Holding

The 1980 amendment expanding the definition of manufacture to include bleaching, dyeing, printing, etc., is constitutionally valid; such processes constitute manufacture, making the levy of excise duty lawful and retrospective taxation permissible.

Summary

The Supreme Court examined whether processes such as bleaching, mercerising, dyeing, printing and other treatments of cotton and man‑made fabrics constitute "manufacture" under the Central Excise and Salt Act, 1944, and whether the 1980 amendment expanding the definition of manufacture is constitutionally valid. The Court held that the amended definition is intra‑vires of Parliament under Entry 84 (and, alternatively, Entry 97) of List I, does not violate Articles 14 or 19(1)(g), and that retrospective legislation is permissible. Consequently, the levy of excise duty on the processed fabrics is valid and no refund is due. The Court allowed the civil appeals (C.A. Nos. 586‑592 of 1979) and dismissed the writ petitions and other appeals, vacating any interim orders and directing payment of arrears and future duties.

Issues considered

Whether bleaching, mercerising, dyeing, printing and related processes amount to "manufacture" under the pre‑amendment law.
Whether the 1980 amendment to the definition of "manufacture" is within Parliament's legislative competence under Entry 84 (or Entry 97) of List I of the Seventh Schedule.
Whether the amendment infringes the equality clause (Article 14) or the freedom to carry on business (Article 19(1)(g)).
Whether the retrospective effect of the amendment is constitutionally permissible.
Whether the levy of excise duty on processed cotton and man‑made fabrics is valid and whether refunds are payable.

Legislation cited

Additional Duties of Excise (Goods of Special Importance) Act, 1957
Central Excise and Salt Act, 1944s. 2(f), s. 3, s. 4, s. 5(2)(b)
Central Excise Ruless. Rule 56A, s. Rule 6A, s. Rule 96D
Central Excises and Salt and Additional Duties of Excise (Amendment) Act, 1980s. 2(f) (amendment), s. 5
Central Excises and Salt and Additional Duties of Excise (Amendment) Ordinance, 1979
Constitution of Indias. Article 14, s. Article 19(1)(g), s. Entry 84 of List I, s. Entry 97 of List I

Subjects

Excise dutyManufactureRetrospective legislationConstitutional validityCentral Excise ActTextile processingBleachingDyeingPrintingArticle 14Article 19(1)(g)Entry 84 List IEntry 97 List I

Judgment

292
EMPIRE INDUSTRIES LIMITED & ORS. ETC.
A
v.
UNION OF INDIA & ORS. ETC.

May 6, 1985
B
[S. MURTAZA FAZAL ALI, A. VARADARAJAN AND
SABYASACHI MUKHARH, JJ.]

Central Excise and Salt Act, 1944, (Act I of 1944), section 2 (f) (v) (•i)
and (vil)-Definition of 'Manufacture' as amended by the Central Excise and Salt
c and Additional Dutle> of Excise (Amendment) Act, (Act vi of 1980)-Legislative
competency to make amendment-Whether the Amendment Act is violative of
Articles 14, 19 (I) (g) and Entry 84 of List I of the Seventh Schedule of the
Constitution-Concept of "Manufacture" - Whelher the various processes of
bleaching, mercerising, dyeing, printing etc. of cotton fabrics and woolen fabircs
man.made fabrics as mentioned in items 19 and 22 of the Schedule to the Central
Excises and Salt Act amount to "Manufacture", as the Act stood prior to the
D Amendment Act, so as to attract levy of duty under section 4 of the Act-Whether
the Amendment Act In any event is valid under Entry 97 of List I of the Seventh
Schedt1le of the Constitution-Retrospective legislation whether permissible--
Evidence not produced elear but that sought to be produced in the Supreme Court,
acceptance of-Passing of Interim orders, aviationjvaction by the Court in fiscal
matters, causing of.
E
In Vijay Textile Mill& v. Union of India reported in (1979) 4 E.L.T.J. 181,
the Gujarat High Court by its decision dated 21. l.1979 held that cotton fabrics
subjected to bleachiag, dyeing and printing could not be subjected to excise
duty under Item 19 (!) (b) of the First Schedule to the Central Excises and Salt

F
Act, 1944 is at twenty p~r cent ad-valorem these activities not being taxable
event in the light of section 3 read with 2(d) of the Act. The Gujarat High
Court proceeded on the footing that the processes of bleaching, dyeing and
-
printing were manufacturing processes and held that excise duty would at least
be leviable under residuary Item No. 6S of the First Schedule and therefore,
liable to levy at eight per cent ad·valorem, the High Court directed the "Excise
authorities to calculate the ad valorem excise duty during the period of three
years immediately preceding the institution of each petition before the Court
G and calculate the excise duty payable by each of these petitioners under Item
68 only in respect of the value added by each of the petitioners by the
processing of the fabric concerned. The excise duty paid in excess of such ad
valorem duty under Item 68 during the period of three years immediately
preceding the institution of the respective Special Application is ordered to be
refunded to the petitioners concerned in each of their petitions."
B
Jn Real Honest Textiles and Ors. v. Union of India (now in appeal) the
Gujarat High Court passed similar directions after declaring that the levy and
l'pllel'tiop pf excise duty and •\lditipnal duty on processe\l 111an-made fabrics
EMPIRE INDUSTRiES v. UNION 293
under Tariff Item 22(1) of the Additional Duties of Excise (Goods of Special
Importance) Act, !957 was ultra vires. Since the decisions of the Gujarat High A
Court on 24.1.1979 in these two cases, the petitioners and the processing houses
like the petitioners have been claiming refund.

