/a> [1957] S.T.C.\nVol. VIII p. 358 (SC) distinguished.\n     Mc Nicol  and Anr.\t v. Pinch,  [1906] 2 K.B. 352 quoted\nwith approval.\n     2.2  Etymologically  the  word  \"Manufacture\"  properly\nconstrued would doubtless cover the transformation. Here, in\nthe light  of several  decision of the Supreme Court and the\nHigh Courts  and on  the construction of the expression, the\nprocess of  bleaching, dyeing  and  printing  etymologically\nmeans manufacturing process. The processes of the type which\nhave been  incorporated by  the Act  VI of  1980 were not so\nalien or  foreign to the concept of `manufacture' that these\ncould not  come within\tthat concept covered by entry 84, of\nList I of the Seventh Schedule. After the Act VI of 1980 was\npassed\tthese\tprocesses  indubitably\t fall\twithin\t the\nexpression `manufacture'. [323A,E-H]\n     2.3 The question whether the impugned Act is covered by\nentry 84 can be looked from another point of view namely the\nactual contents\t of entry  84. The word `produced' appearing\nin entry no. 84 of List I of the Seventh Schedule is used in\njuxtaposition with  the\t word  `manufactured'  and  used  in\nconnection with\t the duty  of  excise  and  consequently  it\ncontemplates same expenditure of human skill in bringing the\ngoods concerned\t into the  condition which would attract the\nduty.  It   was\t not   required\t that  the  goods  would  be\nmanufactured in\t the sense  that raw material should be used\nto turn\t out something\taltogether different. It would still\nrequire that these should be produced in the sense that some\nhuman activity\tand energy should be spent on them and these\nshould be  subjected to\t some processes\t in order that these\nmight be brought to the state in which they might become fit\nfor consumption. Here, expenditure\n296\nof human skill and material have been used in the processing\nand  it\t  may  not  be\tthat  the  raw\tmaterial  was  first\ntransformed  but  over\tthe  transformed  material,  further\ntransformation was done by the human labour and skill making\nthis fit  for human consumption. In any event under entry 97\nof List\t I of the Seventh Schedule this would apply if it is\nnot under entry 84. [324 A, G]\n     Aluminium Corporation  of India  Ltd. v. Coal Board AIR\n1959 Cal. 222, approved.\n     The King v. Caledonian Collieries, Ltd. [1928] A,C. 358\nreferred to.\n     2.4 To contend that if the legislation was sought to be\ndefended on  the ground\t that it  is a\ttax on activity like\nprocessing and\twould be  covered by the a powers enumerated\nunder entry  97 of  List I of the Seventh Schedule there was\nno charging  section for  such an  activity and\t as such the\ncharge must  fail and  there cannot be any levy is wrong and\nmisconceived. The charging section is the charging section 3\nof the Central Excises and Salt Act, 1944. It stipulates the\nlevy and  charge of  duty of  excise on\t all excisable goods\nproduced or manufactured. `Manufactured' under the Act after\nthe amendment  would be\t the  'manufacture'  as\t amended  in\nsection 2(f)  and Tariff  Item 19(1)  and 22  and the charge\nwould be on that basis. [324 ;325 A-B]\n     3.1 Imposition of tax by legislation makes the subjects\npay taxes. It is well recognised that (i) tax may be imposed\nretrospectively;  and\tthat  by   itself   would   not\t  be\nunreasonable restriction  on the  right to carry on business\nand (ii)  the Parliament  has powers  to make  retrospective\nlegislation   including\t   fiscal   legislation\t  and\tsuch\nlegislation per se is not unreasonable. [326 D-F]\n     3.2  Here\tthere  is  no  particular  feature  of\tthis\nlegislation which  can be  said to  create any\tunreasonable\nrestriction upon  the petitioners.  The concept\t of  process\nbeing  embodied\t  in  certain\tsituation  in  the  idea  of\nmanufacture, the  impugned legislation is only making 'small\nrepairs' and  that is  permissible mode of legislation. [326\nE-F]\n     3.3 Nor  does the\timpugned legislation act harshly nor\nthere is  any scope  for arbitrariness or discrimination. It\nis clear  from the objects and reasons wherein it was stated\nthat the  Central Excise  Duty was levied for the first time\non cotton  fabrics in  1969, on\t man-made fabrics  (rayon of\nartificial silk\t fabrics) in  1954 and\ton woolen fabrics in\n1955. From the very early stages of the textile tariff, with\na view to achieving progression in the rate structure and to\naligning  excise  control  with\t the  demands  of  different\nproducing sectors  duties has  been levied  not only on grey\nfabrics\t but  also  at\tthe  stage  of\tprocessing  such  as\nbleaching, dyeing  and printing. The Judgment of the Gujarat\nHigh Court  in Real  Honest Textiles  and Ors.\tv. Union  of\nIndia (under  appeal) according\t to the statement of objects\nand reasons of the Act VI of 1980 had upset the arrangements\nregarding levy\tof excise  duties of  textile  fabrics.\t The\njudgment also  had the\teffect\tof  disturbing\tthe  balance\nevolved between\t different sectors  of the textile industry.\nFurthermore, it\t was made  clear that  in  so  far  as\tpast\nassessments were  concerned,  refund  of  excise  duties  to\nmanufactu-\n297\nrers as\t ordered by  the High  Court would have only meant a\nfortuitous windfall  so as  to benefit\tsuch persons without\nany relief to the ultimate consumers A who had purchased the\nfabrics and  had borne the burden of the duties. In order to\navoid this, the Act was passed. [325 E-H; 326 B-C; 327 C]\n     Krishnamurthi &  Co. etc.\tv. State  of Madras  & Anr.,\n[1973] 2 S.C.R. 55, referred to.\n     3.4 Where\tfor the\t purpose of  calculating  assessable\nprofits, a notional and conventional sum is laid down by the\nlegislature to\tbe arrived  at on a certain basis, it is not\npermissible for\t the courts  to engraft\t into it  any  other\ndeduction or  allowance or  addition or\t read it down on the\nscore that  the said  deduction or allowance or addition was\nauthorised  elsewhere\tin  the\t Act  or  in  the  Rules.  A\nconventional  charge   should  be   measured  by   its\t own\ncomputation and\t not by\t facts relating\t to other  method of\ncomputation. The  circumstances that  thereby the benefit of\nany exemption  granted by  the legislation  may be  lost and\nthat in\t some cases  hardship might  result are\t not matters\nwhich would  influence courts  on the  construction  of\t the\nstatute. A  tax payer  subject\tis  entitled  only  to\tsuch\nbenefit as is granted by the legislature. Taxation under the\nAct is\tthe rule  and benefit  and exemption, the exception.\nAnd in this case there is no hardship. [327 E-G] D\n     3.5 When  the textile  fabrics  are  subjected  to\t the\nprocesses  like\t bleaching,  dyeing  and  printing  etc.  by\nindependent processes,\twhether on  their own  account or on\njob charges  basis, the\t value of the purposes of assessment\nunder section  4 of  the Central  Excise Act will not be the\nprocessing charges  alone but  the intrinsic  value  of\t the\nprocessed fabrics  which is  the price at which such fabrics\nare sold for the first time in the wholesale market. That is\nthe effect  of\tsection\t 4  of\tthe  Act.  The\tvalue  would\nnaturally include  the value of grey fabrics supplied to the\nindependent processors\tfor the\t processing. However  excise\nduty, if  any, paid  on\t the  grey  fabrics  will  be  given\nproforma credit to the independent processors to be utilised\nfor the\t payment on the processed fabrics in accordance with\nthe Rules  56 A\t or 96\tof the\tCentral Excise Rules, as the\ncase may be. [327 G-H; 328 A-B] F\n     3.6 Read  in that\tcontext and  in the  context of\t the\nprevalent practice  followed so\t long until  the decision of\nthe Gujarat  High Court\t in Real  Honest case,\tthere is  no\nhardship  and\tno  injustice  to  the\tpetitioners  or\t the\nmanufacturers of grey fabrics. The fact that the petitioners\nare not the owners of the end product is irrelevant. Taxable\nevents is manufacture-not ownership. [328 B-D] G\n     4. Documentary  evidence not produced earlier cannot be\nadmitted at  the late  stage of final hearing of the case by\nthe Supreme Court [308 E]\n     (Per majority Varadarajan J. dissenting).\n     1. Different  Courts sometimes  pass different  interim\norders as the courts think fit. The interim orders passed by\nparticular  courts   on\t certain   considerations  arc\t not\nprecedents for\tother cases  may be  on\t similar  facts.  To\ncontend\n298\nthat once  an interim  order has  been passed by the Supreme\nCourt on  certain A  factors specially in fiscal matters, in\nsubsequent matters  on more  or less  similar  facts,  there\nshould not  be a  different order passed nor should there by\nany variation  with that kind of interim order passed. In as\nmuch as\t that such  variance creates  discrimination  is  an\nunfortunate approach. [329C-E ]\n     2. Every  bench hearing  a\t matter\t on  the  facts\t and\ncircumstances of  each case  should have  the right to grant\ninterim orders\ton such terms as it considers fit and proper\nand if\tit had granted interim order at one stage, it should\nhave right  to vary  or alter such interim orders. The court\nmade the  following suggestions\t (i) A\tconsensus,  however,\nshould be  developed in\t matters of interim orders in fiscal\nmatters specially  in cases  involving indirect\t taxes where\nnormally taxes\thave been  realised from  the consumers\t but\nhave not  been paid over to the exchequer or where taxes are\nto be  realised from  consumers by the dealers or others who\nare parties  before the\t court, interim\t orders staying\t the\npayment of  such taxes\tuntil final  disposal of the matters\nshould not  be passed.\tIt is  a matter of balance of public\nconvenience Large  amounts of  taxes are  involved in  these\ntypes of litigations Final disposal of matters unfortunately\nin  the\t present  state\t of  affairs  in  our  courts  takes\nenormously long\t time and  non-realisation of taxes for long\ntime creates  an upsetting  effect on  industry and economic\nlife  ceasing\tgreat  inconvenience   to  ordinary  people.\nGovernments are run on public funds and if large amounts all\nover  the  country  are\t held  up  during  the\tpendency  of\nlitigations, it becomes difficult for the governments to run\nand  become   oppressive   to\tthe   people.\tGovernment's\nexpenditures  cannot   be  made\t  on  bank   guarantees\t  or\nsecurities. In\tthat view  of the  matter the  Supreme Court\nshall refrain  from passing  any interim  orders staying the\nrealisations of\t indirect taxes or passing such orders which\nhave the  effect of  non-realisation of indirect taxes. This\nwill be\t healthy for the country and for the courts. [329 E-\nH; 330 A-C]\n\n\n\nJUDGMENT:\n<\/pre>\n
     ORIGINAL JURISDICTION:  Writ Petition (Civil) No. 11728
\ny) of 1984.\n<\/p>\n
     Under Article 32 of the Constitution of India.\n<\/p>\n
\t\t\t    WITH
\n     Writ Petitions  Nos. 13556,  13788,  13792,  15438\t and
\n15439 Of  1984 and  Civil Appeals Nos. 6414 of 1983 and 3564
\nof 1984.\n<\/p>\n
\t\t\t    AND
\n     Civil Appeals Nos. 586 to 592 of 1979.\n<\/p>\n
     From the  Judgment and  Order dated  24.1.1979  of\t the
\nGujarat High  Court  in\t Special  Civil\t Appln.\t Nos.  1552,
\n1553\/77 with Nos. 249,1292,1293,1294 and 1295 of 1978.\n<\/p>\n
299<\/span><\/p>\n
     S. J. Sorabjee, A. J. Rana, S. Parekh, Mrs. J. Wad, and
\nMiss Aruna  Mathur for\tthe Petitioners\t in W.P. Nos. 11728,
\n15438 and A 15439 of 1984.\n<\/p>\n
     S.J. Sorabjee,  A.N. Haskar  and S.A.  Shroff  for\t the
\nPetitioner in W.P. No. 13788 of 1984.\n<\/p>\n
     S.S. Shroff  and S.A.  Shroff for the Appellant in C.A.
