BAINS J. - Petitioner company is registered as a private limited company under the Companies Act, 1956, and is engaged in dyeing, scouring, singeing, milling and finishing of textiles of all varieties, namely, woollen, cotton, synthetic fabrics, etc. Under s. 280ZB of the I.T. Act, 1961 (hereinafter referred to as the 'Act'), the petitioner company is entitled to tax credit certificate after the conditions as enshrined in the aforesaid section are fulfilled. The petitioner company is to pay tax for the assessment year commencing from April 1, 1965, which is deemed to be the base years following that year to tax credit certificate for the amounts mentioned in that section. The maximum which can be granted is 10% of the tax payable by the company for the years succeeding the base year. It is alleged that in the base year for the period commencing from April 1, 1965, to March 25, 1970, on an income of Rs. 71,645 to a tax liability of Rs. 34, 672 and thus for the years 1966-67, 1968-70, the petitioner-company became entitled to tax credit certificates as was envisaged under s. 280ZB, read with the Tax Credit Certificate (Corporation Tax) Scheme, 1966.
The petitioner-company is also registered under the Industries (Development and Regulation) Act, 1951, since it employed more than 50 workmen and is engaged in the industry mentioned in Item No. 23 of Schedule I.
The petitioner-company filed an application or the year 1966-67, on April 16,1971, and for the year 1968-69, on April 17,1971, and for the year 1969-70, on April 21, 1971, to respondent No. 1 for taking advantage of s. 280ZB of the Act. These applications were disposed of by a single order by the respondent-ITO and were dismissed on the ground that the petitioner was not manufacturing any textile and it was merely carrying on the process of dyeing and printing on wage basis and it would not amount to the manufacture of textile gods. The petitioner filed an appeal before the Commissioner of Income-tax, which was also dismissed vide his order dated January 22, 1945. Hence, this petition under article 226/227 of the Constitution of India.
Mr. Bhagirath Dass, the learned counsel for the petitioner, canvassed that the process of dyeing, finishing, scouring, singeing and milling, etc., would be deemed to be covered under the words 'manufacture and production' and thus the petitioner would be entitled to the grant of certificate under the Scheme and also under s. 280ZB of the Act. He relied upon Kanpur Textile Finishing Mills v. Regional Provident Fund Commissioner , East India Cotton Manufacturing Company Private Limited v. Assessing Authority-cum-Excise and Taxation Officer  30 STC 489 (P & H) and Hiralal Jitmal v. Commissioner of Sales Tax : AIR1957MP37 . These authorities were also cited before the Commissioner, but the same were distinguished on the ground that the words 'manufacture and production' were interpreted with reference to the provisions of other Acts and not for the purpose of the Act.
The precise contention of the petitioner-company is that it is engaged in the processing and finishing of unfinished textiles manufactured by other concerns and that the petitioner should be held to be engaged in the manufacture or production of textile as mentioned in Entry No. 23 of the First Schedule to the Industries (Development and Regulation) Act, 1951 (hereinafter referred to as 'Schedule'). Entry 23 is in the following terms :
'23. TEXTILES (INCLUDING THOSE DYED, PRINTED OR OTHERWISE PROCESSED) :
(1) made wholly or in part of cotton, including cotton yarn, hosiery and rope.....
(3) made wholly or in part of wool, including wool tops, woollen yarn, hosiery, carpets and druggets,.....
(5) made wholly or in part of synthetic, artificial (man-made) fibres, including yarn and hosiery of such fibres.'
Before the benefit of s. 280ZB of the Act can be given to the petitioner it must prove that it is engaged in a manufacturing business mentioned in any of the entries in the Schedule. Thus the question for determination is whether the assessee is engaged in the manufacturing of textiles (including those dyed, printed or otherwise processed). The word 'textile' has not been defined either in the Industries (Development and Regulation) Act. The dictionary meaning of the word 'textile' has been enlarged in Entry 23 of Scheduled I by including such textiles as are dyed, printed or otherwise processed. But the basic thing for qualifying any goods as textiles is that should be manufacturing of textiles and the benefit under s. 280ZB is claimable only if the activity of the manufacturing of textiles is carried on. If it is not there, it cannot be said that the industry is covered by Entry 23 of Schedule I and that the process of dyeing and printing, etc., cannot be covered by the term 'manufacturing of textile'.