The President of India promulgated an Ordinance being Central
ordinance No. f2 of 1979 called the Central Excises and Salt and Additional
Duties of Fxcise (Amendment) Ordinance 1979. The said Ordinance was B
replaced by the Act VI of 1980 called the Central Excises and Salt and
Additional Duties of Excise (Amendment) Act, 1980, giving retrospective effect
to the Act from 24th February 1979. By section 2 of the Act, section 2(f) of
the Excise Duty Act was amended by adding three sub items in the definition
"manufacture" so as to include the activities like bleaching, dyeing, printing
etc. covered by the two decisions of the Gujarat High Court. Similar '"amend..
ments were made in items 19(1), 21 <I) and 22 (!) of the First Schedule with c
retrospective effect. Section 5(2) (b) of the Amending Act provided "no suit
or other proceedings shall be maintained or continued in any other Court for
the refund of the duty collected and no enforcement shall be made by any
Court of any decree or order directing the refund of such duties of excise which
have been collected and which may have been collected." as if the provisions
of section S of the Act VI of 1980 had been in force on and from the appointed D
day as defined in the Act VI of 1980.

After the Act VI of 1980 was passed, the same was challenged before
the Bombay High Court by several writ petitions. Dismissing W.P. 623/1979
titled New Shakti Dye Works Pvt. and Mahalakshmi Dyeing and Printing Works
v. Union of India along with 24 other writ petitions on 16/17 June, 1983. the
Bombay High Court upheld the Constitutional validity of the impugned Act as Ill
we11 as the levy of duty on certain goods. Special Leave was granted in this
case as in the two earlier Gujarat High Court's cases.

Empire Industrie• Limited also filed a petition under Article 226 of the
cases though Indian Textile Processor Association withdrew it from the file of
the Bombay High Court and by the writ petition under Article 32 of the F
Constitution has challenged the Constitutional validity of tho Act VI of 1980
and the validity of the levy of excise duty under section 4 of the Act. Some
other petitioners similary situated have also filed their petitions under Article
32 of the Constitution.

In these petitions and appeals the following main points fell for
~nslderation : G

1. Whether cotton fabrics subjected to the process of bleaching,
mercerising, dyeing, printing, water-proofing etc. specially the processes
conducted and carried out by the petitioner company in respect of
cotton fabrics and woolen fabrics/man-made fabrics as mentioned under H
Items 19 or 22 of the Schedule to the Central Excises and Salt Act
amount to 'manufacture' as the Act stood prior to the impugned Act of 1980.
In other words whether these various processes carried out by the petitioners
294 SUPREME COURT REPORTS (1985] SUPPL. s.c.ll.

company amount to bringing into existence different and distinct goods,
A commercially known as such, to attract levy of duty under section 4 of the
Contra! Excises and Salt Act, 1944.

2. Whether and in any event after tho impugned Act, the levy is valid.
In connection with the said contention it has to be examined whether the
impugned Act is intra vires entry 84 of List I of the Seventh Schedule to the
Constitution and if not, whether the said impugned Act can be said to be valid
B in any event under entry 97 of List I of the Seventh Schedule to the
Constitution.

3. Whether the impugned Act violates Article 14 or Article 19(1)(g) of
the Constitution.

c Allowing the Revenue appeals in C.A. Nos. 586 to 592 of 1979 and
dismissing all the petitions and other appeals, the Court,

HELD : 1. In view of the amendments made in section 2(f) of the
Central Excises and Salt Act, 1944 by Amending Act VI of 1980 as well as the
substitution of new Item 19(1) and 22(1) in Excise Tariff in place of the original
items, the activities of the petitioner company, namely, as an indep~ndent pro-
D
cessing unit engaged in job activities of dyeing, printing and finishing of man-
made/cotton fabrics attract the exigibility to excise duties under section 3 and 4
of the Act. Excise duty will be charged on processed printed material.
[328 D-E]

Section 3 of the Central Excises and Salt Act clearly indicates that the
E object of the entries in the First Schedule is firstly excisable goods and
iiecondly to specify rates at which excise duty will be levied. Under sub-rule 2
of Rule S6A, a manufacturer will be given credit of the duty which is aiready
paid on the articles used in the manufacture, subject to certain conditions.
Therefore, the processors will be entitled to credit for the duty already paid on
the grey cloth by the manufacturers of the grey cloth. [328 E-FJ
F
New Shakti Dye Works (Pvt.) Ltd. v. Maha/akshmi Dyeing and Printing
Works v. Union of India & Anr. (W.P. Nos. 622 and 623 of 1979 dated 16and17
June 1983 Bombay) approved.