\nNo. 3564\/84  and Petitioner  in W.P.  Nos. 13556,  13792 and
\n13788 of 1984.\n<\/p>\n
     S.J. Sorabjee  and A.  Grover for the Appellant in C.A.
\nNo. 6414 of 1983.\n<\/p>\n
     K.G.  Bhagat  Additional  Solicitor  General  and\tR.N.
\nPoddar for the Appellants in C.A. Nos. 586-92 of 1979.\n<\/p>\n
     K.G.  Bhagat,   Additional\t Solicitor  General,  Girish
\nChandra, Miss  Halida Khatun, Uma Nath Singh and R.N. Poddar
\nfor the Respondents. (Union of India)
\n     S.K. Dholakia,  R.C. Bhatia  and  P.C.  Kapur  for\t the
\nRespondents, in C.A. Nos. 589-92 of 1979.\n<\/p>\n
     Y.S. Chitale,  Anand Haskar,  P.H. Parekh and Miss Indu
\nMalhotra for the Respondents in C.A. No. 586 of 1979.\n<\/p>\n
     A.K Sen,  P.H. Parekh  and Miss  Indu Malhotra  for the
\nRespondents in C.A. No. 587 of 1979- F
\n     F.S. Nariman,  P.H. Parekh\t and Miss  Indu Malhotra for
\nthe Respondent in C.A. No. 588 of 1979.\n<\/p>\n
     The following Judgments were delivered
\n     VARADARAJAN  J.   I  agree\t  with\tmy  learned  brother
\nSabyasachi Mukharji,  J. that  Writ Petitions  Nos. 11728 of
\n1984 and  13556, 13788\t13792, 15438  and 15439\t of 1984 and
\nCivil Appeals  Nos. 6414 of 1983 and 3564 of 1984 have to be
\ndismissed with costs, and that Civil Appeals Nos. 586 to 592
\nof 1979\t have to  be allowed with costs, and interim orders,
\nif any,\t passed should\tstand vacated, and arrears of excise
\nduties should be paid forthwith and future excise
\n300<\/span>
\nduty should  be paid  as and  when the\tgoods are cleared or
\notherwise as per law and rules. But I regret my inability to
\nsubscribe to  the views\t expressed by  him in  the last\t two
\nparas of his judgment regarding interim orders.\n<\/p>\n
     SABYASACHI MUKHARJI,  J.  This  first  petition  herein
\nunder Article  32  of  the  Constitution  arises  under\t the
\nfollowing circumstances.\n<\/p>\n
     The President  of India  promulgated an Ordinance being
\nCentral Ordinance  No. 12 of 1979 called the Central Excises
\nand  Salt   and\t Additional  Duties  of\t Excise\t (Amendment)
\nOrdinance, 1979.  The said Ordinance was replaced by the Act
\ncalled the Central Excises and Salt and Additional Duties of
\nExcise (Amendment) Act, 1980 (hereinafter referred to as the
\n‘impugned Act’).  The said  impugned Act received the assent
\nof the\tPresident on  12th February,  1980 and under section
\n1(2) of\t the impugned  Act, retrospective  effect to the Act
\nwas given from 24th February, 1979.\n<\/p>\n
     It may  be mentioned that the Gujarat High Court in the
\ncase of\t Vijay Textile\tMills v. Union of India rendered its
\ndecision on 24th January, 1979 on this aspect of the matter.
\nThis decision  will have  to- be  examined in  little detail
\nlater. As  a result  of the said decision and with a view to
\novercome  the\tsaid  decision,\t  the  Ordinance   mentioned
\nhereinbefore was  promulgated on  24th November,  1979 which
\nhas since been replaced by the said Central Excises and Salt
\nand Additional Duties of Excise (Amendment) Act. 1980.\n<\/p>\n
     After this\t impugned  Act\twas  passed,  the  same\t was
\nchallenged before  the Bombay  High Court  by  several\twrit
\npetitions, Writ\t Petition No.  623 of 1979 along with others
\nwere disposed  of by  the  Bombay  High\t Court\tby  judgment
\ndelivered by  the Division  Bench on  167\/17th June, 1983 in
\nthe case  of New  Shakti Dye  Works Pvt.  Ltd. & Mahalakshmi
\nDyeing and Printing Works v. Union of India Anr. By the<\/a> said
\njudgment,  the\t Bombay\t High  Court  disposed\tof  24\twrit
\npetitions as  the question  involved in\t all those petitions
\nwas identical.\tIn that\t case the constitutional validity of
\nthe impugned  Act as  well as  the levy\t of duty  on certain
\ngoods identical\t to  the  present  goods  involved  in\tthis
\napplication  under   Article  32  of  the  Constitution\t was
\ninvolved. The  Bombay High  Court dismissed  the  said\twrit
\npetitions. We will refer to the said decision later. We may,
\nhowever, state\tthat we are in respectful agreement with the
\nconclusions as\twell as the reasoning of the decision of the
\nBombay
\n301<\/span>
\nHigh Court in the said petitions. Special leave to appeal to
\nthis Court  has been  granted from  the said decision in the
\ncase of New Shakti Dye Works Pvt. Ltd.\n<\/p>\n
     In order  to appreciate  the contentions  raised, it is
\nnecessary  to  state  that  the\t petitioner  company  is  an
\nindependent processing\tunit carrying  on its  activities at
\nBombay and  as an independent processing unit was engaged in
\njob activities\tof dyeing,  printing and  finishing of\tman-
\nmade\/cotton fabrics.  The petitioner  company further states
\nthat in\t respect of  the  said\tprocessing  activities,\t the
\npetitioner company  holds licences  required under  the laws
\nfor the\t time being  in force  including a licence under the
\nExcise Act  and the  Central Excise  Rules which hereinafter
\nwill be referred to as the ‘said Rules’.\n<\/p>\n
     The petitioners in writ petition No. 11728 of 1984 were
\ntwo in number-one being the petitioner company and the other
\nbeing the Taxation Executive of the petitioner company.\n<\/p>\n
     The petitioners state that the processing operations of
\nthe petitioner\tcompany in  the said  factory are  job\twork
\noperations of  dyeing, bleaching  and printing\tof the\tsaid
\nfabrics which  are cotton fabrics and man-made fabrics. When
\nthe  said  fabrics  are\t received  in  the  factory  of\t the
\npetitioner, company  the same are fully manufactured and are
\nin a  saleable condition  and are commercially known as grey
\nfabrics i.e.  unprocessed fabrics  which are  cleared  after
\npayment of the excise duty under Tariff Item Nos. 19 and 22,
\nas the\tcase may  be. The petitioners further state that the
\nsaid  grey   fabrics  i.e.   unprocessed,  undergo   various
\nprocesses in the factory of the petitioner company. The grey
\nfabrics are boiled in water mixed with various chemicals and
\nthe grey  fabric is  washed and\t thereafter the\t material is
\ntaken for  the dyeing process, that is imparting of required
\nshades of  colours. The next stage is printing process, i.e.
\nputting the  required designs  on the said fabrics by way of
\nscreen\tprinting   on  hot  tables.  The  final\t stages\t the
\nfinishing process,  that is to give a final touch for better
\nappearance According  to the  petitioners, they do not carry
\nout any\t spinning  or  weaving\tof  the\t said  fabrics.\t The
\nmachinery installed by the petitioner company in its factory
\nis only\t for the  purpose of carrying out one or more of the
\naforesaid four\tprocesses and cannot be used for the purpose
\nof either  spinning or\tweaving of  yarn for  manufacture of
\n‘fabric’ i.e.  ‘woven material’.  For spinning or weaving of
\nyarn, one  requires, according to the petitioners, looms and
\npetitioner company is merely a processing
\n302<\/span>
\nhouse. The  petitioner company’s case is that the petitioner
\ncompany A  begins with\tman-made or cotton fabrics before it
\nstarts the  said processes  and also  ends with\t man-made or
\ncotton fabrics\tafter subjecting  the fabrics to the various
\nprocesses.   The    petitioner\t company    receives   fully
\nmanufactured man-made  fabrics and  cotton fabrics  from its
\ncustomers only\tfor the\t purpose of carrying out one or more
\nof the\taforesaid processes  thereon as\t per the requirement
\nand instructions  of the  customers and\t after the necessary
\nprocesses are  carried out,  the same  are returned  to\t the
\ncustomers. According to the petitioners, what is received by
\nthe petitioner\tcompany is  known as cotton\/man-made fabrics
\nand what  is returned  is  again  known\t as  cotton\/man-made
\nfabrics. The  petitioner  company  states  that\t it  has  no
\ndiscretion or choice of shades or colours or designs and the
\nsame are  nominated or\tprescribed  by\tthe  customers.\t The
\nfinally processed  fabric is  not and  cannot be sold by the
\npetitioners  in\t the  market  as  the  petitioner  company’s
\nproduct. The  petitioner company  merely collects  from\t its
\ncustomers charges  only for  job work  of processing done by
\nit. The\t petitioner company  further states  that it  has no
\nproprietary interest  in the  fabrics either before or after
\nthe same  is processed.\t The manufacture  of the fabrics and
\nsale in\t the market of the processed fabrics are effected by
\nthe  petitioner\t  company’s  customers\t and  not   by\t the
\npetitioners.  Further\tthe  processed\t as  well   as\t the
\nunprocessed fabric,  whether cotton  or man-made, can be put
\nto the same use.\n<\/p>\n
     The   petitioner\tcompany,   is\trequired   to\tfile
\nclassification list  for approval  of the  concerned  Excise
\nAuthorities as\tprescribed by  Rule 173-B  of the said Rules
\nfor approval  of Tariff\t items in  the First Schedule to the
\nexcise Act  in respect\tof the\tprocessed  fabrics.  As\t per
\napproval granted there-on in respect of man-made fabrics and
\ncotton fabrics,\t the petitioner\t company classifies  all the
\nprocessed fabrics  under Tariff Items 19 and 22, as the case
\nmay be.\t So far\t as man-made  fabrics  are  concerned  under
\nTariff Item  22, the  petitioner company was required to pay
\ncertain duties as mentioned in the petition. The petitioners
\nstate that the petitioner company has paid such duties.\n<\/p>\n
     The petitioners  further state that such classification
\nlist of\t cotton fabrics\t has been approved under Tariff Item
\nNo. 19\tand the\t petitioner  company  was  required  to\t pay
\ncertain duties\twhich the  petitioner company  has mentioned
\nthat it\t has paid  the same.  The petitioners  further state
\nthat for the purpose of determination of
\n303<\/span>
\nvalue under  section 4\tof the\tExcise Act,  the  petitioner
\ncompany was  required to  file a  price\t list  in  the\tform
\nprescribed  under   the\t said\tRules  for   approval.\t The
\nrespondents-government\t authorities,\taccording   to\t the
\npetitioners, although  being aware  of\tthe  fact  that\t the
\npetitioner company was carrying out and or performing merely
\nthe processing\twork and  collecting the  processing charges
\nonly, had  directed the\t petitioner company  to file a price
\nlist on the basis of the sale price of its customers and for
\nthis purpose  had required  the petitioner  company to\tfile
\nalong with  the said  price list  letters of  its  customers
\ncertifying the\tprice at  which the  said customers sell the
\ngoods in  the markets. The petitioners state that price list
\nincludes the  selling expenses\tand selling  profits of\t the
\nsaid customers\tin  which  the\tpetitioner  company  has  no
\ninterest or share.\n<\/p>\n
     According to  the petitioners,  the respondents approve
\nthe price  list and  as a consequence thereof the petitioner
\ncompany becomes\t liable to pay to the respondents additional
\nExcise duty  calculated on  ad-valorem\tbasis  on  the\tsaid
\napproved sale price that is the sale price of its customers.
\nThe petitioners have annexed a copy of the delivery note and
\na copy\tof the\tinvoice issued by the petitioner company. It
\nis further  the case of the petitioners that both in respect
\nof cotton  fabrics and\tman-made fabrics  which\t are  merely
\nprocessed by  the petitioner  company, the  respondents were
\nlevying and  collecting\t excise\t duty  and  additional\tduty
\nrespectively under  Tariff Items  19 and 22, as the case may
\nbe, at\trates stipulated against the respective entries read
\nwith relevant  exemption notification,\tas if the petitioner
\ncompany was  the  manufacturer\tof  cotton  fabrics\/man-made
\nfabrics, as the case may be.\n<\/p>\n
     The petitioner company further states that it bad filed
\na writ petition in the Bombay High Court which was admitted.
