Chandurkar, Actg. C.J.
1. This judgment disposes of the above-mentioned 24 petitions as the question involved in all these petitions is identical.
2. The petitioners in all the petitions carry on the business of processing cotton fabrics and man-made fabrics by bleaching, dyeing, printing and finishing them. The question is, whether the petitioners, who carry on the business of bleaching, dyeing, printing and finishing cotton fabrics, are liable to the excise duty as the manufacturers for the purpose of the Central Excises and Salt Act, 1944 (hereinafter referred to as 'the Excise Act'). Since it is common ground that the business carried on by all the petitioners is of the same nature, for the purpose of convenience we shall refer to the facts as alleged in Writ Petition No. 623 of 1979 New Shakti Dye Works Pvt. Ltd. v. Union of India and Anr. According to the petitioner-company, cotton fabrics and man-made fabrics are received in the company as full manufactured fabrics commercially known as grey fabrics, which are cleared after payment of excise duty under Tariff Items Nos. 19 and 22, as the case may be. The process to which the grey fabrics are then subjected is called bleaching process in which grey fabrics are boiled in soap and soda solution and thereby by use of a bleaching agent the grey fabrics are made white. After the bleaching process is completed, the material is then taken for the dyeing process, which according to the petitioner, consists of imparting of required shades of colours. After the material is dyed, it is subjected to the printing process, that is, printing of required designs on the fabrics by a printing machine. The final stage is called finishing process which consists of giving final touches for better appearance. The petitioners say that at no stage is the spinning and weaving involved in the processes carried on by the petitioners. The petitioners claim that it is an independent process used and has no activity of spinning of yarn or weaving of cotton or man-made fabrics which can be done only on looms. The petitioner has also alleged that it has no discretion in the choice of shades of colours or designs and has to comply with the directions of the customers. The final processed fabrics cannot be sold by the petitioner in the market and all that the petitioner collects from its customers consists of charges for the job work of processing done by the petitioner-company which has no proprietary or ownership interest in the fabrics either before or after it is processed.
3. It is not in dispute that on being called upon to submit classification list for approval of the excise authorities as prescribed by Rule 173-B of the Central Excise Rules, 1944 (hereinafter referred to as 'the said Rules'). The petitioner submitted the necessary classification list and such list for cotton fabrics has been approved under Tariff Item No. 19 and in respect of manmade fabrics it has been approved under Tariff Item No. 22. Now, it is the common case of all the petitioners that the excise duty recovered from them has been recovered illegally inasmuch as the petitioner not being a manufacturer and the processes of bleaching, dyeing, printing and finishing not being manufacturing processes, they were not liable to pay any excise duty. Consequently, in all these petitions, as originally filed, the petitioners have made claims of refund of the duty, which, according to them, has been illegally recovered. The diverse amounts claimed by the petitioners in their respective petitions need not be referred to as nothing turns on the quantum of the amounts claimed by them.
4. It is obvious that these petitions came to be filed consequent upon the decision of the Gujarat High Court in Vijay Textiles v. Union of India (1979 Excise Law Times J 181). We shall refer to this decision in detail a little later, but it is sufficient for the present to mention that the Gujarat High Court in that case has taken the view that processing of cotton fabrics or man-made fabrics does not bring into existence any new woven stuff or substance and processing in the form of bleaching, dyeing or printing fabrics does not amount to manufacture of any cotton fabrics or man-made fabrics falling under Tariff Items No. 19 or 22. Consequently, the Gujarat High Court took the view that the wording of Items Nos. 19 and 22, as they stood at the material time, did not permit any other levy except that the goods which were received by the petitioners, remain the same, speaking in terms of excisable goods, namely, cotton fabrics or man-made fabrics, and processing did not involve any further manufacture of the woven stuff or woven substance and unlike embroidery and coated or laminated fabrics, there was no specific mention in the inclusive definition so far as processed cloth is concerned, either in Item No. 19 or Item No. 22. The amounts collected by way of excise duty from the processors were thus directed to be refunded on the ground that the recoveries were without the authority of law and were illegal levies.
5. The decision of the Gujarat High Court was rendered on 24th January, 1979. It is clearly with a view to overcome the decision of the Gujarat High Court that an Ordinance called the Central Excises and Salt and Additional Duties of Excise (Amendment) Ordinance, 1979, came to be promulgated by the President of India on 24th November, 1979. This Ordinance was later on replaced by the Central Excises and Salt and Additional Duties of Excise (Amendment) Act, 1980 (hereinafter called the 'Amendment Act'). By sub-section (2) of section 1 of that Act, it is provided that the Amendment Act should deemed to have come into force on 24th November, 1979. After this Amendment Act was enacted, the petitioners amended their original petitions and raised a challenge to the constitutional validity of the Amendment Act. It is necessary at this stage to refer briefly to the amendments which were introduced by the Amendment Act.
