Delhi High Court
M/S. Nath Bros. Exim. International ... vs Union Of India And Others on 9 April, 1997
Equivalent citations: AIR 1997 DELHI 383, (1997) 67 DLT 458
Bench: Y.K. Sabharwal, D.K. Jain
ORDER
1. The challenge in this petition, under Article 226 of the Constitution is to the validity of the public notice issued and published in various newspapers on 30 April 1994, by the Textiles Committee in exercise of me powers conferred by Section 12 of the Textiles Committee Act. 1963 (as amended) (for short the Act).
2. The Textiles Committee (constituted under Section 3 of the Act) in the stated notice, directed all the manufacturing exporters of silk ready made garments to pay to the committee the amount of cess at 0.05% ad valorem from 1975 calculated on the basis of the FOB value of the shipping bills as contemplated under Section 5A(1) of the Act. As per the notice the cess due on the basis of FOB value of the silk garments meant for export is required to be paid at the time of containing the endorsement for quota and non quota purposes. Procedure for endorsement is also indicated therein. The notice also holds out a warning that if any manufacturer fails to pay the duty of excise levied within the period specified, the duty payable by the manufacturer shall be recoverable as an arrear of land revenue through the District Collector concerned as contemplated under Section 5D of the Act.
3. The petitioners primarily impugned the levy of cess on the exporters and seek consequential relief by way of an appropriate writ quashing the said public notice and further a writ in the nature of mandamus commanding the respondents to permit them to export their consignments of readymade silk garments without imposition of cess as envisaged in the public notice.
4. The 1st petitioner is an incorporated company and claims to be a registered export house engaged in the export of ready made garments, including of silk. The second petitioner is the Managing Director and share-holder of the petitioner company. The Textiles Committee, the main contesting party is respondent No. 2. The other respondent Nos. 1, 3 and 5 respectively are the Union of India, through Secretary. Ministry of Textiles (administratively controlling exports of textile garments). Central Silk Board (incorporated under the Central Silk Board Act inspecting silk garments at the time of export) and Director Genera! Foreign Trade, (notifying the procedure regarding export and import of silk and other garments etc.).
5. The petitioner's case is that during the process of shipping two consignments of the silk ready made garments to London they came across the afore noted public notice got published by respondent No. 2, making them liable to pay cess on the basis of FOB value of the silk garments not only meant for future export but also on the garments ex ported from 1975 onwards. Aggrieved by it they made a representation dated 4 May 1994 to the respondents, inter alia, requesting recall of the impugned public notice. There being no response, the petitioners have preferred this petition, on the allegation that the levy of cess on the exporters of silk ready made garments is arbitrary, illegal and beyond the powers conferred on the Textiles Committee under the Act on the grounds that:
(i) In terms of proviso to Section 5A(1) of the Act no cess can be levied on textiles manufactured from out of hand loom and power loom industry but in the impugned notice no such exemption has been given and the levy as such is illegal :
(ii) a basic duty is levied on silk imported material under the Customs Act. 1962 at the stage of import itself, and therefore, no further cess can be levied under the Act in respect of the goods manufactured out of the same imported silk as it would amount to double taxation; and
(iii) as per Section 5A(3) of the Act the duty of excise levied under sub-section (1) can be collected only from a manufacturer of textiles or textile machinery and not from an exporter and thus the public notice to the extent it imposes cess on an exporter is beyond the powers of the Textiles Committee.
6. The petition is resisted by respondent No. 2. In the counter-affidavit filed on its behalf, while contending that the petition is pre-mature inasmuch as the petitioners have failed to exhaust the alternative remedy available under the Act by way of an appeal under Section 5B of the Act, the grounds set up in the writ petition, assailing the notification, are countered seriatim on the pleas that:
(i) The exemption from imposition of cess under Section 5A(1) of the Act is only 8 to a fabric, cloth, yearn, garment or any other article made wholly or in part of cotton, wool, silk, artificial silk or other fabric only on a power loom or a handloom, and the petitioner has failed to demonstrate that the garments exported by it are manufactured from out of handloom or power loom industry. Alternatively, assuming that the raw material for the garments in question are the textiles procured by the petitioner from handloom and power loom industry, the said garments will not be exempt from levy of cess under proviso to Section 5A(1) because the finished garments cannot be said to he the textiles manufactured from out of the handloom and power loom industry :
(ii) The levy of cess under the Act and the Customs Act being independent and different from each other in nature and incidence, there is no question of any double taxation; and
(iii) though an exporter simplicitor, exporting textiles and/or textile machinery which are not produced or manufactured either by himself or with the help and assistance of the hired labourer any third party may not fall within the ambit of the Act. an exporter, like the petitioner, who brings into existence or makes or fabricates a textile by his own labour or through an independent contractor or through the instrumentality of an agent of servant and exports the said manufactured textiles would he a "manufacturer" covered by the Act. Besides, it is averred that having declared in his application and got himself registered with the Textiles Committee as a "manufacturer-exporier, the petitioner is now estopped from taking the plea that he is an exporter simplicities of ready made garments.