G
2.1 Excise duty is a duty on the manufacture of goods and not on sale.
Manufacture is complete as soon as by the application of one or more process,
the raw material undergoes some change. 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 process or processes would amount
to manufacture. Tb.erefore, the taxable event under the Excise Law is
•manufacture•. The moment there is transformation into a new commodity
H commercially known as a distinct and separate commodity having its own
character, use and name, whether be it the result of one process or several
processes •manufacture' takes place and liability to duty under section 4 is
attracted. (312 C-D; 316 B-C]
EMPIRE iNDUSTRIES V. UNION

Union of India v. Delhi Cloth & General Mills, (1963) 1 Supp. S.C.R. '86;
Union of India v. H.U.F. BuJiness known as Ranilal Mansukhnai, Rewarl & A.nr. A
[1971) I S.C.R. 937; Al/enburry Engineers v. Ramakrishna Dalmia & Ors.,
[1933] 2 S.C.R. 257; Dep11ty Commissioner, Sales Tax (Law) Board of Revenue
(Taxes) Ernakulam v. Pio Food Packm, [1980] 3 S.C.R. 1271 and Chowgule and
Co. P>t. Ud. and Anr. v. Union of India and Ors. [1981] 1 S.C.C. 653 referred
to.

Commissioner of Sales Tax, U.P. Lucknow v. Barbi/as Ral and Soru B
[1968] S.T.C. Vol. 21p.17 (S.C.) followed.

Hiralal Jitmal v. Commissioner of Sales Tax, [1957] S.T.C. Vol. Vlll 325
(MP); East India Cotton Manufacturing Company Pvt. Lid. v. The Assessing
Authority- cum-Excise and Tatation Officer, Gurgaon and Anr., (1972) S.T.C. Vol.
30 p. 489 (Punjab and Haryana); Kores (India) Ltd. v. Union of India and Ors.,
[1982] E.L.T. Vol. 10, p. 253 and K. Venkatarama11 and Company and Ors. v.
c
Deputy Commercial Tax Officer, Coimbata,e IV a11d Ors., [1972] S.T.C. Vol. ~O
p. 57 (Mad) approved.

Extrusion Process Pvt. Ltd. v. N.R. Jadhav, S11perin1endent of Central
Excise, [197914 E.L.T. J. 380 (Gujarat); Swa~tik P,·oducts, Baroda v. Superint~n
dent of Central Excise, [1980] 6 E.L.T. 164 (Gujarat) and Kai/ash Nath and Anr.
D
y, The State of U.P. and Ors., [1957] S.T.C. Vol. VIII p. 358 (SC)
distinguished.

Mc Nicol and Anr. v. Pinch, [1906] 2 K.B. 352 quoted with approval.

E
z.2 Etymologically the word "Manufacture" properly construed would
doubtless cover the transformation. Here, in the light of several decsion of the
Supreme Court and the High Courts and on the construction of the expression,
the process of bleaching, d)'eing and printing etymologically means manu-

- facturing process. The processes of the type which have been incorporated by
the Act VI of 1980 were not so alien or foreign to the concept of 'manufacture'
that these could not come within that concept covered by entry 84, of List I of F
the Seventh Schedule. After the Act VI of 1980 was passed these processes
indubitably fall within the expression •manufacture'. [323A,E·H]

!.3 The question whether the impugned Act is covered by entry 84 can
be looked from another point of view namely the actual contents of enty 84.
The word 'produced' appearing in entry no. 84 of List I of the Seventh Schedule G
i! used in juxtaposition with the word 'manufactured' and used in connection
with the duty of excise and consequently it contemplates same expenditure of
human skill in bringing the goods concerned into the condition which would
attract the duty. It was not required that the goods would be manufactured
... in the sense that raw material should be used to turn out something altogether
H
different. It would still require that these should be produced in the sense
that some human activity and energy should be spent on them and these
should be subjected to some processes in order that these might be brought to
the state in which they mi11ht become fit for consumption. Here, expenditure
296 SUPREME COURT REPORTS [1985) SUPPL, s.c.ll.

of human skill and material have been used in the processing and it may not
A be that the raw material was first transformed but over the transformed
material, further transformation was done by the human labour and skill
making this fit for human consumption. In any event under entry 97 of List I
of the Seventh Schedule this would apply if it is not under entry 84. [324 A, GJ

Aluminium Corporation of India Ltd. v. Coal Board AIR 1959 Cal. 222,
B approved.

The King v. Caledonia• Collieries, ltd. [1928) A.C. 358 referred to.