6. The first material amendment made was in the definition of the word 'manufacture' in section 2(f) of the Excise Act. The original definition of the word 'manufacture' in section 2(f) contained a general definition of an inclusive nature to say that manufacture includes any process incidental or ancillary to the completion of a manufactured product, and a special reference to certain processes was made in four sub-clauses in that definition in respect of certain articles such as tobacco, salt, patent or proprietary medicines and lastly in clause (iv) in relation to goods comprised in Item No. 18A of the First Schedule to the Excise Act. By the Amendment Act, three more clauses were added to the definition of the word 'manufacture'. We are really concerned with clauses (v) and (vii) of section 2(f) of the Excise Act. The relevant part of the definition as amended now reads as follows :-
''manufacture' includes any process incidental or ancillary to the completion of a manufactured product, and
** ** **
(v) in relation to goods comprised in Item No. 19-I of the First Schedule, includes bleaching, mercerising, dyeing, printing, water-proofing, rubberising, shrink-proofing, organdie processing or any other process or any one or more of these processes;
** ** **
(vii) in relation to goods comprised in Item No. 22(1) of the First Schedule, includes bleaching, dyeing, printing, shrink-proofing, tentering, heat-setting, crease resistant processing or any other process or any one or more of these processes;'
The object of these amendments was clearly to expand the definition of the word 'manufacture' in relation to Item No. 19-I, which was cotton fabrics and Item No. 22(1), which was man-made fabrics.
7. The second part of the amendment is to be found in Section 3 of the Amendment Act by which original Item No. 19-I in the First Schedule to the Excise Act, was substituted by new Item No. 19-I and for the original Item No. 22(1) new Item No. 22(1) was substituted. These Items, as substituted, now read as follows :
'I. Cotton fabrics, other than (i) embroidery in the piece, in strips or in motifs, and (ii) fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials -
(a) cotton fabrics, not subjected to any Twenty per centprocess. ad valorem.(b) cotton fabrics, subjected to the Twenty per centprocess of bleaching, mercerising, ad valorem.dyeing, printing, water-proofing,rubberising, shrink-proofing, organdieprocessing or any other process orany two or more of these processes. ** ** **
22(1). Man-made fabrics other than (i) embroidery in the piece, in strips or in motifs, (ii) fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials - (a) man-made fabrics, not subjected to any Twenty per centprocess. ad valorem plusrupees five persquare metre.(b) man-made fabrics, subjected to the Twenty per centprocess of bleaching, dyeing, ad valorem plusprinting, shrink-proofing, tendering, rupees five perheat-setting, crease resistant square metre.processing or any other process orany two or more of these processes.'
It may be pointed out that the original Item No. 19 referred to 'cotton fabrics'. It provided that 'Cotton fabrics means all varieties of fabrics manufactured either wholly or partly from cotton and includes dhoties, sarees, chadders, bed-sheets, bed-spreads, counter-panes, table-cloths, embroidery in the piece, in strips or in motifs and fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials,.....' The proviso is not material for our purpose. The original Item 19-I read as follows :
'I. Cotton fabrics other than (i) embroidery in the piece, in strips or in motifs, and (ii) fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials.'
Thus, Item No. 19-I is now substituted by the new Item referred to above and the effect of this substitution is that for the purposes of excise duty cotton fabrics have been categorised into two classes, namely, (a) cotton fabrics, not subjected to any process, and (b) cotton fabrics, subjected to the process of bleaching, mercerising, dyeing, printing, water-proofing, rubberising, shrink-proofing, organdie processing or any other process or any two or more of these processes. The duty on each one of them is twenty per cent ad valorem. Substantially the same is the nature of the substitution of old Item No. 22(1) by new Item No. 22(1). This Item referred to made-made fabrics and by the amendment, man-made fabrics have again been divided into two categories, namely, (a) man-made fabrics, not subjected to any process, and (b) man-made fabrics, subjected to different processes referred to in clause (b).
8. Cotton fabrics and man-made fabrics were also subjected to the additional duty of excise as a result of the enactment of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (hereinafter referred to as 'the Additional Duties Act'). By section 4 of the Amending Act, Items Nos. 19-I and 22(1) of the First Schedule to the Excise Act were also similarly amended by making an identical substitution of Items Nos. 19-I and 22(1) in the First Schedule to the Additional Duties Act. The Amendment Act has been made retrospective in operation, and so far as cotton fabrics are concerned, it becomes operative from 1st March, 1955 and so far as man-made fabrics are concerned, it becomes operative from 18th June, 1977. Now, it has been provided by clause (iv) of sub-section (1) of section 5 of the Amendment Act that amendments to clause (f) of section 2 of the Excise Act should be treated as having been in force at all relevant times subject to the modifications that the reference in the Excise Act to the 'goods comprised in Item No. 19-I of the First Schedule' shall be construed as reference to such 'cloth', 'cotton cloth' or, as the case may be, 'cotton fabrics', and reference to the 'goods comprised in Item No. 22(1) of the First Schedule' shall be construed as reference to such 'rayon or artificial silk fabrics', or, as the case may be, 'man-made fabrics'. Section 5(2) of the Amendment Act also validates duties of excise already levied, assessed or collected on cloth, cotton cloth, cotton fabrics, woolen fabrics, rayon or artificial silk fabrics and man-made fabrics subjected to any process. It provides that all duties of excise levied, assessed or collected or purported to have been levied, assessed or collected, before the date of commencement of the Amendment Act, on (i) 'cloth', 'cotton cloth' and 'cotton fabrics' subjected to any process, (ii) 'woolen fabrics' subjected to any process, (iii) 'rayon or artificial silk fabrics' and 'man-made fabrics' subjected to any process, under any Central Act shall be deemed to be, and shall be deemed always to have been as validly levied, assessed or collected as if the provisions of section 5 had been in force on and from the appointed day. It is also expressly enacted in section 5 of the Amendment Act that every Central Act as in force at any time during the period commencing with the appointed day and ending with day immediately preceding the date of commencement of the Amendment Act and providing for or relating to the levy of duties of excise on '(a) 'cloth', 'cotton cloth' or, as the case may be, 'cotton fabrics', (b) 'woolen fabrics', (c) 'rayon or artificial silk fabrics', or, as the case may be, 'man-made fabrics', shall have and shall be deemed to have always had effect during the said period as if (i) such 'cloth' or as the case may be, 'cotton fabrics' comprised for the purpose of the duty leviable under the Excise Act - (A) a sub-item covering