Since the interpretation of the words, 'the manufacturing and production of textiles' is involved which is of importance may arise in many cases and the question is not free from difficulty, I am of the view that it would be better if it decided by a larger Bench. Accordingly, it is directed that the papers may be laid before my Lord Honble the Chief Justice for constituting a larger Bench .
SANDHAWALIA C.J. - Would the mere dyeing, printing, singeing or otherwise finishing or processing or fabrics amount to 'manufacture or production of textile' within the meaning of Entry 23 of the First Schedule to the Industries (Development and Regulation) Act, 1951 - is the solitary significant question necessitating this reference to the Division Bench.
M/s. Niemal Textile Finishing Mills (Private) Limited, Amritsar, is a private limited company engaged in scouring, singeing, milling finishing of all types of woollen, silken or cotton fabrics. Under s. 280ZB of the I.T. Act, 1961, an assessee is entitled to a tax credit certificate if the conditions specified therein stand satisfied. It was averred that in the base year of 1965, the petitioner company had been assessed on March 25, 1970, on an income of Rs. 71,645 and to a tax liability of Rs. 34,672 and thus for the subsequent years of 1966 to 1970, the petitioner company had become entitled to the tax credit certificate as envisaged under s. 280ZB of the I.T. Act read with Tax Credit Certificate (Corporation Tax) Scheme, 1966.
The petitioner company preferred applications for the assessment years 1966 to 1970 before the ITO, Amritsar, for taking advantage of s. 280ZB of the I.T. Act and seeking a tax credit certificate thereunder. All the applications were, however, disposed of by a single order by the respondent-ITO on the ground that the petitioner was not manufacturing any textiles and it was merely carrying on the process of dyeing on a wage basis which would not amount to the manufacture of textile goods. Aggrieved thereby, the petitioner preferred an appeal before the Commissioner of Income-tax, which was also dismissed by the impugned order dated February 22, 1975. The petitioner company then preferred the present writ petition which first came up before my learned brother Mr. Justice Bains, sitting singly. Noticing that the interpretation of the word 'the manufacturing or production of textiles' was involved which, apart from its intrinsic importance, was also likely to arise in many other cases, the matter was referred to for decision by a larger Bench.
As before the single Bench so also before us, Mr. Bhagirath Dass, learned counsel for the petitioner, canvassed this primary proposition that (even) the mere process of dyeing, finishing, scouring and singeing of fabrics and textiles of all kinds would come well within the ambit of the manufacture or production of textiles, as envisaged by the statute, and the petitioner-company would consequently be entitled to the tax credit certificate under s. 280ZB of the I.T. Act. Reliance was placed on Kanpur Textile Finishing Mills v. Regional Provident Fund Commissioner ; East India Cotton Manufacturing Company (Private) Limited v. The Assessing Authority-cum-Excise and Taxation Officer  30 STC 489 (P &H) and Hiralal Jitmal v. Commissioner of Sales Tax, : AIR1957MP37 .
Perhaps at the very outset I should mention that it is not my intention to attempt the impossible task of laying down any inflexible or all-pervading definition of the phrase ' manufacture or production of textiles'. It is well settled that for setting in which it so placed. I would, therefore, devote myself to the somewhat modest exercise of attributing a true meaning to the aforesaid words in the context in which they are laid. Herein, what perhaps calls for notice at the threshold is the fact that it would be inept and perhaps misleading to interpret either the words 'manufacture or production' or the word 'textiles' in isolation. I would neither attempt nor fell called upon to expound on the various nuances or meanings that might be attributable to the words 'manufacture', 'production' or 'textiles' when construed separately. It is the phrase 'manufacture or production of textiles' which one is called upon to expound in its true context and to which primarily I would now devote my attention.