\nThe said  writ petition\t was filed  through  Indian  Textile
\nProcessors Association.\t The petitioners  stated  thereafter
\nthe  circumstances   under  which   the\t said  petition\t was
\nwithdrawn and  why the\tpresent petition under Article 32 of
\nthe Constitution is being filed. For our present purpose, it
\nis not necessary to set out these details.\n<\/p>\n
     The petitioners  challenge the  impugned Act  mentioned
\nhereinbefore. Before  the contentions  are  dealt  with,  it
\nwould be appropriate to deal with the relevant provisions of
\nthe impugned  Act. Section  2 of  the  impugned\t Act  amends
\nsection 2(f)  of the Excise Act by adding three sub-items in
\nthe definition of ‘Manufacture’ which
\n304<\/span>
\nwere included  by Act 6 of 1980 being the impugned Act which
\ncame   into effect  from 24th  November, 1979 which are sub-
\nclauses (v), (vi) and (vii). These read as follows:-
\n\t“(v) in relation to goods comprised in Item No. 19 I
\n     of the First Schedule, includes bleaching, mercerising,
\n     dyeing, printing,\twater-proofing, rubberising,  shrink
\n     proofing, organdie\t processing or\tany other process or
\n     any one or more of these processes;\n<\/p>\n
\t (vi)  in relation  to goods  comprised in  Item No.
\n     21(1) of the First Schedule, includes milling, raising,
\n     blowing, tentering,  dyeing or any other process or any
\n     one or more of these processes;\n<\/p>\n
\t (vii)\tin relation  to goods  comprised in Item No.
\n     22(1)  of\t the  First  Schedule,\tincludes  bleaching,
\n     dyeing,  printing,\t shrink-proofing.  tentering,  heat-
\n     setting,  crease  resistant  processing  or  any  other
\n     process or any one or more of these processes;”
\n     Similar amendments\t we made  in Items  19(1), 21(1) and
\n22(1)  of  the\tCentral\t Excise\t Tariff,  and  also  similar
\namendments were\t effected in  relation to Act of 1957. These
\namendments  were  effected  retrospectively  from  different
\ndates for  different fabrics,  as mentioned  in the impugned
\nAct. According\tto section  5(2) (b) of the impugned Act, no
\nsuit or\t other proceedings  shall be maintained or continued
\nin any\tother court  for the  refund  of  the  same  and  no
\nenforcement shall  be made  by any  court of  any decree  or
\norder directing\t the refund  of such  duties of excise which
\nhave been  collected and which may have been collected as if
\nthe provisions\tof section S of the impugned Act had been in
\nforce on  and from  the appointed  day\tas  defined  in\t the
\nimpugned  Act.\tIt  may,  however,  be\tmentioned  that\t the
\noriginal unamended  definition of  the word “manufacture” in
\nsection 2(f)  contained a  general definition  of  the\tword
\n“manufacture”  which  was  and\tstill  continues  to  be  an
\ninclusive definition  to say  that the\tmanufacture includes
\nany process  incidental or  ancillary to the completion of a
\nmanufactured product.\n<\/p>\n
     According to the petitioners, the impugned Act had been
\nenacted and  brought into  force because  of the judgment of
\nthe Gujarat High Court dated 24th January, 1979 given in the
\ncase of
\n305<\/span>
\nReal Honest Textiles and others v. Union of India-a decision
\nwhich is also subject matter of appeal before this Court and
\nhas been  heard A along with this petition. The Gujarat High
\nCourt had  declared that  the levy  and collection of excise
\nduty and  additional duty  on processed cotton fabrics under
\nTariff Item  No. 19  I of the Schedule to the Excise Act and
\nadditional duty\t on processed  man-made fabrics under Tariff
\nItem 22(1)  of the  Additional Duties  of Excise  (Goods  of
\nSpecial Importance)  Act,  195,\t was  ultra  vires  and\t the
\nprocessing houses  were liable\tto pay\tduty  of  excise  on
\nprocessed fabrics  ad-valorem under  Tariff Item  68 of\t the
\nSchedule to  the Excise\t Act only  on value  added by way of
\nprocess charges\t on cotton  or manmade\tfabrics, as the case
\nmay be,\t and not  on the  full value  of  such\tfabrics.  As
\nmentioned hereinbefore,\t an application for special leave to
\nappeal to  this Court  had been filed from the said decision
\nof the\tGujarat High  Court, these  appeals are\t pending and
\nwould be disposed of by this judgment.\n<\/p>\n
     It may be mentioned that so long as the respondents had
\nbeen collecting\t and the  petitioners had been paying excise
\nduty and\/or  additional duty  as the  petitioner company was
\nmanufacturing cotton  fabrics under  Tariff Item Nos. 19 and
\n22, as\tthe case  may be.  Since the decision of the Gujarat
\nHigh Court  in New  Shakti Dye\tWorks  Pvt.  Ltd.,  and\t the
\npetitioners and\t the processing houses like petitioners have
\nbeen  claiming\t refund-  The\tmaterial  portions   of\t the
\namendments of  the Act have been set out hereinbefore in the
\ndefinition of  section 2(f). The second part of the impugned
\nAct by\twhich amendments were effected is found in section 3
\nof the\timpugned Act  by which\toriginal item  No. 19 in the
\nFirst Schedule to the Excise Act was substituted by new Item
\nNo. 19\tI and  for the\toriginal item No. 22, a new item No.
\n22(1) was substituted. These are:\n<\/p>\n
\t ”  1. Cotton  fabrics, other than (i) embroidery in
\n     the piece,\t in strips  or in  motifs, and\t(ii) fabrics
\n     impregnated, coated  or laminated\twith preparations of
\n     cellulose derivatives  or of  other artificial  plastic
\n     materials\n<\/p>\n
     (a)  cotton fabrics, not subjected to any process
\n\t\t\t\t\t     Twenty per cent
\n\t\t\t\t\t\t  ad-valorem\n<\/p>\n
     (b)  cotton  fabrics,   subjected\tto  the\t process  of
\n\t  bleaching, mercerising, dyeing, printing,
\n306<\/span>
\n\t  water-proofing,  rubberising,\t  shrink-  proofing,
\n\t  organdie processing  or any  other process  or any
\n\t  two or more of these processes.<\/p>\n
\n\t\t\t\t\t     Twenty per cent\n\t\t\t\t\t\t  ad-valorem\n     XXX\t\t      XXX\t\t       XXX\n<\/pre>\n
\t 22(1) Man-made fabrics other than (i) embroidery in
\n     the  piece,  in  strips  or  in  motifs,  (ii)  fabrics
\n     impregnated, coated  or laminated\twith preparations of
\n     cellulose derivatives  or of  other artificial  plastic
\n     materials-\n<\/p>\n
     (a)  man-made fabrics, not subjected to any process.\n<\/p>\n
\t\t\t\t\t     Twenty per cent
\n\t\t\t\t\t     ad-valorem plus
\n\t\t\t\t\t     rupees five per
\n\t\t\t\t\t       square metre.\n<\/p>\n
     (b)  man-made fabrics,  subjected\tto  the\t process  of
\n     bleaching,\t  dyeing,    printing,\t shrink\t   proofing,
\n     tentering, heat-setting, crease resistant processing or
\n     any  other\t  process  or  any  two\t or  more  of  these
\n     processes.\n<\/p>\n
\t\t\t\t\t     Twenty per cent
\n\t\t\t\t\t     ad-valorem plus
\n\t\t\t\t\t     rupees five per
\n\t\t\t\t\t       square metre.\n<\/p>\n
\t It may be pointed out that the original Item No. 19
\n     I\treferred  to  “cotton  fabrics”.  It  provided\tthat
\n     “cotton  fabrics\tmeans  all   varieties\tof   fabrics
\n     manufactured either  wholly or  partly from  cotton and
\n     includes dhoties,\tsarees, chadders,  bed-sheets,\tbed-
\n     spreads, counter-panes, table cloths, embroidery in the
\n     piece, in\tstrips or in motifs and fabrics impregnated,
\n     coated or\tlaminated  with\t preparations  of  cellulose
\n     derivatives or of other artificial plastic materials.”\n<\/p>\n
307<\/span><\/p>\n
The proviso  is not relevant for the issue now. The original
\nItem 19 I read as follows:\n<\/p>\n
\t “I. Cotton fabrics other than (i) embroidery in the
\n     piece,  in\t strips\t or  in\t motifs,  and  (ii)  fabrics
\n     impregnated, coated  or laminated\twith preparations of
\n     cellulose derivatives  or of  other artificial  plastic
\n     materials”.\n<\/p>\n
     Thus, Item\t No. 19 I is now substituted by the new item
\nreferred to  above and\tthe effect  of this  substitution is
\nthat for  the purposes\tof excise  duty cotton\tfabrics have
\nbeen categorised into two classes, namely (a) cotton fabrics
\nnot  subjected\t to  any  process  and\t(b)  cotton  fabrics
\nsubjected to  any process of bleaching, mercerising, dyeing,
\nprinting,  water-proofing,   rubberising,   shrink-proofing,
\norgandie processing  or any other process or any two or more
\nof these  processes. The  duty on each one of them is twenty
\nper cent ad-valorem. Substantially the same is the nature of
\nthe substitution  of old  Item No.  22(1) by  new  Item\t No.
\n22(1).\n<\/p>\n
     This item\treferred to  man-made  fabrics\tand  by\t the
\namendment, man-made fabrics have again been divided into two
\ncategories, namely,  (a) man-made  fabrics, not subjected to
\nany process, and (b) man-made fabrics subjected to different
\nprocesses referred to in clause (b).\n<\/p>\n
     Cotton fabrics and man-made fabrics were also subjected
\nto the\tadditional duties  of excise  as  a  result  of\t the
\namendments of  the Additional  Duties of  Excise  (Goods  of
\nSpecial Importance)  Act, 1957\t(hereinafter referred  to as
\n“the Additional\t Duties Act”).\tBy section 4 of the amending
\nact, Item  Nos. 19  I and 22(2) of the First Schedule to the
\nExcise\tAct   were  also  similarly  amended  by  making  an
\nidentical substitution\tof Item\t No. 191  and 22(1)  in\t the
\nFirst Schedule\tto the\tAdditional Duties Act. The Amendment
\nAct has\t been made retrospective in operation, and so far as
\ncotton fabrics\tare concerned,\tit became operative from 1st
\nMarch, 1955 and so far as man-made fabrics are concerned, it
\nbecame operative  from 18th  June, 1977.  Now, it  has\tbeen
\nprovided by  clause (iv)  of sub-section (1) of section 5 of
\nthe Amendment Act that amendments of clause (f) of section 2
\nof the\tExcise Act should be treated as having been in force
\nat all\trelevant times subject to the modifications that the
\nreference in  the Excise Act to the “goods comprised in Item
\nNo. 19\tI of  the First\t Schedule” shall  be construed\tas a
\nreference to such “cloth”, “cotton
\n308<\/span>
\ncloth”,or, as  the case\t may  be,  ‘  cotton  fabrics”,\t and
\nreference to the A “goods comprised in Item No. 22(1) of the
\nFirst Schedule”\t shall be  construed as\t a reference to such
\n“rayon or  artificial silk  fabrics” or, as the case may be,
\n“man-made fabrics”.  Section 5(2)  of the Amendment Act also
\nvalidates duties  of excise  already  levied,  assessed,  or
\ncollected on  cloth, cotton  cloth, cotton  fabrics, woollen
\nfabrics, rayon\tor  artificial\tsilk  fabrics  and  man-made
\nfabrics subjected  to any  process.  It\t provides  that\t all
\nduties of  excise levied, assessed or collected or purported
\nto have\t been levied, assessed or collected, before the date
\nof commencement\t of  the  Amendment  Act,  on  (i)  “cloth”,
\n“cotton\t cloth”\t  and  “cotton\tfabrics”  subjected  to\t any
\nprocess, (ii)  “woollen fabrics”,  subjected to any process,\n<\/p>\n
(iii) “rayon  or   artificial silk  fabrics”  and  “man-made
\nfabrics” subjected  to any  process, under  any Central\t Act
\nshall be  deemed to  be, and  shall be deemed always to have
\nbeen as\t validly levied,  assessed or  collected as  if\t the
\nprovisions of  section 5  had been  in force on and from the
\nappointed day.\tIt is also expressly enacted in section 5 of
\nthe Amendment  Act that every Central Act as in force at any
\ntime during the period commencing with the appointed day and
\nending\twith   day  immediately\t  preceding  the   date\t  of
\ncommencement of\t the Amendment\tAct  and  providing  for  or
\nrelating to  the levy  of duties  of excise on “(a) ‘cloth’,
\n‘cotton cloth’ or, as the case may be, ‘cotton fabrics’, (b)
\n‘woollen fabrics’,  (c) ‘rayon\tor artificial silk fabrics’,
\nor as  the case\t may be,  ‘man-made fabrics’, shall have and
\nshall be  deemed to  have always  had effect during the said
\nperiod as if (i) such ‘cloth’ or as the case may be, ‘cotton
\nfabrics’ comprised  for the  purpose of\t the  duty  leviable
\nunder the  Excise Act- (A) a sub-item covering such ‘cloth’,
\n‘cotton cloth’\tor ‘cotton  fabrics’ not  subjected  to\t any
\nprocess mentioned in sub-clause (v) of clause (f) of section
\n2 of the Central Excise Act, as amended by this Act; and (B)
\na sub-item  covering such  ‘cloth’ ‘cotton cloth’ or ‘cotton
\nfabrics’ subjected  to any  such process  or any two or more
\nsuch processes\tand the\t rate or  duty specified in such Act
\nwith  respect  to  such\t cloth,\t cotton\t cloth,\t or  ‘cotton
\nfabrics’ had  been specified separately with respect to each
\nof the\taforementioned sub-items thereof”. Similar provision
\nwas also  made in clause (iii) of sub-section (1) of section
\n5 in  respect of “rayon or artificial silk fabrics” or “man-
\nmade fabrics”.\tIt is  common  ground  that  the  effect  of
\nvarious\t amendments  inserted  in  the\tExcise\tAct  by\t the
\nAmendment Act  was to  include the  processes of  bleaching,
\ndyeing and  printing, in so far as the present petitions are
\nconcerned, within  the definition of the word “manufacture”.