such 'cloth', 'cotton cloth' or 'cotton fabrics' not subjected to any process mentioned in sub-clause (v) of clause (f) of section 2 of the Central Excises Act, as amended by this Act; and (B) a sub-item covering such 'cloth', 'cotton cloth' or 'cotton fabrics' subjected to any such process or any two or more such processes, and the rate of duty specified in such Act with respect to such 'cloth' 'cotton cloth' of 'cotton fabrics' had been specified separately with respect to each of the aforementioned sub-items thereof'. Similar provision was also made in clause (iii) of sub-section (1) of section 5 in respect of 'rayon or artificial silk fabrics' or 'man-made fabrics'. It is common ground that the effect of various amendments inserted in the Excise Act by the Amendment Act was to include the processes of bleaching, dyeing and printing, in so far as the present petitions are concerned, within the definition of the word 'manufacture'. It is also common ground that by making amendment to Tariff Item No. 19-I and by creating two separate categories of cotton fabrics, that is, (1) not subjected to any process, and (2) subjected to the processes of bleaching, dyeing, printing and other processes and by making these amendments retrospectively, recoveries which have so far been made from the processors in question, were sought to be legalised. With this effect of the amendments there is no dispute between the parties. In other words, if these amendments can be sustained and if the amendments in section 2(f) were within the legislative competence of the Parliament, and the processes of bleaching, dyeing and printing and other processes mentioned in the newly introduced clause (v) of section 2(f) were manufacturing processes, then it is not in dispute that the processors would become liable to pay excise duty refund of which is now sought. The only way by which the petitioners could have got rid of the liability to pay the excise duty on the processed cloth, that is, cloth subjected to the processes of bleaching, dyeing, and printing, was to attack the Amendment Act, and that is what has been done by the learned counsel appearing for the petitioners in the course of the arguments in these petitions. The matters have been exhaustively argued before us by Mr. Patel, Mr. Rana and Mr. Singhvi appearing for the several petitioners. Since the arguments are common, it is not necessary to refer to the arguments by each of the learned counsel separately.
9. The contention of the petitioners firstly is that the Amendment Act, in so far as it amends the definition of the word 'manufacture' with regard to Tariff Items Nos. 19-I and 22, it ultra vires of entry 84 of List I of the Seventh Schedule to the Constitution of India. Now, entry 84 relied upon by the petitioners reads as follows :
'84. Duties of excise on tobacco and other goods manufactured or produced in India except -
(a) alcoholic liquors for human consumption;
(b) opium, Indian hemp and other narcotic drugs and narcotics,
but including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry.'
It is argued before us that entry 84 authorises levy of excise duty on tobacco and other goods manufactured or produced in India. It is argued that it is not open to the Parliament to enact a provision giving an artificial meaning to the word 'manufacture'. It must be given its etymological meaning. According to the learned counsel, the processes of bleaching, dyeing and printing are not processes which could be properly described as manufacturing processes. By making the said amendment to the word 'manufacture' and by including such processes within that definition as also making consequential amendments in Tariff Items Nos. 19-I and 22(1), the Parliament has traversed beyond the scope of entry 84, and the Amendment Act must, therefore, be struck down ultra vires. The learned counsel for the petitioners have argued that all that is done by the processors is that fully manufactured cotton fabric, which is incomplete, is further subjected to the processes of bleaching, dyeing and printing and, therefore, the article still continues to be a cotton fabric and no different article having distinctive features and character comes into existence. The learned counsel have, therefore, argued that grey cloth, before it was used, was cotton fabric and after it was processed, it continues to be cotton fabric and therefore cotton fabric was not subjected to any manufacturing processes. Reliance was placed before us on certain decisions which turn on the question as to whether a particular process was a manufacturing process or not. According to the learned counsel appearing for the department, the processes of bleaching, dyeing and printing are essentially manufacturing processes inasmuch as a result of these processes a new substance known to the market is brought into being. He also relied on certain decisions in support of his argument that dyeing and printing processes are manufacturing processes. We would first prefer to decide as to whether bleaching, dyeing or printing processes are manufacturing processes on first principle. What is the test which has to be applied before deciding whether a particular process is a manufacturing process or not and what is the essential requirement, which must be satisfied before a particular process is described as a manufacturing process or not to be a manufacturing process, has been subject-matter of some of the decisions of the Supreme Court. In Union of India v. Delhi Cloth and General Mills : 1973ECR56(SC) the Supreme Court was concerned with the question as to whether the manufacture of refined oil from the raw materials undertaken by the manufacturers of vegetable product known as vanaspati was liable to excise duty. The manufacturers purchased ground-nut and til oil from the open market and the oils thus purchased by them are subjected to different processes in order to turn them into vanaspati. Their contention was that at no stage they produced any new product which can come within the items described in the Schedule as 'vegetable non-essential oils, all sorts, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power'. The contention of the department was that the manufacturers in the course of manufacture of vanaspati, which is a vegetable product, from the raw ground-nut and til oil, brought into existence that is known in the market as refined oil after carrying out some process with the aid of power, and it fell within the description of 'non-essential oils' and is liable to excise duty, and in that context, it was pointed out by the Supreme Court that the excise duty is on the manufacture of goods and not on the sale. After referring to the argument of the counsel for the revenue that manufacture is complete as soon as by the application of one or more processes the raw material undergoes some change, it has been observed by the Supreme Court as follows (page 794) :
'To say this is to equate 'processing' to 'manufacture' and for this we can find no warrant in law. The word 'manufacture' used as a verb is generally understood to mean as 'bringing into existence a new substance' and does not mean merely 'to produce some change is a substance', however minor in consequence the change may be. This distinction is well brought about in a passage thus quoted in Permanent Edition of Words and Phrases, Vol. 26, from an American Judgment. The passage runs thus :- 'Manufacture' implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character or use.'