2.4 To contend that if the legislation was sought to be defended on the
ground that it is a tax on activity Jike processing and would be covered by the
0 powers enume~ated under entry 97 of List I of the Seventh Schedule there was
no charging section for such an activity and as such the charge must fail and
there cannot be any levy is wrong and misconceived. The charging section
is the charging section 3 of the Central Excises and Salt Act, 1944. It stipula ..
tes the levy and charge of duty of excise on all excisable goods produced or
manufactured. 'Manufactured' under the Act after the amendment would be.
the 'manufacture' as amended in section 2(f) and Tariff Item 19(1) and 22 and
D the charge would be on that basis. (324 5;325 A-BJ

3.1 I1nposition of tax by legislation n1akes the subjects pay taxes. It is
well recognised that (i) tax may be imposed retrospectively; and that by itself
would not be unreasonable restriction on the right to carry on business and (ii)
the Parliament has powers to make retrospective legislation including fiscal
E legislation and such legislation per se is not unreasonable. [326 D-E]

3.2 Here there is no particular feature of this legislation which can be
said to create any unreasonable restriction upon the petitioners. The concept
of process being embodied in certain situation in the idea of manufacture, the
impugned legislation is only making 'small repairs' and that is permissible
mode of legislation. [326 E-FJ
F
3.3 Nor does the impugned legislation act harshly nor there is any
scope for arbitratriness or discrimination. It is clear from the objects and
reasons wherein it was stated that the Central Excise Duty was levied for the
first time on cotton fabrics in 1969, on man·madc fabrics-(rayon of artificial
silk fabrics) in 1954 and on woolen fabdcs in 1955. From the very early stages
G of the textile tariff, with a view to achieving progression in the rate structure
and to aligning excise control with the demands of differt.nt producing sectors
duties has been levii:d not only on grey fabrics but also at the stage of proces·
sing such as bleaching, dyeing and printing. The Judgment of the Gujarat
High Court in Real Honest Textiles and Ors. v. Union of India (under appeal)
according to the statement of objectS' and reasons of the Act VI of 1980 had
H upset the arrangements regarding levy of excise duties of textile f.:i.brics. The
judgment a1so had the effect of disturbing the balance evolved between diffe·
rent sectors of the textile industry. Furthermore, it was made clear that in so
far as paat assessments were concerned, refund of excise duties to manufactu·

I
EMPIRE INDUSTRIES V. UNION ~97

rers as ordered by the High Court would have-only meant a fortuitous wind~
fall so as to benefit such persons without any relief to the ultimate consumers A
who had purchased the fabrics and had borne the burden of the duties. In
order to avoid this, the Act was passed. [325 E-H; 326 B·C; 327 CJ

Krishnamurthi & Co. etc. v. State of Madras & Anr., [1913) 2 S.C.R. 55,
referred to.

3.4 Where for the purpose of calculating assessable profits, a notional
B
and conventional sum is laid down by the legislature to be arrived at on a
certain basis, it is not permissible for the courts to engraft into it any other
deduction or allowance or addition or read it down on the score that the said
deduction or allowance or addition was authorised elsewhere in the Act or in
the Rules. A conventional charge shou'd be measured by its own computation
and not by facts relating to other method of computation. The circumst-'nces c
trat thereby the benefit of any exemption granted by the legislation may be
lost and that in son1e cases hardship might result are not matters which would
influence courts on the construction of the statute. A tax payer subject is
entitled only to such benefit as is granted by the legislaf.ure. Taxation under
the Act is the rule and benefit and exemption, the exception. And in this case
there is no hardship. [327 E·GJ
D
3.5 When the textile fabrics are subjected to the processes like bleach-
ing, dyeing and printing etc. by indt"pendent processes, \\'hether on their own
account or on job charges basis, the value of the purposes of assessment under
section 4 of the Central Excise Act will not be the processing charges alone
but the intrinsic value or the processed fabrics which is the price at which such
fabrics are sold for the first time in the wholesale market. That is the effect E
of section 4 of the Act. The value would naturally include the value of grey
fabrics supplied to the independent proce~sors for the processing. However,
t"XCise duty, if any, paid on the grey fabries will be given proforma credit to the
independent processors to be utilised for the payment on the processed fabrics
in accordance with the Rules 56 A or 96 D of the Central Excise Rules, as the
case may be. [327 G-H; 328 A-BJ
F
3.6 Read in that context and in the eon.text of the prevalent practice
followed so long until the d(!cision of the Gujarat High Court in Real Honest
case, there is no hardship and no injustice to the petitioners or the manufactu-
rers of grey fabrics. The fact that the petitioners are not the owners of the
end product is irrelevant. Taxable events is manufacture-not ownership.
[328 B·D]
G
4. Documentary evidence not produced earlier cannot be admitted at
the late stage of final hearing of the case by the Supreme Court. [308 E]