Inevitably, one must first turn to the larger statutory purpose. It is not in dispute that the Industries (Development and Regulation) Act, 1951, was enacted to bring under the central control the development and regulation of a number of important industries, the activities of which affected the economy of the country as a whole and the development of which was governed by economic factors of all-India import. The future development on sound and balanced lines of these industries was sought to be secured by the licensing of all new undertakings by the Central Government. Section 2 of the Act declared that it was expedient in public interest that the Union should take under its control the industries specified in the First Schedule. The relevant part of the said Schedule containing as many as 38 industries therein is as under :
'Any industry engaged in the manufacture or production of any of the articles mentioned under each of the following headings or sub- headings, namely :........
23. TEXTILES (INCLUDING THOSE DYED, PRINTED OR OTHERWISE PROCESSED) :
(1) made wholly or in part of cotton, including cotton yarn, hosiery, and rope:
(2) made wholly or in part of jute, including jute twine and rope:
(3) made wholly or in part of wool, including wool tops, woollen yarn, hosiery carpets and druggets :
(4) made wholly or in part of silk, including silk yarn and hosiery;
(5) made wholly or in part of synthetic, artificial (man-made) fibres, including yarn and hosiery of such fibres. .......'
Later, by the Finance Act 1965, Chapter XXII-B pertaining to tax- credit certificates was inserted in the I.T. Act wherein is included s. 280ZB (the relevant part whereof is in the following terms) which provides for tax credit certificate to certain manufacturing companies in certain cases :
'280ZB. (1) Where any company engaged in the manufacture or production of any of the articles mentioned in the First Schedule to the Industries (Development and Regulation) Act, 1951, is, in respect of its profits and gains attributable to such manufacture or production, -.........
and the tax for any such succeeding year exceeds -
(a) in the case referred to in clause (i), the tax payable for the base year; (b) in the case referred to in clause (ii), the tax payable for the succeeding base year,
than the company shall be granted a tax credit certificate for an amount equal to twenty per cent of such excess :
Provided that the amount of the credit certificate shall not for any assessment year exceed ten per cent. of such tax payable by the company for the year'.
Now, reading the provisions of the Act and Chapter XXII-B of the I.T. Act with particular reference to s. 280ZB thereof, it is plain that the object appears to be promote and encourage the growth of manufacturing industries and to afford them incentives by the grant of certain exemptions from income-tax. Consequently, the true meaning to be given to the phrase 'manufacture or production of textiles' must, other things being equal, in a way subserve this larger purpose.
With the aforesaid presumption, one might well ask the questions; Whether it could be the intent of the Legislature to promote the mere dyeing, printing or the processing of grey cloth or other unfinished textiles Were detailed tax exemption provisions and other benefits extended for the somewhat common place and existing processes for the finishing of textiles which amply existed in the country To my mind, the answer inevitably would be in the negative. The overall intent here was clearly to afford incentives and tax exemptions for the production or manufacture or creation of textiles and not merely to the cosmetic processes applied thereto for making them attractively marketable.
Neither the word 'manufacture or 'production' nor the word 'textiles' nor equally the composite phrase 'manufacture or production of textiles' are defined either in the Act or in I.T. Act. One must, therefore, turn to their ordinary meaning keeping well in mind the settled canons of construction that phrases, which are not terms of art, are to be construed as understood in common parlance. No overtly technical or specialized meaning to be easily attributed to them.
Inevitably, one must now advert to the ordinary dictionary meaning of the key word 'textile'. It would appear that the root word therefore is the Latin word 'textile' meaning 'woven' or 'woven fabric'. In the Shorter Oxford Dictionary, the meanings given to the word 'textile' are :
'that has been or may be woven; of or connected with weaving; a woven fabric any kind of cloth; of or pertaining to weaving or to woven fabrics'.