Thus, according to the Supreme Court, if a new substance is brought into existence or if a new or different article having a distinctive name, character or use result from particular processes, such processes would amount to manufacture. In a later decision in Allenbury Engineers v. S. R. K. Dalmia : 2SCR257 , the scope of the word 'manufacture' was again considered. In paragraph 8 (page 427) the Supreme Court observed as follows :
'The word 'manufacture', according to its dictionary meaning, is the making of articles or material (now on a large scale) by physical labour or mechanical power.'
Reference to the extract from the Permanent Edition of Words and Phrases reproduced above was made. The Supreme Court then further observed as follows (page 427) :
'The word 'manufacture' said Abbott, C.J., in R. v. Wheeler (1819) 2B Ald. 345 , cited in Stroud's Judicial Dictionary (3rd ed.) Vol. 3, p. 1734.
'has been generally understood to denote, either a thing made which is useful for its own sake and vendible as such, as a medicine, a stove, a telescope, and many others; or to mean an engine or instrument, or some part of an engine or instrument, to be employed either in the making of some previously known article, or in some other useful purpose, as a stocking frame, or a steam engine for raising water from mines; or, it may perhaps extend also to a new process to be carried on by known implements ...... No more philosophical or abstract principle can answer to the word 'manufactures'. Something of a corporeal and substantial nature - something that can be made by man from the matters subjected to his art and skill, or at the least some new mode of employing practically his art and skill, is required to satisfy the word.'
The Supreme Court has referred to the earlier decision in Delhi Cloth & General Mills' case and observed that there must be such a transformation that a new and different article must emerge having a distinctive name, character or use. The test to be applied must, therefore, be whether the processes in question have resulted into bringing into being a distinctively new article which is known to the market. It is not in dispute that what is given to the processors is grey cloth which is unbleached. That grey cloth is undoubtedly the main product of the manufacturing processes. When this grey cloth is made available to the processors, it is first bleached and then dyed, printed and finished. Now, the argument of the learned counsel for the petitioners is that after bleaching, dyeing, printing and finishing, the product continues to be cotton fabric and, therefore, since grey cloth was handed over to the processors, it continues to be cotton fabric even after it is subjected to the other processes. There was no process of manufacture, nor is the printed material product resulting from manufacturing processes. It is undoubtedly true that both printed material and grey cloth could generally be described as cotton fabric, but surely, the unbleached grey cloth is not the same cotton fabric as printed cotton fabric. It is difficult to accept the argument that a dyed and printed cotton fabric must be treated on the same footing or indeed as the same article as commonly known as grey cloth. The use to which the bleached, dyed and printed and finished product could be put to is entirely different or in any case, in addition to the use to which grey cloth could be put. The printed material in its finished form is wholly different from the grey cloth and, in fact, the grey cloth could be treated as the basic material on which is subjected to different processes. Admittedly, the printed material is known in the market not by the same name i.e. 'grey cloth'. Cotton fabric is merely a general description but, there may be various types of cotton fabrics and it can never be said that all cotton fabrics are identical or are the same as the base material which was originally given to the processors. On first principles, therefore, we are not inclined to accept the contention of the learned counsel for the petitioners that bleaching, dyeing, printing and finishing processes are not manufacturing processes.
10. We may, at this stage, refer to the decision of the Gujarat High Court in Vijay Textile's case. Even though the Gujarat High Court held that cotton fabrics subjected to bleaching, dyeing and printing could not be subject to the excise duty under Item No. 19-I, it is important to note that the High Court proceeded on the footing that the processes of bleaching, dyeing and printing are manufacturing processes and held that excise duty would be leviable under residuary Item No. 68 of the First Schedule. In paragraph 22 of the judgment, the Gujarat High Court observed as follows (page J 193) :
'..... Item 68 refers to 'All other goods not specified elsewhere manufactured in a factory'. Therefore, processed cotton fabrics and processed man-made fabrics were manufactured in the factories of the petitioners and since they are not covered by Item 19 or 22 of the Schedule, they are liable to pay ad valorem duty only in respect of the value added by them at the time of processing because the only manufacturing activity which they have done is the manufacturing of processed fabrics from fabric which was already in existence.'