(Per majority Varadarajan J. dissentinc).
H
t. Different Courts sometimes pass different interim orders as the courts
think fit. The interim orders passed by particular courts on certain considera-
tions arc not precedents for other cases may be on similar facts. To contend
298 SUPREME COURT REPORTS [19851 SUPPL. s.c.ll.

that once an interim order has been passed by the Supreme Court on certain
A factors specially in fiscal matters, in subsequent matters on more or less similar
facts, there should not be a different order passed nor should there by any
variation with that kind of interim order passed. In as much as that such
variance creates discrimination is an unfortunate approach. [329C-E]

2. Every bench hearing a matter on the facts and circumstances of cac:h
case should have the right to grant interim orders on such terms as it considers
B fit and proper and if it had granted interim order at one stage, it should have
right to vary or alter such interim orders. The court made the followina
auggestions (i) A consenses. however, should be developed in matters of
interim orders in fiscal matters specially in cases involving indirect taxes where
normally taxes have been realised from the consumers but have not been paid
over to the exchequer or where taxes are to be realised from consumers by th1
c dealers or others who are parties before the court, interim orders staying th1
payment of such taxes until final disposal of the matters should not be passed.
1t is a matter of balance of public convenience. Large amounts of taxes are
involved in these types of litigations Final disposal of matters unfortunately
in the present state of affairs in our courts takes enormously long time and
non-realisation of taxes for long time creates an upsetting effect on industry
and economic life causing great inconvenience to ordinary people. Governments
D are run on public funds and if large amounts all over the country are held up
during the pendency of litigations, it becomes difficult for the governments to
run and become oppressive to the people. Government's expenditures cannot
be made on bank guarantees or i;ecurities. Jn that view of the matter th1
Supreme Court shall refrein from passing any interim orders ataying th1
realisations of indirect taxes or passing such orders which have the effect of
E non·realisation of indirect taxes. This will be healthy for the country and for
the courts. [329 E-H; 330 A-CJ

ORIGINAL JURISDICTION: Wrii Petition (Civil) No. 11728 of
1984.

Under Article 32 of the Constitution of India.
F
WITH

Writ Petitions Nos. 13556, 13788, 13792, 15438 and 15439 of
1984 and Civil Appeals Nos. 6414 of 1983 and 3564 of 1984.
G
AND

Civil Appeals Nos. 586 to 592 of 1979.
H
From the Judgment and Order dated 24.1.1979 of the Gujarat
High Court in Special Civil Appln. Nos. 1552, 1553/77 with No1•
249, 1292, 1293, 1294 and 1295 of 1978.
EMPIRE INDUSTRIES v. UNION (Varadarajan, J.) 299
S.J. Sorabjee, A.J. Rana, S. Parekh, Mrs. J. Wad, and
Miss Aruna Mathur for the Petitioners in W.P. Nos. 11728, 15438 and A
15439 of 1984.

S.J. Sorabjee, A.N. Haskar and S.A. Shroff for the Petitioner
in W.P. No. 13788 of 1984.
B
S.S. Shroff and S.A. Shroff for the Appellant in C.A. No.
3564/84 and Petitioner in W.P. Nos. 13556, 13792 and 13788 of
1984.

S.J. Sorabjee and A. Grover for the Appellant in C.A. No. 6414
of 1983. C
K.G. Bhagat Additional Solicitor General and R.N. Poddar for
the Appellants 'in C.A. Nos. 586-92 of 1979.

K.G. Bhagat, Additional Solicitor General, Girish Chandra,
Miss Ha/ida Khatun, Um2 Nath Singh and R.N. Poddar for the D
Respondents. (Union of India)

S.K. Dholakia, R.C. Bhatia and P.C. Kapur for the
Respondents, in C.A. Nos. 589·92 of 1979.
E
Y.S. Chitale, Anand Haskar, P.H. Parekh and Miss lndu
Malhotra for the Respondents in C.A. No. 586 of 1979.

A.K. Sen, P.H. Parekh and Miss Indu Malhotra for the
Respondents in C.A. No. 587 of 1979. F
F.S. Nariman, P.H. Parekh and Miss Indu Malhotra for the
Respondent in C.A. No. S88 of 1979.

The following Judgments were delivered
G
VARADARAJAN J. I agree with my learned brother Sabyasachi
Mukharji, J. that Writ Petitions Nos. 11728 of 1984 and 13556, 13788
13792, 15438 and 15439 of 1984 and Civil Appeals Nos. 6414
of 1983 and 3564 of 1984 have to be dismissed with costs, and H
that Civil Appeals Nos. 586 to 592 of 1979 have to be allowed with
costs, and interim orders, if any, passed should stand vacated, and
arrears of excise duties should be paid forthwith and future excise
3o0 SUPREME COURT REPORTS (1985] SUPPL. s.c.R..

duty should be paid as and when the goods are cleared or otherwise
A as per law and rules. But I regret my inability to subscribe to the
views expressed by him in the last two paras of his judgment
regarding interim orders.