Again, according to the Websters Third New International Dictionary, the meanings of the word 'textile' are :
'Cloth, especially a woven or knit cloth; a fibre, filament, or yarn used in the making of cloth'.
Again, the following are the meanings given to the word 'textile' in the Random House Dictionary of the English language :
'1. any material that is woven;
2. a material as fibre or yarns, used in or suitable for weaving :
3. Woven or capable of being woven textile fabrics;
4. of or pertaining to weaving, textile industries'.
It would follow from the above that whatever may be the other ancillary attributes thereof, yet a weaving or knitting process is foundational to the manufacture or production of textiles.
However, Mr. Bhagirath Dass, learned counsel for the petitioner, pinned upon the secondary meaning of 'textile' namely, that a fibre, filament or yarn suitable or capable of being woven, was equally within the ambit of the word 'textile'. This may perhaps be so but I am unable it would, in any way, ultimately advance the case of the writ petitioner. At best, it would appear that even though a weaving or a knitting process is foundation to the manufacture or production of textiles yet, as a matter of enlarged or loose terminology, the fibre, filament or yarn to be used for such a weaving or knitting process may also be loosely labelled as a textile. To my mind, this secondary meaning does not appear to be attracted or applicable when viewed in the context of Entry 23 of the First Schedule and indeed clauses (1) to (5) thereof would pointedly tend to the exclusion of this enlarged meaning. This would indicate that a fibre or cloth or woven or knitted material is basic to the textile whether the same is dyed, printed or otherwise possessed. Consequently, for this reason, the fabric may have been woven or knitted from cotton, jute, wool, silk or synthetic yarn or fibre. That the fabric may have any of the five components for the weaving or knitted from process would indicate that the Legislature here was using the word 'textile' in a somewhat restricted sense and not to the enlarged one of even including a fibre, filament or yarn itself as a textile.
Even on an enlarged and comprehensive meaning for a textile, it appears to me that the subsequent process of dyeing, printing, singing or otherwise finishing or possessing of the fabric once manufactured, would not make the same as a manufacture or production of textiles in stricto sencu. There is no manner of doubt that the manufacture or production of textiles may involve a wide variety of possesses preceding or succeeding the functional one of weaving and knitting of the fabrics. For instance, in the case of cotton fabrics, it may well include the growing of cotton, its collection, the ginning and cleaning thereof and cleaning thereof and thereafter making a thread or yarn therefrom which would be fit for weaving cloth. Similarly, after the cloth has been woven or knitted, a wide variety of subsequent processes may be necessary to marketable. This, as already noticed, may be like bleaching, dyeing, singeing and a host of other sophisticated cosmetic treatment of the base material of the knitted or woven textile. This process may be even more sophisticated in the case of synthetic or artificial man-made fabrics which are the reaction of purely chemical process for weaving or knitting a fabric. To my mind, it would be anomalous to label each one of the ten or twelve component processes which may go into the making of the yarn, fibre or filament, fit for weaving or woven textile. This process may be even more sophisticated in the case of chemical process for weaving or knitting a fabric. To my mind, it would be anomalous to label each one of the ten or twelve component processes which may go into the making of the yarn, fibre or filament, fit for weaving or knitting and perhaps as many processes for finishing or processing the same as individually being the manufacture or production of textile itself. In the sense, it would make the ginning of cotton or spinning as production or manufacture of textiles. Similarly, this would warrant the mere bleaching of grey cloth as a manufacture or production of a textile. This, to my mind, would not be a meaning which in common parlance can be understood as such. By way of analogy it was argued that the mere manufacture of a component or a part of a product is not to be labelled as the manufacture of the product itself. Learned counsel for the respondents rightly pinpointed that in the manufacture of motor-cars, the ancillary process of manufacturing the hub wheels cannot be labelled as a manufacture of cars but would only be a manufacture or production of wheels. Similarly, in more sophisticated production like aircraft which may have thousands of individual components, the manufacture of each one of them would not be a manufacturer of aircraft but only a production one of them would not be a manufacturer of aircraft but only a production of the individual items. That being so, even if fibre, filament or yarn capable of being woven or knitted into fabrics may, as a special meaning, be labelled as textile, this would, in no way, advance the case of the writ petitioner that dyeing, printing, singeing or otherwise finishing or processing fabrics amounts to 'manufacture or production of textiles'.