The main question which fell for decision before the Gujarat High Court was whether the articles fell within tariff entry 19 or 22 as contended by the Department or under residuary entry 68. It is no doubt true that the learned counsel for the petitioner did not accept as correct the view of the Gujarat High Court that processing was a manufacturing activity. But, as we have already pointed out above, even etymologically, the processes of bleaching, dyeing and printing must be described as manufacturing processes. The decision of the Gujarat High Court in Extrusion Process Pvt. Ltd. v. H. R. Jadhav, Superintendent of Central Excise 1979 E.L.T. J 380, in which the Gujarat High Court held that the printed and lacquered aluminium tubes did not have, in relation to a plain extruded tubes, any distinctive name, character or use as both can be used for the same purpose, both enjoy the same character, and enjoy the same name, and therefore, they cannot be said to be a new substance distinguishable from plain extruded tubes, cannot be of any assistance to the petitioners. The petitioner in that case had been printing and lacquering only plain extruded tubes, and the question was whether by printing and lacquering the plain extruded tubes of aluminium the petitioners firstly applied any further process of extrusion to them and did they thereby manufacture tubes, and it was held that printing and lacquering are not even remotely connected with the manufacture of aluminium tubes and that it was a process independent of the manufacture of aluminium tubes. The question as to whether a particular process is a process of manufacture or not has to be determined having regard to the facts and circumstances of each case and having regard to the well-known tests laid down by the Supreme Court. In any case, there is no similarity of facts in the Extrusion Process's case and the present cases. The other decision relied upon by the petitioners was a case in which colouring of a paper which is already manufactured was not held to be a process in the manufacture of paper, nor was it a process which was incidental or ancillary to the manufacture of paper. This decision is in Swastic Products, Baroda v. Superintendent of Central Excise 1980 E.L.T. 164. The petitioner in that case purchased paper manufactured by manufacturers and coloured or printed one side. The Gujarat High Court held that colouring of a paper which was already manufactured was not a 'process in the manufacture of paper' and that if colouring was in the process of the manufacture of the paper, then it will come within the expression 'paper, all sorts'. It was also held that no manufacturing process was involved by printing on white paper or by colouring manufactured product, namely, the paper. This product was held not to fall under Tariff Item No. 17(4). It is obvious that the activity of printing and colouring was considered in the light of the expression 'all other kinds of paper'.
11. We would also refer to decision of the Supreme Court in Deputy Commissioner, Sales Tax, Ernakulum v. Pio Food Packers : 1980(6)ELT343(SC) . The question before the Supreme Court was whether processing of pineapple fruit into slices for selling in sealed cans did not involve consumption of a commodity in the process of manufacture as contemplated by Section 5A of the Kerala General Sales Tax Act, 1963. Now, on the facts of that case, the Supreme Court held that there was no consumption of original pineapple fruit for the purpose of manufacture, when pineapple fruit was processed into pineapple slices for the purpose of being sold in sealed cans. The test which was applied by the Supreme Court was : 'Does the processing of the original commodity bring into existence a commercially different and distinct article ?'. The Supreme Court referred to a series of cases in some of which it was held that a different commercial article had come into existence, and in some others where although the original commodity had undergone a degree of processing it had not lost its original identity. A passage from an American decision was extracted which read as follows (page 1229) :
'At some point processing and manufacturing will merge. But where the commodity retains a continuing substantial identity through the processing stage we cannot say that it has been 'manufactured'.'
It was this comment which the Supreme Court found was applicable to the case before it, and the view taken was that although a degree of processing was involved in preparing pineapple slices from the original fruit, the commodity continues to possess its original identity, notwithstanding the removal of inedible portions, the slicing and thereafter canning it on adding sugar to preserve it. It was pointed out that higher price was occasioned only because of the labour put into making the fruit more readily consumable and because of the can employed to contain it.
Having regard to what we have said earlier, unless it is possible for us to say that a dyed, printed and finished cotton fabric had substantially the same identity as the grey cloth, it would be difficult for us to accept the contention of the petitioners that these processes are not processes of manufacture. As already pointed out, the identity of the final material which emerged as a result of processing was wholly different and distinguishable from the original grey cloth or cotton cloth.
Dated 17th June 1983
12. Mr. Rana has also referred us to a decision of the Supreme Court in Kailash Nath v. State of U.P. (1957) 8 S.T.C. 358 in support of the contention that cotton fabric even after it is processed remains the same cotton fabric. The main question involved in that decision was the interpretation of a notification issued by the U.P. Government exempting sale of manufactured cloth or yarn with a view to export such cloth or yarn. The notification provided that with effect from 1st December 1949 the provisions of the U.P. Sales Tax Act, 1948, did not apply to the sales of cotton cloth or yarn manufactured in Uttar Pradesh, made on or after 1st December, 1949, with a view to export such cloth or yarn outside the territories of India on the condition that the cloth or yarn was actually exported and proof of such actual export was furnished. Undoubtedly, the Supreme Court in that case held that although the colour of the cloth had changed by printing and processing, the cloth exported was the same as the cloth sold by the petitioners and they were therefore entitled to the exemption under the notification. The facts of that case will show that what fell for consideration before the Supreme Court was the identity of the cloth purchased and exported having regard to the use of the words 'such cloth' in the notification. These words were construed by the Supreme Court to mean that the Legislature did not intend that the identical thing should be exported in bulk and quantity or that any change in appearance would be crucial to alter it. It was also pointed out that the words 'such cloth or yarn' would mean cloth or yarn manufactured in Uttar Pradesh and sold and those words have nothing to do with the transformation by printing and designs on the cloth. It is implicit in the decision of the Supreme Court that by printing or designing the cloth was in fact transformed. But, since the decision turned on the construction of the notification in which any change in appearance or transformation of an article into another did not become relevant, we do not think that this decision is of any assistance to Mr. Rana.