SABYASACHI MUKHARJI, J. This first petition herein under Article
B 32 of the Constitution arises under the following circumstances.

The President of India promulgated an Ordinance being
-
Central Ordinance No. 12 of 1979 called the Central Excises and
Salt and Additional Duties of Excise (Amendment) Ordinance, 1979.
c The said Ordinance was replaced by the Act called the Central
Excises and Salt and Additional Duties of Excise (Amendment) Act,
1980 (hereinafter referred to as the 'impugned Act'). The said
impugned Act received the assent of the President on 12th February,
1980 and under section 1(2) of the impugned Act, retrospective effect
to the Act was given from 24th February, 1979.
D
It may be mentioned that the Gujarat High Court in the case
of Vijay Textile Mills v. Union of India rendered its decision on 24th
January, 1979 on this aspect of the matter. This decision will have
to be examined in little detail later. As a result of the said decision
and with a view to overcome the said decision, the Ordinance menti-
oned hereinbefore was promulgated on 24th November, 1979 which
has since been replaced by the said Central Excises and Salt and
Additional Duties of Excise (Amendment) Act, 1980.

After this impugned Act was passed, the same was challenged
F before the Bombay High Court by several writ petitions, Writ
Petition No. 623 of 1979 along with others were disposed of by the
Bombay High Court by judgment delivered by the Division Bench
on 167/17th June, 1983 in the case of New Shakti Dye Works Pvt.
Ltd. & Maha/akshmi Dyeing and Printing Works v. Union of India &
G Anr. By the said judgment, the Bombay High Court disposed of 24
writ petitions as the question involved in all those petitions was
identical. In that case the constitutional validity of the impugned
Art as well as the levy of duty on certain goods idential to the
present goods involved in this application under Article 32 of the
H Constitution was involved. The Bombay High Court dismissed
the said writ petitions. We will refer to the said decision later. We
may, however, state that we are in respectful agreement with the
conclusions as well as the reasoning of the decison of the Bombay
EMPIRE INDUSTRIES p, UNION (S. Mukharji, J.) 301

High Court in the said petitions. Special leave to appeal to this
Court has been granted from the said decision in the case of New
Shakti Dya Works Pvt. Ltd.

In order to appreciate the contentions raised, it is necessary to
state that the petitioner company is an independent processing unit
carrying on its activities at Bombay and as an independent processing
unit was engaged in job activities of dyeing, printing and finishing of,
B
man-made/cot.ton fabrics. The petitioner company further states that
in respect of the said processing activities, the petitioner company
holds licences required under the laws for the time being in force
including a licence under the Excise Act and the Central Excise Rules
which hereinafter will be referred to as the 'said Rules'. c
The petitioners in writ petition No. 11728of1984 were two in
number-one being the petitioner company and the other being the
Taxation Executive of the petitioner company.
D
The petitioners state that the processing operations of the
petitioner company in the said factory are job work operations of
dyeing, bleaching and printing of the said fabrics which are cotton
fabrics and man-made fabrics. When the said fabrics are received
in the factory of the petitioner, company the same are fully manu·
factured and are in a saleable condition and are commercially known E
as grey fabrics i.e. unprocessed fabrics which are cleared after pay·
ment of the excise duty under Tariff Item Nos. 19 and 22, as the
case may be. The pet<tioners further state that the said grey fabrics
i.e. unprocessed, undergo various processes in the factory of the
petitioner company. The grey fabrics are boiled in water mixed with
various chemicals and the grey fabric is washed and thereafter the
material is taken for the dyeing process, that is imparting of required
shades of colours. The next stage is printing process, i.e. putting the
required designs on the said fabrics by way of screen printing on hot
tables. The final stage is the finishing process, that is to give a
final touch for better appearance According to the petitioners, they G
do not carry out any spinning or weaving of the said fabrics. The
machinery installed by the petitioner company in its factory is only
for the purpose of carrying out one or more of the aforesaid four
processes and cannot be used for the purpose of either spinning or
H
weaving of yarn for manufacture of 'fabric' i.e. 'woven material'.
For spinning or weaving of yarn, one requires, according to the
petitioners, looms and petitioner company is merely a processin~
302 SUPREME COURT REPORTS [1985] SUPPL. s.c.R.

house. The petitioner company's case is that the petitioner company
A begins with man-made or cotton fabrics before it starts the said
processes and also ends with man-made or cotton fabrics after
subjecting the fabrics to the various processes. The petitioner com·
pany receives fully manufactured man·made fabrics and cotton
fabrics from its customers only for the purpose of carrying out one
8 or more of the aforesaid processes thereon as per the requirement
and instructions of the customers and .after the necessary processes
are carrried out, the same are returned to the customers. According
to the petitioners, what is received by the petitioner company is
known as cotton/man-made fabrics and what is returned is again
known as cotton/man·made fabrics. The petitioner company states
that it has no discretion or choice of shades or colours or designs
and the same are nominated or prescribed by the customers. The
finally processed fabric is not and cannot be sold by the petitioners
in the market as the petitioner company's product. The petitioner
company merely collects from its customers charges only for job
D work of processing done by it. The petitioner company further states
that it has no proprietary interest in the· fabrics either before or
after the same is processed. The manufacture of the fabrics and sale
in the market of the processed fabrics are effected by the petitioner
company's customers and not by the petitioners. Further the
processed as well as the unprocessed fabric, whether cotton or
Iii man-made, can be put to the same use.