7. We have heard learned counsel for the parties.
8. In order to appreciate the rival stands, based on pleadings, it would he necessary to notice some of the salient provisions of the Act, on which learned counsel for the parties have based their arguments.
9. The Act as stated in the long preamble has been enacted with the sole object and purpose to provide, "for the establishment of a Committee for ensuring the quality of textiles and textile machinery and the mailers connected therewith."
10. Section 2(g) gives a wide definition to the expression "textiles" as meaning any fabric or cloth or yarn or garment or any other article made wholly or in part of cotton: or wool, or silk; or artificial silk or other fibre and includes fibre. For the purpose of the Act, the expressions "handloom industries", "power loom" and "power loom industries" have been defined in clauses (ca). (da) and (db) of Section 2 respectively as follows:
"(ca) "handloom industries" has the meaning aligned to it in the Khadi and other Handloom Industries Development (Additional Excise Duty on Cloth) Act. 1453:
(da) "power loom" means a loom which is worked by power as defined in clause (g) of Section 2 of the Factories Act. 1948 and which is used or capable of being used only for weaving cloth wholly or parity out of cotton yarn or woollen yarn, or fibre, or any kind of mixed yarn:
(db) "power loom industry" means an industry in which a manufacturer of textiles has. at any lime during the period fixed by the Committee under clause (a) of sub-section (5) of Section 5A. not more than fifty power looms (without any spinning plains) in the factory or factories owned, controlled or managed by him.
Explanation -- For the purposes of this clause, the expression "factory" has the meaning assigned to it in the Factories Act. 1948."
11. Section 3 of the Act provides for the establishment of Textiles Committee by the Central Government and Section 4 deals with its functions, stated generally, are to ensure standard qualities of textiles both for internal marketing and export purposes and the manufacture and use of standard type of textile machinery. Section 7 of the Act provides for constitution of a fund called the Textiles Fund. Funds recovered under the Act form part of this fund and the monies in the fund are applied for meeting the pay and allowances of the officers and other employees of the Committee and to meet its other administrative expenses for carrying out the purpose of the Act. Section 12 empowers the Committee to levy fee and also provides for recovery of any sum payable to the Committee under the Section as an curs of land revenue. Section 5A, inserted by Act No. 51 of 1973 w.e.f. 1 January. 1975, which is the charging Section and all important for the purpose of the instant case reads as follows :
"5A(1) There shall be levied and collected as a cess for the purposes of this Act, a duly of excise on all textiles and on all textile machinery manufactured in India at such rate, not exceeding one per cent ad valorem as the Central Government may by notification in the Official Gazette, fix.
Provided that no such cess shall be levied on textiles manufactured from out of handloom or power loom industry.
(2) The duty of excise levied under sub-section (1) shall be in addition to any cess or duty leviable on textiles or textiles machinery under any other law for the time being in force.
(3) the duty of excise levied under sub-section (1) shall be collected by the Committee, in accordance with the rules made in this behalf, from every manufacturer of textiles or textile machinery (hereinafter in this section and in Sections 5C and 5D referred to as the manufacturer).
(4) The manufacturer shall pay to the Committee the amount of the duly of excise levied under sub-section (1) within one month from the dale on which he received a notice of demand therefor, from the Committee.
(5) For the purpose of enabling the Committee to assess the amount of the duty of excise levied under sub-section (1) :
(a) the Committee shall, by notification in the Gazette of India, fix the period in respect of which assessment shall he made; and
(b) every manufacturer shall furnish to the Committee a return, not later than fifteen days after the expiry of the period to which the return relates, specifying the total quantity of textiles or textile machinery manufactured by him during the said period and such other particulars as may he prescribed.
(6) If any manufacturer fails to furnish the return referred to in sub-section (5) within the time specified therein, or furnishes a return which the Committee has reason to believe is incorrect or defective, the Committee may assess the amount of the duty of excise in such manner as may he prescribed.