13. On first principles we have already held that the processes of bleaching, dyeing and printing did bring into existence a new marketable commodity different from the grey cloth which is handed over to the processors. We find that we are supported in this view by some decisions which were brought to our notice by Mr. Joshi. In Hiralal Jithmal v. Commissioner of Sale Tax (1957) 8 S.T.C. 325, no doubt a Division Bench of the Madhya Pradesh High Court while considering the meaning of the word 'manufacture' for the purposes of the Madhya Bharat Sales Tax Act, 1950, held that it was not necessary that there must be a transformation in the materials and that the transformation must have progressed so far that the manufactured article becomes commercially known as another and different article from the raw materials, and all that is necessary is that the material should have been changed or modified by man's art or industry so as to make it capable of being sold in an acceptable form to satisfy some want, or desire, or fancy or taste of man. It does appear that the concept of manufacture has been given a very wide meaning, but it is not necessary for us to go into the question as to whether that view is correct or not, because we have already referred to the later decision of the Supreme Court in Delhi Cloth and General Mills' case : 1973ECR56(SC) and Allenbury Engineers' case : 2SCR257 . All that we wish to point out is that the Madhya Pradesh High Court took the view that a person who is engaged in the work of printing and dyeing textiles purchased by him and in the business or selling or supplying the printed and dyed material is a manufacturer within the definition given in section 2(k) of the Madhya Bharat Sales Tax Act. We may also in passing refer to the argument raised by Mr. Joshi that this view has, in fact, been approved by the Supreme Court in Commissioner of Sales Tax v. Harilas Rai (1968) 21 S.T.C. 17. In that decision, the Supreme Court pointed out that the word 'manufacture' has various shades of meaning, and in the context of sales legislation, if the goods to which some labour is applied remain essentially the same commercial article, it cannot be said that the final product is the result of manufacture. Referring to the decision in Hiralal Jithmal's case (1968) 8 S.T.C. 325 the Supreme Court observed as follows (page 20) :
'......... The decision of the Madhya Pradesh High Court might perhaps be justified on the ground that a printed or dyed cloth is commercially a different article from the cloth which is purchased and printed or dyed.'
Though this observation cannot be read as an express approval of the broad proposition propounded by the Madhya Pradesh High Court in Hiralal Jithmal's case, the fact remains that even according to the Supreme Court a printed or dyed cloth is commercially a different article from the cloth which is purchased and printed or dyed - a conclusion we have already reached on construing the meaning of the word 'manufacture'. A similar view has been taken by the Punjab and Haryana High Court in East India Cotton . v. The Assessing Authority-cum-Excise and Taxation Officer, Gurgaon, (1972) 30 S.T.C. 489. The Division Bench in that case positively took the view that sizing, bleaching or dyeing of raw cloth turns it into a different marketable commodity and, as such, amounts to 'manufacture' of a commercially new product. We may also in passing refer to a decision of this Court in Kores (India) Limited v. Union of India & others 1983 E.L.T. 253 where the question which fell for decision of the Division Bench was whether the process of cutting large rolls of paper into specific sizes and dimensions and to roll them into teleprinter rolls with the aid of power driven machines amounts to manufacture under section 2(f) of the Excise Act. The Division Bench held that teleprinter paper or roll was a different commodity or article from the one used as the base material which was large size or jumbo rolls writing or printing paper.
14. We must, therefore, reject the argument, having regard to what we have stated earlier and the decisions referred to above, advanced on behalf of the petitioners that when grey cloth is subjected to the processes of bleaching, dyeing, printing and finishing, there is no manufacture of a new marketable commodity. Consequently, we must also reject the argument that when these processes are included in the definition of the word 'manufacture' by the Amendment Act, no artificial concept of manufacture has been introduced and challenge to the validity of the Amendment Act on that ground must, therefore, fail.