The petitioner company is required to file classification list for
approval of the concerned Excise Authorities as prescribed by Rule
173-B of the said Rules for approval of Tariff items in the First
Schedule to the Excise Act in respect of the processed fabrics.
F As per approval granted there-on in respect of man-made fabrics and
cotton fabrics, the petitioner company classifies all the processed
fabrics under Tariff Items 19 and 22, as the case may be. So far as
man-made fabrics are concerned under Tariff Item 22, the petitioner
company was required to pay certain duties as mentioned in the
G petition. The petitioners state that the petitioner company has paid
such duties.

The petitioners further state that such classification list of
cotton fabrics has been approved under Tariff Item No. 19 and the
H petitioner company was required to pay certain duties which the
petitioner company has mentioned that it has paid the same. The
petitioners further state that for the purpose of determination of
IMPIRB INDUSTRlllS v. UNION (S. Mukharjl, J.) 303

value under section 4 of the Excise Act, the petitioner company was
required to file a price list In the form prescribed under the said
Rules for approval. The respondents-government authorities,
according to the petitioners, although being aware of the fact that
the petitioner company was carrying out and ·or performing merely
the processing work and collecting the processing charges only, had
directed the petitioner company to file a price list on the basis of the B
sale price of its customers and for this purpose had required the
petitioner company to file along with the said price list letters of its
customers certifying the price at wWch the said customers sell the
coods in the markets. The petitioners state that price list includes
the selling expenses and selling profits of the said cu>tomers in which
the petitioner company has no interest or share. C

According to the petitioners, the respondents approve the price
list and as a consequence thereof the petitioner company becomes
liable to pay to the respondents additional Excise duty calculated on
ad·valorem basis on the said approved sale price that is the sale D
price of its customen. The petitioners have annexed a copy of the
delivery note and a copy or the invoice issued by the petitioner
company. It is further the case of the petitioners that both in respect
of cotton fabrics and man· made fabrics which are merely processed by
the petitioner company, the respondents were levying and collecting
excise duty and additional duty respectively under Tariff Items 19
and 22, as the case may be, at rates stipulated against the respective
entries read with relevant exemption notification, as if the petitioner
company was the manufacturer of cottou fabrics/man-made fabrics,
r u the case may be.
F
The petitioner company further states that it bad ftled a writ
petition in the Bombay High Court which was a.dmitted. The said
writ petition was filed through Indian Textile Processors Association.
The petitioners stated thereafter the circumstances under which the
aaid petition was withdrawn and why the present petition under
Article 32 of the Constitution is being filed. For our present purpose, G
it is not necessary to set out these details.

The petitioners challenge the impugned Act mentioned
hereinbefore. Before the contentions are dealt with, it would be H
appropriate to deal with the relevant provisions of the impugned Act.
Section 2 of the impugned Act amends section 2(f) of the Excise Act
by adding three sub-items in the definition of 'Manufacture' which
304 SUPREME COURT REPORTS (1985) SUPPL. s.c.B..

were included by Act 6 of 1980 being the impugned Act which came
into effect from 24th November, 1979 which are sub-clauses (v), (vi)
and (vii). These read as follows :-

"(v) in relation to goods comprised in Item No. 19 I
of the First Schedule, includes bleaching, mercerising,
B dyeing, printing, water-proofing, rubberising, shrink-
proofing, organdie processing or any other process or
any one or more of these processes;

(vi) in relation to goods comprised in Item No. 21(1)
of the First Schedule, includes milling, raising, blowing,
c !entering, dyeing 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,
D shrink-proofing. !entering, heat-setting, crease resistant
processing or any other process or any one or more of
these processes;"

Similar amendments wer made in Items 19(1), 21(1) and 22(1)
of the Central Excise Tariff, and also similar amendments were
E effected in relation fo Act of 1957. These amendments were effected
retrospectively from different dates for different fabrics, as men-
tioned in the impugned Act. According to section 5(2) (b) of
the impugned Act, no suit or other proceedings shall be maintain-
ed or continued in any other court for the refund of the same
F and no enforcement shall be made by any court of any decree
or order directing the refund of such duties of excise which have been
collected and which may have been collected as if the provisions of
section 5 of the impugned Act bad been in force on and from the
appointed day as defined in the impugned Act. It may, however, be
mentioned that the original unamended definition of the word
G "manufacture" in section 2(f) contained a general definition of the
word "manufacture" which was and still continues to be an inclusive
definition to say that the manufacture includes any process incidental
or ancillary to the completion of a manufactured product.
H
According to the petitioners, the impugned Act had been
enacted and brought into force because of the judgment of the
Gujarat High Court dated 24th January, 1979 given in the case of
EMPIRE iNDUSTRIES v. UNION (S. Mukhatji, J.) 305