Inevitably, one must now turn to the somewhat tangled case law on the point. Pride of place in this context must go to the observations of their Lordships of the Supreme Court in Commissioner of Sales Tax v. Harbils Rai and Sons  21 STC 17. Therein it was held that a dealer, who bought bristles plucked from pigs and later boiled them, washed them with soap and other chemicals, sorted him out according to their sizes and colours, and packed them in separate bundles of different sizes for marketing abroad, was not manufacturing goods within the meaning of the U.P. Sales Tax Act, 1948. The basic test which seems to have been accepted was that 'manufacture' involved the conversion of goods into something essentially or commercially different from the original. It was observed that in the said case, no new article was produced by the assessee and what they produced were known as bristles both in the form in which these were bought and the form in which they were sold abroad. The core, point, therefore, is whether the end-product is something essentially or commercially different. This precedent seems to be a plain warrant for the proposition that merely processing, finishing or making a product more marketable is not the manufacture of that article. Herein, there is no manner of doubt that thought the pig bristled were finished, processed and cosmetized for the market, yet it was not held to be manufacture processed, finished or glamourized to be more marketable The answer would be an obvious negative.
In CIT v. Cacino (Pvt.) Limited  ITR 289, a Division Bench of the Kerala High Court drew a distinction between 'manufacturing' and 'processing' whilst holding that preparing articles of food from raw materials in a hotel would not constitute either a 'manufacture' or 'processing' of goods within the meaning of s. 2(6)(d) of the Finance Act of 1968. It was held that unless a commercially new different article is produced, the process could not be called a manufacturing process.
Whilst considering the authorities relied upon by the petitioner, what has to be pointedly kept in mind is the note of caution sounded by their Lordships of the Supreme Court in Harbilas Rais  21 STC 17, that the word 'manufacture' has various shades of meaning and it cannot be given the same meaning in every statute regardless of the context thereof. With this warning in mind, one may advert to the original authority in this contest i.e., North Bengal Stores Ltd. v. Member, Board of Revenue  1 STC 157. Therein, the language was in the widest amplitude with regard to 'manufacture or produce goods for sale' in the Bengal Finance (Sales Tax) Act, 1941. It was held therein that a dispensing chemist who prepares mixtures in accordance with the prescription provided by customers, manufactures of produces goods for sale under the Finance Act. It is significant to recall that this pertained to the manufacture or production of goods in their generic sense. It did not pertain to the produce or manufacture of a specified article. It was highlighted that the essence of manufacturing is that something is produced or brought into existence which is different from that out of which it is made in the sense that the thing produced is by itself a commercial commodity. Das J. pointedly noticed that he would decline to be drawn into an academic discussion as to the abstract meaning of the term 'manufacture' and confined to the particular meaning attributable to it in the context of the Bengal Finance (Sales Tax) Act, 1941. The general observations in this authority, therefore, are of no great aid to the Writ petitioner.