15. The other ground on which the validity of the Amendment Act is challenged is that, by giving the amendments retrospective effect by section 5 thereof, there is an unreasonable restriction on the petitioners' fundamental rights to carry on business and the Amendment Act is, therefore, invalid as being violative of article 19(1)(g) of the Constitution of India. Now, at the outset it is to be remembered that the petitioners have already paid the excise duty demanded of them from time to time and the present petitions are only for seeking orders of refund. The inevitable result of any taxing legislation is that subjects become liable to pay tax. In a given case a tax may also be imposed retrospectively. That by itself would not amount to unreasonable restriction on the right to carry on business. What is canvassed before us is that the unreasonable restriction consists of levy of tax retrospectively. As already pointed out, if there is power in the Parliament to enact retrospective legislation, it would also include a fiscal legislation and imposition of tax liability. Merely on the ground that such a legislation has been enacted, the legislation cannot become open to challenge on the basis of unreasonableness. We have not been shown any further pleadings as to how and on what ground such a legislation would be called as unreasonable restriction. Mr. Joshi has referred us to a decision of the Supreme Court in Krishnamurthi & Co. v. State of Madras : 2SCR54 . That was a case in which originally as a result of the amendment made by Madras Act 7 of 1964 in entry 47 of the First Schedule to the Madras General Sales Tax Act, 1959, sales tax was intended to be levied on all kinds of mineral oils, including non-lubricants, at the rate mentioned in that entry. The Madras High Court, however, while construing entry 47 held that furnace oil, which was a non-lubricant mineral oil, was not covered by entry 47 and entry 47 could not be used to levy tax on sale of non-lubricant mineral oils. The Madras Legislature then passed an Amendment Act 7 of 1964 to rectify and remove the defect in the language found by the High Court and to validate the past levy and collection of tax in respect of all kinds of non-lubricant mineral oils including furnace oil at the rate specified in entry 47 from April 1, 1964 when Act 7 of 1964 came into force. When this challenged, the challenge was negatived on the ground that such an amending and validating Act to make 'small repairs' is a permissible mode of legislation and is frequently resorted to in fiscal enactments. It was further pointed out that the fact that a dealer is not in a position to pass on the sales tax to others does not affect the competence of the legislature to enact a law imposing sales tax retrospectively, it being a matter of legislative policy. The following paragraph from 73 H L R 692 was reproduced with approval (page 2459) :
'It is necessary that the legislature should be able to cure inadvertent defects in statutes or their administration by making what has been aptly called 'small repairs. Moreover, the individual who claims that a vested right has arisen from the defect is seeking a windfall since had the legislature's or administrator's action had the effect it was intended to and could have had, no such right would have arisen. Thus, the interest in the retroactive curing of such a defect in the administration of government outweighs the individual's interest in benefiting from the defect..... The Court has been extremely reluctant to override the legislative judgment as to the necessity for retrospective taxation, not only because of the paramount governmental interest in obtaining adequate revenues, but also because taxes are not in the nature of a penalty or a contractual obligation but rather a means of apportioning the costs of government among those who benefit from it.'
It is now settled law that retrospective legislation cannot be struck down though such legislation might operate harshly in some cases (see paragraph 11 of the judgment in Krishnamurthi's case).
16. At one stage, it was argued by Mr. Rana that the petitioners are apprehensive that the Department would now take advantage of retrospective effect of the legislation and there is a clear possibility of demand which would otherwise be barred by limitation, and the course of reading down of such a provision which was adopted by the Delhi High Court in J.K. Cotton Spinning and Weaving Mills v. Union of India 1983 E.L.T. 239 was suggested. It is strictly not necessary for us to go into the hypothetical submission that the Department might raise demands which were barred by limitation taking advantage of retrospective legislation. If and when such demands are raised, the question as to whether such demands could legally be raised or whether retrospective provisions are themselves subject to the other relevant provisions of the Excise Act would have to be considered. This disposes of the contention raised with regard to the constitutional validity of the Amendment Act.
17. The next contention which has been raised, and mainly on the basis of the decision of the Gujarat High Court in Vijay Textile's case, is that notwithstanding the amendment in Items Nos. 19-I and 22(1) of the First Schedule to the Excise Act, the petitioners cannot become liable to excise duty, because the definition on the expression 'cotton fabrics' in Item No. 19 has not been amended. As we have already pointed out, in Vijay Textile's case the Gujarat High Court had proceeded on the footing that bleaching, dyeing and printing were processes of manufacture, and since the processed cotton fabrics did not find a place in the definition of the expression 'cotton fabrics' in Item No. 19, liability of excise duty was attracted not under Item No. 19 but under Item No. 68. It is needless to say that the whole object of the Amendment Act was to overcome the Gujarat High Court decision. Notwithstanding such clear intention the fact still remains that the Parliament did not think it necessary to amend the definition of the expression 'cotton fabrics' in Item No. 19, but instead substituted a new Item No. 19-I and Item No. 22(1) in place of the original entries. In our view, no such amendment of the definition was necessary in view of the clear amendment in Item No. 19-I. When we consider the amended entry in Item No. 19-I, it is clear that 'cotton fabrics' referred to in Item No. 19-I are obviously cotton fabrics as defined in Item No. 19. The said Item defines the expression 'cotton fabrics' as 'all varieties of fabrics manufactured either wholly or partly from cotton and includes...........' When the new Item No. 19-I was substituted for the old Item, as already pointed out, cotton fabrics were divided into two categories : (a) cotton fabrics, not subjected to any process, and (b) cotton fabrics, subjected to the process of bleaching, mercerising, dyeing, printing, water-proofing etc. The cotton fabrics referred to in clauses (a) and (b) had to be cotton fabrics specified in Item No. 19. When we read the charging provision in section 3 of the Excise Act, it will appear clear that the object of the entries in the First Schedule is two-fold : Firstly, they are intended to specify excisable goods and secondly, they are intended to specify the rates at which excise duties would be levied. By the Amendment Act what the Parliament has done is that, though the meaning of the expression 'cotton fabrics' is not changed in Item No. 19, two different kinds of cotton fabrics have been specified as excisable articles. As already pointed out, when clauses (a) and (b) of sub-item I refer to 'cotton fabrics', they are undoubtedly cotton fabrics which are covered by Item No. 19, and when it comes to specifying the duty, the entries independently refer to cotton fabrics not subjected to any process and cotton fabrics subjected to different processes. Duty payable on these cotton fabrics have been separately specified in the new entries by amendment. If cotton fabrics in clauses (a) and (b) of sub-Item I are the cotton fabrics which are defined in Item No. 19, we fail to see how it could be argued that even though grey fabrics are subjected to manufacturing processes of bleaching, dyeing and printing, excise duty as provided by the Amendment Act is not attracted. The contention of all the learned counsel for the petitioners appears to be based on a misapprehension of the nature of the decision of the Gujarat High Court in Vijay Textile's case. The main ground on which the processed cotton fabrics are held fabrics were not specified as a separate item subjected to levy in Item No. 19-I and that was why it was taken to fall under residuary Item No. 68. Once that omission is now removed by the Parliament by specifically mentioning 'processed cotton fabrics', it is obvious that the view taken by the Gujarat High Court must stand superseded. The same reasoning must equally apply while rejecting the argument of Mr. Patel that amendments to the Additional Duties Act 'seem to have misfired' as the learned counsel put it. Even there, as already pointed out, Item No. 19-I has been amended and for the reasons which we have already given, it was not necessary to make any separate amendment in the substantive Item No. 19. The same principle will apply in the case of substitution of new Item No. 22(1) regarding man-made fabrics.