(7) Any manufacturer aggrieved by an assessment made under this section may appeal to the Tribunal, constituted under Section 5B for cancellation or modification of the assessment."
12. The object of the 1973 amendment.
inserting Section 5A aforesaid as can he gathered from the Statement of Objects and Reasons, (see Gazette of India, 6-4-1973, Pt. II, S.2, Ext. P273) was to augment the resources of the Textiles Committee by levy "of a cess as duly of excise on all textiles (other than those manufactured by handloom and power loom industries) and textile machinery .. ..."
13. The result of the introduction of Section 5A is that in place of fee, which hitherto, was being levied under Section 12 of the Act, a cess hy way of duty of excise has been imposed. Subsection (1) provides that there shall he levied and collected as a cess for the purposes of the Act a duty of excise on all textiles and on all textile machinery manufactured in India at such rate, not exceeding 1% ad valorem, as the Central Government may, by notification in the official gazette fix. Proviso thereto, heavily relied upon by the petitioners, interdicts that no such cess shall he levied on textiles manufactured from out of handloom or power loom industries. Subsection (2)of Section 5A directs that the duty on excise levied under sub-section (I) shall he in addition to any cess or duty leviable on textiles or textile machinery under any other law for the time being in force. Sub-sections (3) to (6) prescribe the procedure for assessment and recovery of the duly of excise payable by a manufacturer. Subsection (7) provides for remedy against the assessment made by the Textiles Committee.
14. Another change brought about by the Act 51 of 1973, having bearing on the present case, was the deletion of clause (b) of Section 12 and clause (c), and replacing it by a reentered clause (h) with a proviso and insertion of the word "special" in place of the word "other", appearing in old clause (b) and the inclusion of "exporters" therein in along with manufacturers. Section 12 with the new clause (b), so inserted now reads thus:
"12. (1) The Committee may levy such fees as may be prescribed :
(a) for inspect ion and examination of textiles :
(b) for any special service which the Committee may render to the manufacturers or exporters of textiles and textile machinery ;
Provided that no fees shall be levied in respect of inspection and examination of textiles on which a duly of excise is leviable under this Act.
Provided further that the Central Government may by notification in the Official Gazette, exempt from the payment of fees, generally or in any particular case.
(a) Any sum payable to the Committee under sub-section (1) may be recovered as an arrear of land revenue."
15. Having examined the matter in the light of the aforesaid provisions of the Act, we are unable to persuade ourselves to accept any of the contentions urged on behalf of the petitioner.
16. Taking up the afore noted three grounds seriatim, we find in the instant case that though the main sub-section (1) of Section 5A provides that all textiles manufactured in India are exigible to the levy of cess, the proviso thereto carves out an exception for such textiles which are manufactured from out of handloom or power loom industry. The argument of learned counsel for the petitioner that the expression "from out of" as appearing in the proviso means that any product though by itself "textiles" within the meaning of Section 2(g) of the Act hut manufactured out of textiles manufactured by a handloom or power loom industry is exempted Irom a le\y under the Act, in our view is devoid of merit. Doing so would tantamount to nullifying the effect of the main provision by adding words to it and enlarging its scope, which is not permissible.
17-18. The Supreme Court in Trihhovandas 11. Tamboli v. Gujarat Revenue Tribunal. held that a proviso to a particular provision of a statute only embraces the field, which is covered by the main provision. Therefore, its scope is to carve out an exception to the main enactment and it excludes something which otherwise would have been within the Rule but it has to operate in the same field and it the language of the main enactment is clear, the proviso cannot he torn a part from the main enactment nor can it he used to nullify by implication what the enactment clearly says nor set at naught the real object of the main enactment unless the words of the proviso are such mat it is its necessary effect. The same view was again reiterated by the Supreme Court in a later judgment in Kerala State Housing Board v. M/s. Ramapriya Hotels (P) Ltd. .
19. In our view the words in the proviso, from out of cannot be looked at in isolation but they have to be contextually construed. The important word in the proviso is "manufacture", preceding from out of handloom or power loom industry. This clearly signifies that the manufactured textiles" for being eligible for exemption must ilself, in the finished form, come out from the handloom or power loom industry and not processed further from it. To put it differently, a bare reading of the proviso makes it evident that the cess under the Act is not to be levied only on that particular "textiles" which by itself is manufactured by that handloom and power loom industry which falls within the ambit of clauses (ca) and (da) of Section 2 of the Act and not on the textiles/products which are manufactured by a process other than or in addition to by the handloom or power loom industry. The word manufacture would necessarily requite ire a fabric cloth, yam or garment itself to be of a kind which itself can he said to come out of and hence manufactured out of handloom and power loom industry. In our opinion. exemption under the proviso is given only to the "textiles"' manufactured by the handloom and power loom industry capable of being used or marketed as such. It docs not and cannot include subsequent conversion to a finished product of a different form. There is no averment in the entire petition that the textiles exported by the petitioner arc manufactured as such by the handloom or power loom industry. As a matter of fad from the material placed on record along with the counter affidavit of respondent No. 2. it appears that the textiles/garments exported by the petitioner could not be manufactured on a handloom or power loom industry.