In Kanpur Textile Finishing Mills v. Regional Provident Fund Commissioner , the Division Bench was construing the words 'manufacture or production' in the peculiar context of the Employees Provident Funds Act. It was noticed that, being a beneficent piece of legislation in favour of the workmen, it had to be construed liberally and was so done in order to give the benefit thereof to the employees. Particular notice was taken that the said Act, as originally enacted in 1952, was soon thereafter amended in 1953 add thereto a wide ranging definition of the word ' manufacture' and by omitting the words 'or production' and adding an explanation to the word 'textiles'. It was in this context that it was held that these amendments following on the heel of the original enactment, were indeed clarificatory and declaratory of what the Legislature thought to be the meaning of those words which had been put in doubt. In this peculiar context and in view of the extended definitions of ' manufacture' and 'textiles', it was held that the processing of textile goods by dyeing, printing and bleaching came within Schedule I of the Employees Provident Fund Act, 1952, read with ss. 2(i) and 4 thereof. It is obvious that the meaning therein given to the word 'textiles' was in the context of its specialised definition as also of the word 'manufacture'. The Division Bench judgment of the Bombay High Court in CST v. Radha Dyeing and Printing Mills  48 STC 61, is plainly distinguishable as it turned on the peculiar definition of the word 'manufacture' in s. 2(17) of the Bombay Sales Tax Act, 1959, which expressly included therein the words 'altering, ornamenting, finishing or otherwise processing, treating, or adapting any goods'. Plainly enough, thereby the Legislature had itself included these processes in the definition of 'manufacture', apparently because they might well not fall within it in common parlance.
The weight of precedent seems to be clearly in favour of the view which we are inclined to take. It is apt to recall that in Union of India v. Delhi Cloth and General Mills Co. Ltd. : 1973ECR56(SC) , their Lordship said in no uncertain term that mere processing is not to be equated with 'manufacture' which, in turn, does not mean merely to produce some change in a substance, however minor, in consequence, the change may be. Unless a new substance known to the market is brought into existence, it cannot be labelled as a manufacture thereof. To the same tenor is the reasoning and ration of two cases of this court in Raghbir Chand Som Chand v. Excise and Taxation Officer, Bhatinda  11 STC 149 and Patel Cotton Co. (Pvt) Limited v. State of Punjab,  15 STC 865.
It would thus appear that on the peculiar language and context of the statutory provision which fall for construction herein, on principle, and even on the weight of precedent, the answer to the question posed at the outset could well have been rendered in the negative to hold that a mere dyeing, printing, singeing or otherwise or processing of fabrics would not amount of the 'manufacture or production of textiles' within the meaning of Entry 23 of the First Schedule to the Industries (Development and Regulation) Act, 1951.
However, it appears that the aforesaid view, which we are inclined to take is some what in discordance with that taken within this court by the Division Bench in East India Cotton Manufacturing Company Private Limited v. Assessing Authority-cum-Excise and Taxation Officer  30 STC 489. Therein, it was held in the context of the Central Sales Tax Act 1956, that bleaching or dyeing or raw cloth turns it into a different marketable commodity and, as such amount to 'manufacture' of a commercially new product. However, this conclusion was arrived at not upon any principle or rationale but apparently on the assumption that the ratio of Hirala Jitmal v. Commissioner of Sales Tax : AIR1957MP37 , had been incidentally approved by the Supreme Court in Harbilas Raicase  21 STC 17, had in no way approved the ratio of Hiralal Jitmals case : AIR1957MP37 . Indeed, a close reading of the Supreme Court judgment would show that their Lordships were distinguishing the case and indeed saying that this could be justified only for the limited reasons of the peculiar facts of that case. Therein, it was not on the general meaning of the word 'manufacture' nor particularly on the phrase ' manufacture of textiles' that the issue turned, but upon the peculiar definition thereof in the Madhya Pradeshs Sales Tax Act. It appears to us that the principle and ratio laid down by their Lordships in Hasrbilas Rais case  21 STC 17 (SC), runs patently counter to what was observed in Hiralal Jitmals case : AIR1957MP37 and their Lordships of the Supreme court rejected the argument based thereon and dismissed the appeal. We are, therefore, unable to hold that Harbilas Rais case  21 STC 17 (SC), is in any way an approval of Hiralal Jilmals case : AIR1957MP37 from which we would wish to record a respectful dissent.
With the deepest humility, the view we are inclined to take is contrary to the observation in East India Cotton Manufacturing Company Private Limiteds case  30 STC 489 (P&H;). For clarity of precedent within this court, it therefore, becomes necessary that these doubts be resolved by a larger Bench. We, accordingly, direct that the matter be placed before a Full Bench for an authoritative decision.