\nIt is  also common ground that by making amendment to Tariff
\nItem
\n309<\/span>
\nNo. 19\tI and  by creating two separate categories of cotton
\nfabrics, that  is, (1) not subjected to any process, and (2)
\nsubjected to  the A processes and by making these amendments
\nretrospective recoveries  which have  so far  been made from
\nthe processors\tin question  were sought to be legalised. If
\nthese amendments  can stand the test of challenge of Article
\n19(1)(g) and  14 and  if the  amendments in section 2(f) are
\nwithin the legislative competence of the Parliament, and the
\nprocess\t of   bleaching,  dyeing   and\tprinting  and  other
\nprocesses mentioned  in the  newly introduced  clause (v) o
\nsection\t 2(f)\twere  manufacturing   processes,  then\t the
\nprocessors would become liable to pay excise duty, and there
\ncannot be any question of refund. This is not disputed.\n<\/p>\n
     The amending  Act has,  however,  been  challenged\t and
\nvarious submissions on behalf of the respective parties were
\nmade and numerous decisions were referred to us.\n<\/p>\n
     The following  main points\t fall for  consideration  in
\nthese applications and appeals:\n<\/p>\n
     1.\t  Whether cotton fabrics subjected to the process of
\n\t  bleaching, mercerising,  dyeing,  printing,  water
\n\t  proofing etc.\t specially the\tprocesses  conducted
\n\t  and carried  out  by\tthe  petitioner\t company  as
\n\t  enumerated before in respect of cotton fabrics and
\n\t  woollen  fabrics\/man-made   fabrics  as  mentioned
\n\t  under Items  19 or  22  of  the  Schedule  to\t the
\n\t  Central   Excises   and   Salt   Act\t amount\t  to
\n\t  ‘manufacture’\t as  the  Act  stood  prior  to\t the
\n\t  impugned Act of 1980. In other words whether these
\n\t  various processes  carried out  by the  petitioner
\n\t  company  amount   to\t bringing   into   existence
\n\t  different and\t distinct goods,  commercially known
\n\t  as such,  to attract\tlevy of duty under section 4
\n\t  of the Central Excises and Salt Act, 1944.\n<\/p><\/blockquote>\n
     2.\t  Whether and  in any  event after the impugned Act,
\n\t  the levy  is valid.  In connection  with the\tsaid
\n\t  contention it\t has  to  be  examined\twhether\t the
\n\t  impugned Act\tis intra vires entry 84 of List I of
\n\t  the Seventh  Schedule to  the Constitution  and if
\n\t  not, whether\tthe said impugned Act can be said to
\n\t  be valid  in any event under entry 97 of List I of
\n\t  the Seventh Schedule to the Constitution,
\n310<\/span>\n<\/p><\/blockquote>\n
     3.\t  Whether the  impugned Act  violates Article  14 or
\n\t  Article 19(1)(g) of the Constitution.<\/p><\/blockquote>\n
     If the  impugned Act  is valid,  then no other question
\nneed be\t examined except  the question\tas to what should be
\nthe actual levy of the duties.\n<\/p>\n
       It is therefore necessary to examine the amendment of
\nthe definition\tof ‘manufacture’  in  section  2(f)  of\t the
\nCentral Excise and Salt Act, 1944 and Tariff Items 19(1) and
\n22(1) of the First Schedule to the Central Excise Tariff.\n<\/p>\n
       The  main contention  of the  petitioner is  that the
\nimpugned Act  is ultra\tvires of  entry 84  of List I of the
\nSeventh Schedule.  It is not necessary to set out in extenso
\nentry  84   of\tList  I\t of  the  Seventh  Schedule  to\t the
\nConstitution. It  deals with duties of excise on tobacco and
\nother goods  manufactured or  produced in  India. It  may be
\nmentioned that\tthe charging  section i\t e. section 3 of the
\nCentral Excises\t and Salt  Act, 1944  empowers the  levy and
\ncollection in  such manner  as may  be prescribed  duties of
\nexcise on  all excisable  goods other  than salt  which\t are
\nproduced or  manufactured  in  India  and  a  duty  on\tsalt
\nmanufactured in, or imported by land into, any part of India
\nas they\t apply in respect of goods at rates set forth in the
\nFirst Schedule\tto the\tsaid Act.  “Excisable  goods”  under
\nsection 2(d)  means goods specified in the First Schedule as
\nbeing subject  to a duty of excise and includes salt. It was
\nurged in  support of  this application\tthat Parliament\t was
\nincompetent under entry 84 to enact the impugned Act whereby
\nan artificial  meaning to  the word ‘manufacture’ was given.
\nThe  word  ‘manufacture’  must\tbe  given  its\tetymological
\nmeaning. It  was urged that process of bleaching, dyeing and
\nprinting are not processes which could properly be described
\nas manufacturing  processes. Therefore it was submitted that
\nby making  the said  amendment to the word ‘manufacture’ and
\nby including such processes in the definition of manufacture
\nand in\teffectuating the  consequential amendments in Tariff
\nItem Nos.  19 I\t and 22(1),  Parliament has  gone beyond the
\nscope of  entry 84  of List I of the Seventh Schedule to the
\nConstitution and  as such  is ultra  vires. It was submitted
\nthat all  that was  being done\twas that  fully manufactured
\ncotton fabrics is subjected to further process of bleaching,
\ndyeing\tand   printing\tand   therefore\t the  article  still
\ncontinues to  be cotton\t fabric\t and  no  different  article
\nhaving distinctive  features, character\t and use  comes into
\nexistence. It was submitted that grey
\n311<\/span>
\ncloth before  it is  processed is cotton fabric and after it
\nis processed,  continues to  be cotton\tfabrics. As  such it
\ncannot be  said that  there A  was any manufacture involved.
\nNumerous decisions  on the  question  whether  a  particular
\nprocess was a manufacturing process or not were referred to.
\nOn the other hand on behalf of the revenue it was urged that
\nthe  processes\t of  bleaching,\t dyeing\t and  printing\twere
\nessentially manufacturing  processes inasmuch as a result of
\nthese processes,  a new\t substance known  to the  market  is
\nbrought into  being. In\t support of this contention, several
\ndecisions were\talso referred to. Though it is not necessary
\nto refer to all these decisions, some of these may be noted.\n<\/p>\n
     In Union  of India\t v. Delhi  Cloth & General Mills,<\/a>(l)
\nthis Court  was concerned  with the  question as  to whether
\nmanufacture of\t‘refined oil’  from raw materials undertaken
\nby  the\t  manufacturers\t of   Vegetable\t products  known  as
\nVanaspati was  liable  to  excise  duty.  The  manufacturers
\npurchased ground-nut  and til  oil from open markets and the
\noils thus  purchased by\t them were  subjected  to  different
\nprocesses in  order to\tturn  these  into  Vanaspati.  Their
\ncontention was\tthat at\t no  stage  they  produced  any\t new
\nproducts which\tcould come within the items described in the
\nSchedule as  “vegetable non-essential oils, all sorts, in or
\nin relation  to the  manufacture of  which  any\t process  is
\nordinarily carried on with the aid of power”. The contention
\nof the\trevenue was  that the manufacturers in the course of
\nmanufacture of\tVanaspati which was a vegetable product from
\nthe raw\t ground-nut and til oil, brought into existence what
\nis known  in the  market as ‘refined oil, after carrying out
\nsome process  with the\taid of\tpower and it fell within the
\ndescription of\t“vegetable non-essential  oils” and  as such
\nwas p liable to duty. And in that context it was pointed out
\nby this Court that excise duty was a duty on the manufacture
\nof goods  and not  on sale. After referring to the arguments
\nof respective  parties, this  Court noted at page 596 of the
\nreport\tthe   contention  on  behalf  of  the  revenue\tthat
\nmanufacture was\t complete as  soon as  by the application of
\none or more process, the raw material underwent some change.
\nIt further stated-\n<\/p>\n
\t    “To\t say  this  is\tto  equate  “processing”  to
\n     “manufacture” and\tfor this  we can  find no warrant in
\n     law. The word “manufacture” used as a verb is generally
\n(1) 11963]1 SUPP, S.C.R. 586.\n<\/p><\/blockquote>\n
312<\/span><\/p>\n
     under stood to mean as “bringing into existence a new A
\n     substance” and  does not  mean merely  “to produce some
\n     change in\ta substance”,  however, minor in consequence
\n     the change\t may be.  The distinction  is  well  brought
\n     about in  a passage thus quoted in Permanent Edition of
\n     Words and\tPhrases, Vol. 26, from an American Judgment.
\n     The passage runs thus:\n<\/p><\/blockquote>\n
\t “Manufacture” implies a change, but every change is
\n     not manufacture  and yet  every change of an article is
\n     the result\t of treatment,\tlabour and manipulation. But
\n     something\tmore   is  necessary   and  there   must  be
\n     transformation; a new and different article must emerge
\n     having a distinctive name, character or use.”
\n     Hence according to this decision, if a new substance is
\nbrought into  existence or  if a  new or  different  article
\nhaving a  distinctive name,  character or  use results\tfrom
\nparticular processes, such process or processes would amount
\nto manufacture.\t This view  point  has\tbeen  reiterated  in
\nnumerous decisions. Reference in this connection may be made
\nto the\tdecision in  the case  of Union\t of India v. II.U.F.
\nBusiness known\tas Ramlal  Mansukhrai, Rewari & Anr.(‘) This
\nCourt at pages 941-942 of the report observed as follows:-
\n\t “The  word “manufacture” is defined in Section 2(f)
\n     of the  Act as  including\tany  process  incidental  or
\n     ancillary to  the completion of a manufactured product.