20. We may now examine the point spelt out in the second ground that the levy of further cess under the Act amounts to double taxation because customs duty is also levied on the raw material (silk) imported for manufacture of final product exported.
21. Apart from the fact that having regard to the nature and purpose of the cess levied under the Act, although credited to the consolidated fund of India and then disbursed to the Textiles Committee, but it still has the traces of fees, as was being levied prior to insertion of Section 5A in the Act. and could perhaps he distinguished from a tax. we feel that the incidence of the two levies namely, under the Customs Act and under the Act are entirely different. The former being at the time of import of a particular item and the latter at the time of manufacture of textiles. There is no question of double taxation, as alleged by the petitioners. That apart, even sub-section (2) of Section 5A itself provides for levy under the Act in addition to any cess or duly which may be leviable on the same textiles or textile machinery under any other law for the time being in force. The question of want of Parliamentary competence to frame such a provision has neither been nor can he raised, particularly after the decision of the Supreme Court in Sirsilk Ltd. v. Textiles Committee. . upholding the validity of 'the Act.
22. Now turning to the third and the last ground that exporters cannot be brought within the purview of the Act, it would he necessary to again have a took at the charging Section 5A of the Act. Prom a hare reading of the said Section it is evident that the incidence of levy of cess is on the "manufacture" of textiles and textile machinery. Who "manufactures" the textiles or textile machinery is immaterial. Therefore, the question which arises for con si duration is whether the petitioner, who claims himself to be a mere exporter can he said to be "manufacturer" of textiles/garments which he is exporting? Assuming that he is not manufacturing any textiles himself.
though the plea in the counter-affidavit that the petitioner is registered with the Textile Committee as a manufacturer-cum-exporter of readymade garments is not countered. The expression, "manufacture" or "manufacturer" are not defined in the Act. We may, therefore, look for then definition in some other statute. Under the Central Excise and Salt Act. 1944, the word "manufacture" has been defined as follows :
23. 2(f) "manufacture" includes any process :--
(i) incidental or ancillary to the completion of a manufactured product :
(ii) which specified in relation to any goods in the Section or Chapter Notes of the Schedule to the Central Excise Tariff Act, 1985 as amounting to manufacture, and the word "manufacture" shall he construed accordingly and shall includes not only a person who employs hired labour in the production or manufacture of excisable goods. but also any person who engages in their production or manufacture on his own account :
(ia) to (ix) .....
and the word "manufacture" shall be construed accordingly and shall include not any a person who employs hired labour in the production of manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account;"
24. From the above definition it is clear that the expression manufacture includes, any process incidental or ancillary to the completion of the manufactured product and the word manufacturer includes not only a person who employs hired labour in the production or manufacture of goods hut also am one, who engages in their production or manufacture on his own account, if those goods are intended for sale. It is thus clear that the word manufacturer does not merely include those persons who in common parlance are themselves engaged in the manufacturing of textiles hut also includes those persons who engage themselves in gelling the textiles, intended for export, produced or manufactured on their own account. In other words a person who brings into existence an article or a product even through the instrumentality of an agent or a servant has to be regarded as a manufacturer. An actual physical act of manufacturing cannot be said to he the essence of the definition of the word manufacturer.
For instance, a person who supplies yarn to a handloom or power loom owner for weaving cloth according to his specifications/design/pattern on payment of labour charges is a "manufacturer".
25. We are therefore, of the view that an exporter, like the petitioner who may not himself employ any labour for the purpose of manufacture of textiles and/or textile machinery being exported by him but gets these manufactured through an independent contractor or agent, would also fall within the purview of the Act. We may add that inclusion of the expression "ex porters" in Section 12 of the Act by the Act 51 of 1973 also makes the legislative intent abundantly clear that the exporters are also covered under the Act.
26. For the reasons aforesaid there is no merit in the petition and the same is accordingly dismissed with costs, which we quantify at Rs. 5,000/-
27. Petition dismissed.