18. That brings us to the last argument, vehemently advanced by Mr. Rana and Mr. Singhvi with regard to excisable value of goods. It is argued before us, relying on the decision of the Supreme Court in A. K. Roy and another v. Voltas Limited 1977 E.L.T. J 177 that, since excise is a tax on the production and manufacture of goods, excisable value must be determined on the manufacturing cost and manufacturing profit. Since as processors the job of the petitioners was only to bleach, dye and print, the excisable value must be the value of the job done, that is to say, the value will have to be determined on the basis of manufacturing cost and manufacturing profit. Reliance has been placed before us on a decision of this Court in Narendra Engineering Works v. Union of India 1981 E.L.T. 859, it was held by a Division Bench of this Court that while computing the value of clearance of a job worker, it was only the cost which was incurred by him in relation to the manufacture of excisable goods that could be taken into account and, therefore, the value of raw material supplied by the customers to the job worker would not be taken into account, while computing the real value of the goods manufactured on job work basis because manufacturing cost as referred to by the Supreme Court in Voltas' case 1977 E.L.T. J 177 meant the cost incurred by the manufacturer. Now, the only provision which is relevant for determination of the excisable value is the provision in section 4 of the Excise Act. Under that provision it is expressly provided that where the duty of excise is chargeable on any excisable goods with reference to value, such value shall be deemed to be the normal price thereof, and by normal price it means the price at which the goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale. We have already pointed out that these are all cases where there has never been any dispute with regard to the price with reference to which excise duty is determined. We have tried to ascertain from the learned counsel as to whether there is any allegation in any of these petitions to show that they have disputed the normal price on the basis of which recoveries have been made. The main grievance appears to be that while the processors get the grey cloth on which duty is already paid, they are required to pay duty on the basis of the value of the manufactured article which also includes the value of grey cloth on which excise duty has already been paid and the basic contention is that there is double levy of excise duty, Mr. Joshi has referred us to Rule 56A of the Rules which provides for special procedure for movement of duty-paid materials or component parts for use in the manufacture of finished excisable goods. Under sub-rule (2) of Rule 56A it is expressly provided that a manufacturer will be given credit for they duty which is already paid on the articles already used in the manufacture subject to certain conditions and it is not now in dispute before us, irrespective of the question whether such claim for grant of credit was made or not, that in view of the provisions of this Rule, when excise duty will be charged on a processed printed material the processors will be given credit for the duty already paid on the grey cloth by the manufacturer of the grey cloth. A contention was raised before us that such credit would not be sufficient and would be extremely meagre in a given case. Now, when a statutory provision provides for credit being given, whether that credit is substantial or meagre is a matter which is beyond the pale of our jurisdiction. It is essentially a matter of policy for the Parliament to decide. If it is bound that an excisable article has been manufactured and the excise duty has been determined or is determinable in prescribed manner, then such a liability cannot be challenged before us on the ground that the liability is excessive. Having heard the learned counsel for the petitioners and the Department at considerable length, we are not satisfied that there is any substance in the challenges raised to the Amendment Act. Since, as already pointed out, these petitions for directions for refund were wholly based on the alleged constitutional invalidity of the Amendment Act, we have no other alternative but to reject these petitions.
19. Rules issued in all these petitions are discharged. There will be no order as to costs in all these petitioners.
20. Mr. Rana has made a request that the operation of this judgment be stayed for a period of four weeks. As we have found no substance in these petitions, we are not inclined to stay the operation of the judgment as requested.
21. Mr. Rana and Mr. Patel have made application for leave to appeal to the Supreme Court in Miscellaneous Petitions Nos. 481 and 2079 of 1979 and Writ Petitions Nos. 622 and 623 of 1979, and the same is rejected. Similarly, application for leave made by Mr. Menon and Mr. Singhvi in their matters is also rejected.