\n     The rolling  of a\tbillet into  a circle is certainly a
\n     process in the course of completion of the manufactured
\n     product, viz., circles. In the present case, as we have
\n     already indicated\tearlier, the product, that is sought
\n     to be subjected to duty, is a circle within the meaning
\n     of that  word used\t in Item  26A(2). In  the other\t two
\n     cases  which  came\t before\t this  Court,  the  articles
\n     mentioned in  the relevant\t items of the First Schedule
\n     were never\t held to  have come  into existence, so that
\n     the completed  product, which was liable to excise duty
\n     under the\tFirst Schedule,\t was never  produced by\t any
\n     process. In the case before us, circles in any form are
\n     envisaged\tas   the  completed   product  produced\t  by
\n     manufacture which\tare subjected  to excise  duty.\t The
\n     process of conversion of billets into circles
\n(1) [l971] I S.C.R. 937.\n<\/p>\n
313<\/span><\/p>\n
     was described  by the legislature itself as manufacture
\n     of circles.”\n<\/p>\n
       The  question of ‘manufacture’ was also considered by
\nthis  Court   in  the\tcase  of   Allenburry  Engineers  v.
\nRamakrishna Dalmia Ors.<\/a>(1)
\n     It may  be noted  in the  case  of\t Hiralal  Jitmal  v.
\nCommissioner of\t Sales Tax<\/a>(2),\ta Division  Bench of  Madhya
\nPradesh\t High  Court  in  considering  the  meaning  of\t the
\nexpression `manufacture’  for  the  purpose  of\t the  Madhya
\nBharat Sales  Tax Act, 1950, was of the view that it was not
\nnecessary  that\t there\tmust  be  a  transformation  in\t the
\nmaterials and  that the\t transformation must have progressed
\nso far\tthat the  manufactured article\tbecame\tcommercially
\nknown as  a different article from the raw materials and all
\nthat was  required was\tthat the  material should  have been
\nchanged or  modified by\t man’s art or industry so as to make
\nit capable  of being  sold in  an acceptable form to satisfy
\nsome want,  or desire,\tor fancy  or taste  of\tman.  It  is
\napparent that  the concept of ‘manufacture’ in that decision
\nhas been  given a  wide meaning.  It is\t not necessary to go
\ninto this  aspect any further. It may be mentioned that this
\nCourt in the case of Commissioner of Sales Tax, U.P. Lucknow
\nv. Harbilas  Rai and  Sons(3)  pointed\tout  that  the\tword
\n‘manufacture’ has  various shades  of meaning,\tand  in\t the
\ncontext of sales tax legislation, if the goods to which some
\nlabour was  applied remained essentially the same commercial
\narticle, it could not be said that the final product was the
\nresult of  manufacture. Referring to the Madhya Pradesh High
\nCourt decision\tin the\tcase of Hiralal Jitmal (supra), this
\nCourt observed at page 20 as follows:\n<\/p>\n
\t “….The  decision of the Madhya Pradesh High Court
\n     might perhaps be justified on the ground that a printed
\n     or dyed  cloth is commercially a different article from
\n     the cloth which is purchased and printed or dyed.
\n       This is precisely the position here. On behalf of the
\nrevenue, great\temphasis was  laid on  the  view  that\teven
\naccording to  this  Court,  printed  or\t dyed  cloth  was  a
\ncommercially different\tarticle\t from  the  cloth  which  is
\npurchased and printed or dyed.\n<\/p>\n
(l) [1973] 2 S.C.R. 257.\n<\/p>\n
(2) [1957l S.T.C. Vol. VIII, 325 (M.P.).\n<\/p>\n
(3) [1968] S.T.C. Vol. 21 p. 17 (S.C.),
\n314<\/span>
\n     A similar view was taken by the Punjab and Haryana High
\nCourt in the case of East India Cotton Manufacturing Company
\nPrivate Limited\t v. The\t Assessing Authority-cum-Excise\t and
\nTaxation Officer, Gurgaon and Another.(l) The Division Bench
\nin that case positively took the view that sizing, bleaching
\nor dyeing  of raw cloth turns it into a different marketable
\ncommodity, and,\t as such,  amounted to\t“manufacture”  of  a
\ncommercially new  product. Reference  may also\tbe made to a
\ndecision of  the Bombay\t High Court in Kores (India) Limited
\nv. Union  of India  and Others(2),  where the Division Bench
\nwas considering\t the question whether the process of cutting
\nlarge rolls  of paper into specific sizes can dimensions and
\nto roll\t these into  teleprinter rolls with the aid of power
\ndriven machines\t amounted manufacture  under section 2(f) of
\nthe  Central  Excise  Act.  The\t Division  Bench  held\tthat
\nteleprinter rolls are different commodities or articles from
\nthe one\t used as  the base  material which  is large size or
\njumbo rolls writing or printing papers.\n<\/p>\n
     Fabric itself  means woven\t materials. It was contended
\nthat processing\t the manufactured fabric does not bring into
\nexistence any  new woven  material but the question is: does
\nnew and\t different goods emerge having distinctive name, use
\nand character  ? The  Madras High  Court in  the case  of  K
\nVenkataraman and Company and others v. Deputy Commercial Tax
\nOfficer, Coimbatore  IV and  others(8) had  to consider that
\ncinders do  not fall  within the expression “coal, including
\ncoke in\t all its  form” in  item I of the Second Schedule of
\nthe Tamil  Nadu General Sales Tax Act, 1959. Where the words
\nused in an entry are comprehensive or wide enough to include
\nall kinds  or types  of particular  goods falling within the
\ndescription, the  question was whether their scope should be
\nrestricted and\tin that context it was held that mere change
\nin form\t or colour  of the goods by reason of any processing
\ncannot be  held to be sufficient ground for removing it from
\nits original classification.\n<\/p>\n
     In the  case of Commissioner of Sales Tax, U.P. Lucknow
\nv. Harbilas  Rai and Sons (supra), it was held that the word
\n‘manufacture’ has  various shades  of meaning,\tand  in\t the
\ncontest of sales tax legislation, if the goods to which some
\nlabour is  applied remain  essentially the  same  commercial
\narticle, it cannot be said that the\n<\/p>\n
(l) [1972] S.T.C. Vol. 30 p. 489 (Pb. & Har.).
\n(2) [1982] E.L.T. Vol. 10, p. 253.\n<\/p>\n
(3) [1972] S.T.C. Vol. 30 p. 57 (Mad.).\n<\/p>\n
315<\/span><\/p>\n
final product  is  the\tresult\tof  manufacture.  There\t the
\nassesses,dealers in pig bristles, bought bristles plucked by
\nKanjars from  pigs, A boiled them, and washed them with soap
\nand other  chemicals, sorted  them out\taccording  to  their
\nsizes  and   colours,  tied  them  in  separate\t bundles  of
\ndifferent sizes and despatched them to foreign countries for
\nsales. It  was held that the sales made to foreign countries
\nwere not taxable as the bristles were not manufactured goods
\nwithin Explanation  II(ii) to section 2(h) of the U.P. Sales
\ntax Act, 1948.\n<\/p>\n
     In Deputy\tCommissioner, Sales  Tax (Law)\tBoard  of  .
\nRevenue (Taxes) Ernakulam v. Pio Food Packers<\/a>(‘) arising out
\nof Kerala  General Sales  Tax Act  1963 where the expression
\nused under section 5-A(l)(a) was “consumes such goods in the
\nmanufacture of\tother goods  for  sale\tor  otherwise”,\t and
\nmeaning of  the expression under section 5-A(1) (a) fell for
\nconsideration for exigibility to tax of pineapple fruit when
\nprocessed into\tslices for  the purpose\t of  being  sold  in
\nsealed cans. Though in the facts of that case in the context
\nof Sales Tax Law, it was held that there was no manufacture,
\nthe principles enunciated by this Court are in the following
\nterms:\n<\/p>\n
\t “There are several criteria for determining whether
\n     a commodity  is consumed  in the manufacture of another
\n     The generally  prevalent test  is whether\tthe  article
\n     produced is regarded in the trade, by those who deal in
\n     it, as distinct in identity from the commodity involved
\n     in its  manufacture. Commonly,  manufacture is  the end
\n     result of\tone or\tmore processes,\t through  which\t the
\n     original commodity\t is made  to pass.  The\t nature\t and
\n     extent of processing may vary from one case to another,
\n     and indeed\t there may  be several\tstages of processing
\n     and perhaps  a different  kind of\tprocessing  at\teach
\n     stage.  With   each  process   suffered,  the  original
\n     commodity experiences a change. But it is only when the
\n     change or\ta series  of changes,  take the commodity to
\n     the point\twhere  commercially  it\t can  no  longer  be
\n     regarded as  the  original\t commodity  but\t instead  is
\n     recognised\t as  a\tnew  and  distinct  article  that  a
\n     manufacture can  be said  to take place. Where there is
\n     no\t essential   difference\t in   identity\tbetween\t the
\n     original commodity\t and the processed article it is not
\n     possible to say that one commodity has been
\n(1) [1980] 3 S.C.R. 1271.\n<\/p>\n
316<\/span><\/p>\n
     consumed in  the manufacture  of another. Although it A
\n     has undergone  a  degree  of  processing,\tit  must  be
\n     regarded as still retaining its original identity.”
\n     It may  be noted  that the taxable event in the context
\nof Sales  Tax Law  is ‘sale’.  The taxable  event under\t the
\nExcise\tLaw   is  ‘manufacture’.   The\t moment\t  there\t  is
\ntransformation into  a new commodity commercially known as a
\ndistinct and  separate commodity  having its  own character,
\nuse and\t name, whether\tbe it  the result  of one process or
\nseveral processes ‘manufacture’ takes place and liability to
\nduty is\t attracted. Though in the facts of that case perhaps
\nit was not necessary and as such the attention of the
\n  Court\t was  not  drawn  to  the  definition  of  the\tterm
\n‘manufacture’ under  section 2(f)  of the Central Excise Act
\nnor was the Tariff Item IB placed before the Court.\n<\/p>\n
     This decision  was referred to and followed in the case
\nof Chowgule  & Co. Pvt. Ltd. and Another v. Union of India &
\nOthers.<\/a>(l) Whatever  may be  the operation, it is the effect
\nof the\toperation on  the commodity that is material for the
\npurpose of  determining whether\t the  operation\t constitutes
\nsuch a\tprocess which  will  be\t part  of  ‘manufacture\t Any
\nprocess\t or  processes\tcreating  something  else  having  a
\ndistinctive name, character and use would be manufacture.\n<\/p>\n
     It is  appropriate now  to refer to Gujrat High Court’s
\ndecision in the case of Vijay Textile, y. Union of India.(2)
\nGujarat High  Court held  that cotton  fabrics subjected  to
\nbleaching, dyeing  and printing\t could not  be subjected  to
\nexcise duty  under Item\t 19  (1).  The\tGujarat\t High  Court
\nproceeded on  the footing  that the  processes of bleaching,
\ndyeing and  printing were  manufacturing processes  and held
\nthat excise  duty would be leviable under residuary Item No.
\n68 of  the First Schedule. This decision has two aspects one
\nwhich was  emphasised on  behalf of  the revenue  i.e.\tthat
\nGujarat High  Court accepted  the position that processes of
\nbleaching, dyeing  and printing were manufacturing processes
\nand such  on the  strength of that decision, it could not be
\nsaid that  these processes  do not amount to manufacture and
\non  the\t  other,  which\t  was  stressed\t on  behalf  of\t the
\npetitioners, was that such processes could not transform the
\ncloth
\n(1) [1981] I S.CC.. 653.\n<\/p>\n
(2) [1979] 4 E.L.T. J. 181.\n<\/p>\n
317<\/span><\/p>\n
into item  19(1). The Gujarat High Court’s decision which is
\nreported at page 193 of the report is as follows:-
\n\t“In the instant case, the excise duty claimed on the
\n     basis of  the market  value  of  the  processed  cotton
\n     fabrics or\t man-made fabrics  cannot be levied because,
\n     assuming that  process amounts to manufacture, all that
\n     they have\tdone  is  to  manufacture  processed  cloth,
\n     processed fabric,\teither cotton  or man-made  and that
\n     not being\ta taxable  event in  the light\tof Section 3
\n     read with\tsection 2 (d) of the Act and Items 19 and 22
\n     levy of  excise duty  on this basis was ultra vires and
\n     contrary  to   law.  Therefore,   the  petitioners\t are
\n     entitled to  the refund  of the  excess of\t excise duty
\n     paid by  them during  the period  of last\tthree  years
\n     immediately preceding  the filing\tof the Special Civil
\n     Application over  what they  were bound  to pay  on the
\n     footing  that   processing\t of  cotton  fabrics  is  an
\n     excisable activity\t covered by  Item 68. Item 68 refers
\n     to\t  “All\t other\t goods\t not   specified   elsewhere
\n     manufactured in a factory.” Therefore, processed cotton
\n     fabrics   and   processed\t man   made   fabrics\twere
\n     manufactured in  the factories  of the  petitioners and
\n     since they\t are not  covered by  Item 19  or 22  of the
\n     Schedule, they  are liable\t to pay ad valorem duty only
\n     in respect\t of the\t value added  by them at the time of
\n     processing\t because  the  only  manufacturing  activity
\n     which they\t have done is the manufacturing of processed
\n     fabrics from fabric which was already in existence. The
\n     Excise authorities\t are therefore directed to calculate
\n     the ad  valorem excise  duty during the period of three
\n     years immediately\tpreceding the  institution  of\teach
\n     petition  before  us  and\tcalculate  the\texcise\tduty
\n     payable by each of these petitioners under Item 68 only
\n     in\t respect   of  the   value  added  by  each  of\t the
\n     petitioners by  the processing of the fabric concerned.
\n     The excise\t duty paid in excess of such ad valorem duty
\n     under  Item   68  during  the  period  of\tthree  years
\n     immediately preceding the institution of the respective
\n     Special Application  is ordered  to be  refunded to the
\n     petitioners concerned in each of their petitions.”
\n     The main  question that  fell for\tconsideration before
\nthe Gujarat  High Court was whether the articles fell within
\nTariff Entry  19 or  22 as contended by the revenue or under
\nresiduary Entry 68.\n<\/p>\n
318<\/span><\/p>\n
     It appears in the light of the several decisions and on
\nthe construction  of the  expression  that  the\t process  of
\nbleaching, dyeing  and printing\t etymologically\t also  means
\nmanufacturing  processes.  In  support\tof  this  contention
\nreliance on behalf of the petitioners was also placed on the
\ncase  of   Extrusion  Process  Pvt.  Ltd.  v.  N.R.  Jadhav,
\nSuperintendent of  Central Excise (1) where the Gujarat High
\nCourt had  held that  printed and  lacquered aluminium tubes
\ndid not\t have, in  relation to\ta plain\t extruded tubes\t any
\ndistinctive name, character or use as both could be used for
\nthe same  purpose, both\t enjoy the same name, and therefore,
\nthese could  not be said to be new substance distinguishable
\nfrom plain extruded tubes. This decision, however, cannot be
\nof assistance  in the  instant case. The petitioners in that
\ncase had  been printing\t and lacquering\t only plain extruded
\ntubes  and   the  question   was  whether  by  printing\t and
\nlacquering  the\t  plain\t extruded  tubes  of  aluminium\t the
\npetitioners firstly applied any further process of extrusion
\nto these  and there  by manufactured tubes. It was held that
\nprinting and  lacquering were  not even\t remotedly connected
\nwith the  manufacture of  aluminium tubes.  It was a process
\nindependent of\tthe  manufacture  of  aluminium\t tubes.\t The
\nquestion whether  a  particular\t process  is  a\t process  of
\nmanufacture or\tnot has\t to be\tdetermined naturally  having
\nregard to  the facts  and circumstances\t of  each  case\t and
\nhaving regard  to the  well-known tests\t laid down  by\tthis
\nCourt. Similarly  the facts  of the  decision in the case of
\nSwastic\t Products,   Baroda  v.\t Superintendent\t of  Central
\nExcise(2) are also distinguishable.\n<\/p>\n
     The decision  of this Court in the case of Kailash Nath
\nand Another  v. The  State of  U.P. and Others<\/a>(3) was on the
\nquestion of  interpretation of\ta notification issued by the
\nU.P. Government exempting sale of manufactured cloth or yarn
\nwith a\tview to\t export such cloth or yarn. The notification
\nprovided that  with effect  from  1st  December,  1949,\t the
\nprovisions of  the U.P. Sales Tax Act, 1948 did not apply to
\nthe sales  of cotton  cloth or\tyarn manufactured  in  Uttar
\nPradesh, made on or after 1st December, 1949, with a view to
\nexport such  cloth or  yarn outside the territories of India
\non the\tcondition  that\t the  cloth  or\t yarn  was  actually
\nexported  and  proof  of  such\tactual\texport\twas  further
\nfurnished. This\t Court in  that case  held that although the
\ncolour of the cloth had changed by printing and
\n(1) [1979] 4 E.L.T. J. 380 (Gujarat).\n<\/p>\n
(2) [1980] 6 E.L.T. 164 (Gujarat).\n<\/p>\n
(3) [1957] S.T.C. Vol. VIII p. 358 (S.C.).\n<\/p>\n
319<\/span><\/p>\n
processing, the\t cloth exported\t was the  same as  the cloth
\nsold by the petitioners in that case and they were therefore
\nnot entitled  to exemption  under the notification. As would
\nbe apparent  from the  facts  mentioned\t herein-before,\t the
\nquestion  for\tconsideration  before  this  Court  was\t the
\nidentity of  cloth purchased  and exported  having regard to
\nthe use\t of the\t words “cloth”\tin the\tnotification.  These
\nwords  were  construed\tby  this  Court\t to  mean  that\t the
\nLegislature did\t not intend  that the identical thing should
\nbe  exported   in  bulk\t quantity  or  that  any  change  in
\nappearance would be crucial to alter it. It was also pointed
\nout that  the expression  “such cloth  or yarn”\t would\tmean
\ncloth or  yarn manufactured  in Uttar  Pradesh and  sold and
\nthose words  had nothing  to do\t with the  transformation by
\nprinting and  designs on  the cloth.  It is  implicit in the
\ndecision of  this Court\t that by  printing or designing, the
\ncloth was in fact transformed. But since the decision turned
\non the\tconstruction of the notification in which any change
\nin appearance  or transformation  of an article into another
\ndid not\t become relevant,  the\tdecision  would\t not  be  of
\nassistance in  disposing of  the present case. This question
\nhas been  elaborately considered by the Bombay High Court in
\nthe case of x New Shakti Dye Works Private Ltd. and 24 other
\npetitions heard along with the same and are under appeals to
\nthis Court  by special leave. We are in respectful agreement
\nwith the  conclusions reached  by the  learned Acting  Chief
\nJustice of the Bombay High Court in that decision.\n<\/p>\n
     In England,  in the  case of  Mc Nicol  and Another  v.
\nPinch,(l) the “manufacture of saccharin” in the Finance Act,
\n1901 and  the  Revenue\tAct,  1903  was\t held  to  mean\t the
\n“bringing into being as saccharin”. There the appellants had
\nsubjected certain “330 saccharin” (i.e., saccharin 330 times
\nas sweet  as sugar)  to a  chemical process,  the result  of
\nwhich  was   that  in  some  cases  “550  saccharin”  (i.e.,
\nsaccharin 550  times as\t sweet as  sugar) was  produced,  in
\nothers a  mixture sweeter  than 330, but not so sweet as 550
\nsaccharin, and\tin few\tcases a\t mixture less sweet than 330
\nsaccharin was  there. It  was held by the Court of Appeal by
\nBray  and  Darling  JJ.,  Ridley,  J.  dissenting  that\t the
\nappellants  were  not  manufacturing  saccharin\t within\t the
\nmeaning of  the Finance\t Act, 1901, so as to be compelled to
\ntake out the excise licence required by s. 9 of that Act and
\ns. 2 of the Revenue Act, 1903, and to obtain from an officer
\nof Inland  Revenue a  book such\t as was\t prescribed  by\t the
\nRegulation No. 633 of
\n(1) [1906] 2 K.B 3s2.\n<\/p>\n
320<\/span><\/p>\n
the Statutory  Rules, 1904,  inasmuch as  the substance with
\nwhich the  appellants dealt was always saccharin both before
\nand after  their treatment  of it. Bray J. Observed at pages
\n359-360 of the report as follows-\n<\/p>\n
\t “We have to determine whether upon the facts stated
\n     in the  case the  appellants did manufacture saccharin.
\n     Let us  see what  those facts  are. One of the admitted
\n     facts is  that saccharin  is a  substance produced from
\n     toluene  sulphonamide.   That  is\t the  definition  of
\n     saccharin. This  saccharin\t was  not  produced  by\t the
\n     appellants from  toluene sulphonamide;  it was produced
\n     (if  it  can  be  said  to\t have  been  produced)\tfrom
\n     saccharin itself.\tThe appellants have not manufactured
\n     saccharin from  toluene sulphonamide.  The case  states
\n     that 330  saccharin  is  produced\twithout\t eliminating
\n     certain para  products, or\t only eliminating  them to a
\n     very small\t extent.  Then,\t in  order  to\tconvert\t 330
\n     saccharin into  550, certain of the para compounds have
\n     to be  eliminated. Then  it states\t that “this mixture”
\n     (that is,\tthe  330)  “is\tknown  commercially  as\t 330
\n     saccharin ”  The other mixture is known commercially as
\n     550 saccharine. In both cases it is saccharin, and as a
\n     dutiable article  330 saccharin  does not differ in the
\n     smallest degree  from 550\tsaccharin. The\tsame duty is
\n     payable on\t 550 saccharin as on 330 saccharin. What the
\n     appellants do is stated thus: “The appellants subjected
\n     certain 330  saccharin to\ta chemical  process  .\tThis
\n     amount of\t330 saccharin  was not\ttreated in one bulk,
\n     but  in   separate\t quantities.   The  result  of\tthis
\n     treatment was  that in  some cases\t 550  saccharin\t was
\n     produced, and  in some cases a mixture sweeter than 330
\n     saccharin\tbut  not  so  sweet  as\t 550  saccharin\t was
\n     produced,” and  in some  cases less  sweet. But  it was
\n     always  saccharin;\t it  was  saccharin  before  it\t was
\n     treated, and it was saccharin after it was treated.”
\n     Darling J.\t at pages  361-362 of  the report  made\t the
\nfollowing interesting observations:-\n<\/p>\n
\t “I do not say that to use the word “manufacture” as
\n     exactly synonymous with the word “make,” or to use
\n321<\/span>
\n     the words\t“to manufacture”  as exactly synonymous with
\n     the words\t“to make”  is strictly\tgrammatical,  but  I
\n     think A  that is  what the statute has done. I think it
\n     possible that  in a  literary sense  “to make”  and “to
\n     manufacture” may  not have\t precisely the same meaning.
\n     One can put cases where the word “manufacture” might be
\n     used in  a somewhat  strained way, but perhaps a little
\n     more scientifically.  Take the  case of  a carpenter. A
\n     carpenter uses  wood; he begins with wood; he makes the
\n     wood into\tboxes. What  would you\tsay if you wanted to
\n     talk of  his manufacturing\t ? Ordinary people would not
\n     say that  he  manufactured\t wood;\tthey  would  say  he
\n     manufactured boxes.  But I\t am not\t quite sure it might
\n     not be  strictly said that he manufactures the wood. He
\n     applies a\tprocess to  it. I suppose etymologically “to
\n     manufacture” is “to make by hand.” Everybody knows that
\n     you cannot absolutely make a thing by band in the sense
\n     that you  can create  matter by  hand, because  in that
\n     sense you\tcan make nothing: “Ex nihilo nihil fit.” You
\n     can only  make one\t thing out  of another.\t I think the
\n     essence of\t making or  of manufacturing is that what is
\n     made shall\t be a different thing from that out of which
\n     it is  made. Even if it could be strictly said that the
\n     carpenter “manufactures” wood it could not be said that
\n     he “makes”\t wood. The  same with a man who makes boots;
\n     he takes  leather, and  he makes  it into\tboots. If he
\n     simply made  leather into leather nobody could possibly
\n     say that he was a leather manufacturer, hut it would be
\n     possible to  say that  a man  took leather\t and make it
\n     into boots manufactured leather but made boots. I think
\n     it would  be possible to say that, and I am not sure it
\n     would not\tbe strictly  accurate but I cannot read this
\n     statute in\t that way.  (emphasis supplied).  Whether it
\n     would be  possible to read “manufacture” etymologically
\n     as something  very different  from “make,”\t I think the
\n     Act of  1901 uses\t“manufacture” and  “make”  as  being
\n     convertible terms,\t and that  a  man  who\tmanufactures
\n     saccharin under  s. 9  is doing  the same\tthing as  is
\n     called the\t making of  saccharin  under  s.  S  or\t the
\n     manufacturing of glucose or saccharin under sub-s. 2 of
\n     s. 5,  and that  the appellants did not make saccharin,
\n     because they  began and  ended with saccharin. They did
\n     not “make”\t saccharin, and\t in my opinion, from the way
\n     in which the
\n322<\/span>
\n     word is used by the statute, they did not manufacture A
\n     saccharin, and therefore did not require a licence.”
\n     It may,  however, be  pointed out\tthat when Darling J.
\ndealt with  the example\t of a  carpenter, the  learned judge
\nthought it  was right  that it\tcould not  be slid that when
\n‘box’ is  prepared  that  the  carpenter  was  manufacturing
\n‘wood’ but transforming ‘wood’ into ‘box’ would certainly be
\nmanufacturing ‘boxes’  It is  well-settled that\t one  cannot
\nabsolutely make a thing by hand in the sense that nobody can
\ncreate matter  by hand, it is the transformation of a matter
\ninto something else and that something else is a question of
\ndegree,\t whether   that\t something   else  is\ta  different
\ncommercial commodity  having its distinct character, use and
\nname and  commercially known as such from that point of view
\nis a  question depending upon the facts and circumstances of
\nthe case.  Plain wood is certainly different from ‘box’ made
\nof wood.  Rindley J.  it may  be pointed out, disagreed with
\nthe view  and observed\tat page 362 of the report that where
\nany process  of art  is used  upon  some  substance,  it  is
\n“manufactured.” He observed as follows:-\n<\/p>\n
\t  “To say  that a  person does\tnot “manufacture.” a
\n     thing because  it has  the same  name after the process
\n     has been  passed upon  it as it had before seems to me-
\n     but T  suppose I  am wrong-to  be simply  a question of
\n     words. If\tthere had  happened to\tbe another  word for
\n     saccharin\tof  the\t strength  of  550,  different\tfrom
\n     saccharin of  the strength\t of 330,  it would  almost-I
\n     will not  say quite  follow from  the reasoning  of  my
\n     learned  brothers\t that  this   would  have   been   a
\n     manufacture. I  cannot think  that is so. Take the case
\n     of the manufacture of steel; and let it be steel before
\n     it goes  into works:  apply some  process to  it and it
\n     become a  particular short\t of steel.  But it  is steel
\n     both before  and after,  although\tsteel  of  different
\n     qualities. Is  not that  the manufacture  of  steel?  I
\n     should have  thought so.  Take the manufacture of wool,
\n     it is  wool when  it is on the sheep’s back; it is wool
\n     when it  has passed  through the process of sorting and
\n     picking which  it has to go through in the mill. Is not
\n     that the manufacture of wool ? I should have thought it
\n     most certainly was, although the name “wool” is applied
\n     to it  both before\t the process begins and after it has
\n     ended”<\/p><\/blockquote>\n
323<\/span><\/p>\n
     The learned  judge further\t observed that\tin that case
\nsaccharin was  “manufactured” and  manufacture of  saccharin
\ndoes cover a  process that was done in that case.\n<\/p>\n
     In that  view of  the matter  etymologically  the\tword
\n“manufacture” properly\tconstrued would\t doubtless cover the
\ntransformation. In  support of the question whether actually
\nthere is manufacture or not various documents were attempted
\nto be  utilised at the hearing of the application before us.
\nMost of\t these pieces of evidence cannot be admitted at this
\nstage but  indisputably in  the Indian\tStandard Glossary of
\nterms  which   deals  with  various  expressions,  ‘Bleached
\nFabric’ has  been defined  as a\t fabric which  has undergone
\nbleaching treatment  and is  treated by\t the India  Standard
\nInstitution as something different from fabric which has not
\nundergone the  bleaching operations. Different standards are
\nset out\t by the\t same and  the views  of the Indian Standard
\nInstitution can\t be looked  into by  the Court\twith certain
\namount of  creditability. See  in this\tconnection Union  of
\nIndia v.  Delhi Cloth  & General  Mills<\/a> (supra).  So far  as
\nother evidence\tis concerned, as mentioned, hereinbefore, it
\nmay not be safe to deal with the same as these were produced
\nat a  very late\t stage and  all the materials are not on the
\nrecord.\n<\/p>\n
     After the\timpugned Act  was passed  these processes in
\nthe present  case indubitably  fill  within  the  expression
\n“manufacture” if  the impugned\tAct is valid, and within the
\ncompetence  of\tthe  Parliament.  Arguments,  however,\twere
\nadvanced on  behalf of\tthe petitioners\t that in entry 84 of
\nList I\tof Seventh  Schedule, the  expression  “manufacture”
\ncannot be  extended to\tinclude\t processes  which  were\t not
\n“manufacture”. Large  number of\t decisions were cited at the
\nBar on\tthis aspect  of the  matter. It is true that entries
\nthough should  be widely  construed, these  should not be so
\nconstrued as  to bring\tin something which has nothing to do
\nwith the  “manufacture”. It was submitted that legal concept
\nand  connotation   of  “manufacture.’\twere   well-settled.
\nReliance was placed on several decisions for this purpose.\n<\/p>\n
     As has  been noted,  processes of\tthe type  which have
\nbeen incorporated  by the  impugned Act were not so alien or
\nforeign to the concept of “manufacture” that these could not
\ncome within that Concept.\n<\/p>\n
324<\/span><\/p>\n
     The question  whether the\timpugned Act  is covered  by
\nentry\t84 can\tbe looked  from another point of view namely
\nthe actual  contents of\t entry 84.  In the case of Aluminium
\nCorporation of India Ltd. v. Coal Board(1). a Division Bench
\nof Calcutta  High Court had to consider this question in the
\ncontext of  Coal Mines\t(Conservation and Safety) Act, 1952.
\nThe objection  of the  petitioner  in  that  case  was\tthat
\nalthough coal might be a material or a commodity, it was not
\nsomething which\t was produced  and therefore the entry which
\napplied to  the goods  produced in  India could not apply to
\ncoal. No  question of  manufacture obviously  arose. It\t was
\nsubmitted that\tthe coal produced itself. This was rejected.
\nThe   word ‘produced’ appearing in entry No. 84 of List I of
\nthe Seventh  Schedule is  used in  just a  position with the
\nword ‘manufactured’ according to the Division Bench and used
\nin connection  with duty of excise and consequently it would
\nappear to  contemplate some  expenditure of  human skill and
\nlabour in  bringing the\t goods concerned  into the condition
\nwhich would  attract the  duty. It was not required that the
\ngoods would  be manufactured  in the sense that raw material
\nshould be  used to  turn out something altogether different.
\nIt would  still require that these should be produced in the
\nsense that some human activity and energy should be spent on
\nthem and  these should\tbe subjected  to some  processes  in
\norder that these might be brought to the state in which they
\nmight become  fit for  consumption. To\tspeak of  coal,\t the
\nDivision Bench\twas of the opinion, as produced in the sense
\nto its\tbeing made  a material of Consumption by human skill
\nand labour was entirely correct and had sanction of approved
\nusage. Reference was made to the observations of the King v.
\nCaledonian  Collieries,\t Limited.(2)\tWhere  the  Judicial
\nCommittee  held\t  that\tthe  respondents  before  them\twere
\n‘producers of coal’. If that aspect of the matter is kept in
\nmind then  expenditure of human skill and material have been
\nused in\t the processing\t and it\t may not  be  that  the\t raw
\nmaterial was  first transformed\t but  over  the\t transformed
\nmaterial, further  transformation  was\tdone  by  the  human
\nlabour and skill making this fit for human consumption.\n<\/p>\n
     In any  event under  entry 97  of List I of the Seventh
\nSchedule this  would apply  if it  is not under entry 84. It
\nwas then  argued that  if the  legislation was\tsought to be
\ndefended on  the ground\t that it  is a\ttax on activity like
\nprocessing and would be covered by the
\n(1) A.I.R. 1959 Cal. 222.\n<\/p>\n
(2) [1928] A.C. 358.\n<\/p>\n
325<\/span><\/p>\n
powers enumerated  under entry\t97 of  List I of the Seventh
\nSchedule then  it was  submitted that  there was no charging
\nsection for  such an  A activity and as such the charge must
\nfail, and  there cannot\t be any levy. This argument proceeds
\non an  entire misconception.  The charging  section  is\t the
\ncharging section  3 of\tthe Central  Excises and  Salt\tAct,
\n1944. It stipulates the levy and charge of duty of excise on
\nall excisable goods produced or manufactured. “Manufactured”
\nunder the  Act after the amendment would be the manufacture’
\nas amended  in section 2 (f) and Tariff item 19 I and 22 and
\nthe charge would be on that basis. Therefore it is difficult
\nto appreciate the argument that the levy would fail as there
\nwill be\t no appropriate\t charging section  or machinery\t for
\neffectuating the  levy on  the activity\t like the  method of
\nprocessing even\t if such  an activity can be justified under
\nentry 97  of List  I of Seventh Schedule. We are, therefore,
\nof the opinion that there is no substance in this contention
\nAs mentioned hereinbefore under each of these points several
\nauthorities were  cited but  in the  view we  have taken  on
\nprinciples which  are well-settled,  it is  not necessary to
\nmultiply these authorities.\n<\/p>\n
     The validity  of the impugned Act was challenged on the
\nground that  by giving\tretrospective  effect,\tunreasonable
\nrestrictions  have   been  imposed   on\t  the\tpetitioners’
\nfundamental rights  under Articles  14 and 19 (1) (g) of the
\nConstitution. In  this connection,  it may be appropriate to
\nrefer to the statement of objects and reasons wherein it was
\nstated that the Central Excise duty was levied for the first
\ntime on\t cotton fabrics\t in 1949, on man-made fabrics (rayon
\nof artificial  silk fabrics)  in 1954 and on woollen fabrics
\nin 1955.  From the  very early stages of the textile tariff,
\nwith a\tview to\t achieving progression in the rate structure
\nand to aligning excise control with the demands of different
\nproducing sectors,  duties had\tbeen levied not only on grey
\nfabrics\t but  also  at\tthe  stage  of\tprocessing  such  as
\nbleaching, dyeing  and printing.  In  the  judgment  of\t the
\nGujarat High  Court in\tthe case of Real Honest Textiles and
\nothers v.  Union of India, it was held that ‘fabric’ as used
\nin the\ttariff description  “cotton fabric”  would refer  to
\nsomething that\twas woven;  hence it  could relate  only  to
\ncloth in the grey stage; processing of the grey cloth either
\nby  bleaching,\t dyeing\t or   printing\tdid  not  amount  to
\nmanufacturing  as   both  before  and  after  processing  it
\nremained a  fabric falling  within the\tsame item of Central
\nExcise Tariff (Item 19-cotton fabrics, of the First Schedule
\nto the\tCentral Excises and Salt Act). The Court had arrived
\nat a similar conclusion with regard to man-made fabrics
\n326<\/span>
\nfalling under  item No.\t 22 of\tthe same Schedule. After the
\npronouncement of  the above judgment, several writ petitions
\nwere filed  in various\tcourts. This decision of the Gujarat
\nHigh Court,  according\tto  the\t statement  of\tobjects\t and
\nreasons of  the Act,  had upset\t the arrangements  regarding
\nlevy of\t excise duties on textile fabrics. The judgment also
\nhad the\t effect of  disturbing the  balance evolved  between
\ndifferent sectors  of the  textile industry. Furthermore, it
\nwas made  clear that  in so  far as  past  assessments\twere
\nconcerned,  refund  of\texcise\tduties\tto  manufactures  as
\nordered by the High Court would have only meant a fortuitous
\nwindfall so as to benefit such persons without any relief to
\nthe ultimate consumers who had purchased the fabrics and had
\nborne the  burden of the duties. In order to avoid this, the
\nAct was passed.\n<\/p>\n
     It\t has   therefore  to  be  borne\t in  mind  that\t the
\npetitioners have  already paid\texcise duty demanded of them
\nfrom time  to time and the present petitioners have gathered
\nthe duties from the consumers.\n<\/p>\n
     Imposition of tax by legislation makes the subjects pay
\ntaxes.\tIt  is\twell-recognised\t that  tax  may\t be  imposed
\nretrospectively. It  is also  well-settled  that  by  itself
\nwould not  be unreasonable restriction on the right to carry
\non  business.  It  was\turged,\thowever,  that\tunreasonable
\nrestrictions would  be there because of the retrospectivity.
\nThe  power   of\t the   Parliament  to\tmake   retrospective
\nlegislation including  fiscal legislation  are well-settled.
\n(See M\/S.  Krishnamurthi &  Co. etc.  v. State\tof Madras  &
\nAnr.(‘) Such  legislation per  se is not unreasonable. There
\nis no  particular feature  of this  legislation which can be
\nsaid  to   create  any\tunreasonable  restriction  upon\t the
\npetitioners.\n<\/p>\n
     In\t the   view  we\t  have\ttaken\tof  the\t  expression
\n‘manufacture’, the  concept of\tprocess\t being\tembodied  in
\ncertain situation  in the  idea of manufacture, the impugned
\nlegislation is\tonly making  ‘small  repairs’  and  that  is
\npermissible mode  of legislation.  In 73rd volume of Harward
\nLaw Review p. 692 at p. 795, it has been stated as follows:-
\n\t“It is necessary that the legislature should be able
\n     to\t cure  inadvertent  defects  in\t statutes  or  their
\n     administration by\tmaking what  has been  aptly  called
\n     ‘small repairs’.  Moreover, the  individual who  claims
\n     that a vested right
\n(1) [1973l 2 S.C.R. 55.\n<\/p>\n
327<\/span><\/p>\n
     has arisen\t from the defect is seeking a windfall since
\n     had the legislature’s or administrator’s action had the
\n     effect it\t was intended to and could have had, no such
\n     right would  have arisen.\tThus, the  interest  in\t the
\n     retroactive  curing   of\tsuch   a   defect   in\t the
\n     administration   of    government\t out\tweighs\t the
\n     individual’s interest  in benefiting from the defect ..
\n     The Court\thas been  extremely reluctant  to over- ride
\n     the  legislative  judgment\t as  to\t the  necessity\t for
\n     retrospective  taxation,\tnot  only   because  of\t the
\n     paramount governmental  interest in  obtaining adequate
\n     revenues, but  also because taxes are not in the nature
\n     of a  penalty or  a contractual obligation but rather a
\n     means of  apportioning the\t costs of  government amount
\n     those who benefit from it”.\n<\/p>\n
     The impugned legislation does not act harshly nor there
\nis any scope for arbitrariness or discrimination.\n<\/p>\n
     It was contended on behalf of the petitioners that they
\nare  carrying  on  only\t the  processing  activity  and\t the
\nwholesale cash\tprice is  not theirs  on the entire product.
\nSection 4  of the  Act is  the section\twhich deals with the
\nvaluation of  excise goods  for the purpose of charging duty
\nof the\tsame would  be applicable.  Where for the purpose of
\ncalculating assessable\tprofits, a notional and conventional
\nsum is\tlaid down  by the  legislature to be arrived at on a
\ncertain basis,\tit is  not permissible\tfor  the  courts  to
\nengraft into it any other deduction or allowance or addition
\nor read\t it down  on the  score that  the said\tdeduction or
\nallowance or addition was authorised elsewhere in the Act or
\nin the\tRules. A  conventional charge  should be measured by
\nits own\t computation and  not by  facts\t relating  to  other
\nmethod of  computation. The  circumstances that\t thereby the
\nbenefit of  any exemption  granted by the legislature may be
\nlost and  that in  some cases  hardship might result are not
\nmatters which  would influence courts on the construction of
\nthe statute.  A tax  payer subject  is entitled only to such
\nbenefit as is granted by the legislature. Taxation under the
\nAct is\tthe rule  and benefit  and exemption, the exception.
\nAnd in\tthis case  there is  no hardship.  When the  textile
\nfabrics are  subjected\tto  the\t processes  like  bleaching,
\ndyeing and  printing etc.  by independent processes, whether
\non their  own account  or on job charges basis, the value of
\nthe purposes  of assessment  under section  4 of the Central
\nExcise Act  will not be the processing charges alone but the
\nintrinsic value of the processed fabrics
\n328<\/span>
\nwhich is  the price  at which  such fabrics are sold for the
\nfirst time  A in the wholesale market. That is the effect of
\nsection 4  of the Act. The value would naturally include the
\nvalue of grey fabrics supplied to the independent processors
\nfor the\t processing. However,  excise duty,  if any, paid on
\nthe grey  fabrics will\tbe  given  proforma  credit  to\t the
\nindependent processors to be utilised for the payment on the
\nprocessed fabrics in accordance with the Rules 56A or 96D of
\nthe Central Excise Rules, as the case may be.\n<\/p>\n
     Read  in  that  context  and  in  the  context  of\t the
\nprevalent practice  followed so\t long until  the decision of
\nthe Gujrat  High Court\tin Real\t Honest case,  there  is  no
\nhardship  and\tno  injustice  to  the\tpetitioners  or\t the
\nmanufacturers of grey fabrics. The fact that the petitioners
\nare not the owners of the end product is irrelevant. Taxable
\nevent is  manufacture-not ownership.  See In re 711e Bill to
\namend section  20 of the Sea Customs Act, 1878 and Section 3
\nof the Central Excise & Salt Act 1944.(1)
\n     The conclusion  that inevitably follows that in view of
\nthe amendment  made in section 2(f) of the Central Excises &
\nSalt Act  as well  as the  substitution of new Item 19 I and
\nItem 22(1) m Excise \/ Tariff in place of the original items,
\nthe contentions\t of  the  petitioners  cannot  be  accepted.
\nSection 3  of the  Central  Excises  and  Salt\tAct  clearly
\nindicates that\tthe object  of\tthe  entries  in  the  First
\nschedule is  firstly to specify excisable goods and secondly
\nto specify  rates at  which  excise  duty  will\t be  levied.
\nReference has  already been made to Rule 56A. Under sub-rule
\n(2)  of\t  Rule\t56A,   it  is\texpressly  provided  that  a
\nmanufacturer will  be given  credit of\tthe  duty  which  is
\nalready paid on the articles used in the manufacture subject
\nto certain  conditions. It  is stated  before us that excise
\nduty  will   be\t charged   on  processed  printed  material.
\nProcessors will be given credit for the duty already paid on
\nthe grey  cloth by  the manufacturer  of the  grey cloth. In
\nthis view of the matter we are of the opinion that the views
\nexpressed by the Bombay High Court in the case of New Shakti
\nDye Works  Pvt. Ltd. & Mahalakshmi Dyeing and Printing Works
\nv. Union  of India  and Anr. (Writ Petition Nos.<\/a> 622 and 623
\nof 1979)  are correct.\tThe views  expressed by\t the Gujarat
\nHigh Court  in Vijay Textiles v. Union of India in so far as
\nit held that the processed fabrics could only be taxed under
\nresiduary entry\t and not  Item 19  I or Item 22 of the First
\nSchedule of the (Central Excise Tariff cannot be sustained.
\n(1) [1964] 3 S.C.C. 787 at 822.\n<\/p>\n
329<\/span><\/p>\n
     We are  also unable  to accept  the view of the Gujarat
\nHigh Court  in the case of Union of India & Ors. v. M\/s Real
\nHonest Textiles\t & Ors.\t (Civil Appeal\tNos. 586  to 562  of
\n1979).\n<\/p>\n
     Writ Petition (Civil) No. 11728 of 1984 therefore fails
\nand is dismissed with costs. The connected applications viz.
\nCivil Appeal  No. 3564\tof 1984\t and 6414  of 1983  and Writ
\nPetition Nos.  13556, 13792,  13788, 15438-39  of 1984\talso
\nfail and  are dismissed\t with costs. Interim orders, if any,
\nare vacated.  Arrears of duties should forthwith be paid and
\nfuture duties  should also  be paid  as and  when goods\t are
\ncleared.\n<\/p>\n
     Civil Appeal  Nos. 586  to 592 of 1979 are allowed with
\ncosts.\n<\/p>\n
     Good deal\tof arguments  were canvassed  before us\t for
\nvariation or  vacation of the interim orders passed in these
\ncases. Different  courts sometimes  pass different orders as
\nthe courts  think fit.\tIt is  a matter\t of common knowledge
\nthat the  interim orders  passed  by  particular  courts  on
\ncertain consideration are not precedents for other cases may
\nbe on  similar facts.  An argument  is being built up now-a-
\ndays that  once an  interim order  has been  passed by\tthis
\ncourt on  certain factors  specially in\t fiscal matters,  in
\nsubsequent matters  on more  or less  similar  facts,  there
\nshould not  be a  different order passed nor should there be
\nany variation  with that kind of interim order passed. It is
\nsubmitted  at\tthe   Bar   that   such\t  variance   creates
\ndiscrimination. This is an unfortunate approach. Every Bench
\nhearing a matter on the facts and circumstances of each case
\nshould have  the right to grant interim orders on such terms
\nas it considers fit and proper and if it had granted interim
\norder at  one stage,  it should\t have right to vary or alter
\nsuch interim  orders. We venture to suggest, however, that a
\nconsensus should be developed in matter of interim orders.\n<\/p>\n
     If\t we  may  venture  to  suggest,\t in  fiscal  matters
\nspecially in  cases involving  indirect taxes where normally
\ntaxes have  been realised  from the  consumers but  have not
\nbeen paid  over to  the exchequer  or where  taxes are to be
\nrealised from  consumers by  the dealers  or others  who are
\nparties before the court, interim orders staying the payment
\nof such taxes until final disposal of the matters should not
\nbe passed.  It is a matter of balance of public convenience.
\nLarge amounts  of taxes\t are  involved\tin  these  types  of
\nlitigations. Final  disposal of matters unfortunately in the
\npresent state of affairs in our
\n330<\/span>
\ncourts takes  enormously long  time and\t non-realisation  of
\ntaxes for  long time creates an upsetting effect on industry
\nand economic  life causing  great inconvenience\t to ordinary
\npeople. Governments  are run  on public\t funds and  if large
\namounts all over the country are held up during the pendency
\nof litigations,\t it becomes difficult for the governments to
\nrun  and  become  oppressive  to  the  people.\tGovernments’
\nexpenditures  cannot   be  made\t  on  bank   guarantees\t  or
\nsecurities. In that view of the matter as we said before, if
\nwe may\tventure to  suggest for consideration by our learned
\nbrothren that  this Court  should refrain  from passing\t any
\ninterim orders staying the realisations of indirect taxes or
\npassing such orders which have the effect of non-realisation
\nof indirect  taxes. This will be healthy for the country and
\nfor the courts.\n<\/p>\n
S.R.\t\t\tCivil Appeal Nos. 586 to 592 of 1979
\n\t\t\t    allowed and Petitions dismissed.\n<\/p>\n
331<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Empire Industries Limited & Ors. … vs Union Of India & Ors. Etc on 6 May, 1985 Equivalent citations: 1986 AIR 662, 1985 SCR Supl. (1) 292 Author: A Varadarajan Bench: Varadarajan, A. (J) PETITIONER: EMPIRE INDUSTRIES LIMITED & ORS. ETC. Vs. RESPONDENT: UNION OF INDIA & ORS. ETC. DATE OF […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-31314","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nEmpire Industries Limited & Ors. ... vs Union Of India & Ors. 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