Real Honest Textiles and others v. Union of India-a decision which
is also subject matter of appeal before this Court and bas been beard A
along with this petition. The Gujarat High Court bad declared that
the levy and collection of excise duty and additional duty on proces-
sed cotton fabrics under Tariff Item No. 19 I of the Schedule to the
Excise Act and additional duty on processed man-made fabrics under
Tariff Item 22(1) of the Additional Duties of Excise (Goods of
B
Special Importance) Act, 195 , was ultra vires and the processing
houses were liable to pay duty of excise on processed fabrics
ad-valorem under Tariff Item 68 of the Schedule to the Excise Act
only on value added bY way of process charges on cotton or man-
made fabrics, as the case may be, and not on the full value of such
fabrics. As mentioned bereinbefore, an application for special leave c
to appeal to this Court had been filed from the said decision of the
Gujarat High Court, these appeals are pending and would be
disposed of by this judgment.

It may be mentioned that so long as the respondents had been D
collecting and the petitioners had been paying excise duty and/or
additional duty as the petitioner company was manufacturing cotton
fabrics under Tariff Item Nos. 19 and 22, as the case may be. Since
the decision of the Gujarat High Court in New Shakti Dye Works Pvt.
Ltd., and the petitioners and .the processing houses like petitioners
have been claiming refund. The material portions of the amendments E
of the Act have been set out herein before in the definition of section
2(f). The second part of the impugned Act by which amendments
were effected is found in section 3 of the impugned Act by which
original item No. 19 in the First Schedule to the Excise Act was
substituted by new Item No. 19 I and for the original item No. 22, a
new item No. 22(1) was substituted. These are:

"\. 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 G

(a) cotton fabrics, not subjected to any process
Twenty per cent
ad-valorem
H
(b) cotton fabrics, subjected to the process of
bleaching, mercerising, dyeing, printing,
306 SUPREME COURT REPORTS [1985) SUPPL. s.c.R.

water-proofing, rubberising, shrink-
A proofing, organdie processing or any other
process or any two or more of these
processes.

Twenty per cent
ad-valorem
B
xxx xxx xxx
22(1) Man-made fabrics other than (i} embroidery
in the piece, in strips or in motifs, (ii} fabrics impregnated,
C coated or laminated with preparations of cellulose deriva-
tives or of other artificial plastic materials -

(a) man-made fabrics, not subjected to any
process.
Twenty per cent
D ad•valorem plus
rupees five per
square metre.

(b) man-made fabrics, sabjected to the process
E of bleaching, dyeing, printing, shrink·
proofing, !entering, heat-setting, crease
resistant processing or any other process
or any two or more of these processes.
Twenty per cent
F ad-valorem plus
rupees five per
square metre.

It may be pointed out that the original Item No. 19 I
referred to "cotton fabri<1s''. It provided that "cotton
G
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
H fabrics impregnated, coated or laminated with prepara-
tions of cellulose derivatives or of other artificial plastic
111aterials,"
EMPIRE INDUSTRIES v. UNION (S. Mukharji, J.) 307

The proviso is not relevant for the issue now. The original Item 19 I
read as follows : A

"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". B
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 any process of bleaching, mercerising, dyeing, c
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).
D
This item referred to man-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}. E

Cotton fabrics and man-made fabrics were also subjected to
the additional duties of excise as a result of the amendments of the
Additional Duties· of Excise (Goods of Special Importance) Act,
1957 (hereinafter referred to as "the Additional Duties Act"). By F
section 4 of the amending act, Item Nos. 19 I and 22(2) of the First
Schedule to the Excise Act were also similarly amended by making
an identical substitution of Item No. 191 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 became operative from I st March, 1955 and so far
G
as man-made fabrics are concerned, it became operative from 18th
June, 1977. Now, it has been provided by clause (iv) of sub-section (I)
of section 5 of the Amendment Act that amendments of clause (f) of
section 2 of the Excise Act should be treated as having been in force
H
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 a reference to such "cloth", "cotton
/
308 SUPRllME COURT REPORTS (1985) SUPPi>. S.C.R.
,
cloth", or, as the case may be, '·cotton fabrics", and reference to the
A "goods comprised in Item No. 22(1) of the First Schedule" shall be
construed as a reference to such "rayon or artificial silk fabrics" or,
as the case may be, "man-made fabrics". Section 5(2) of the Amend•
ment Act also validates duties of excise already levied, assessed, or
collected on cloth, cotton cloth, cotton fabrics, woollen fabrics, rayon
or artificial silk fabrics and man·made fabrics subjected to any
B
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 pro-
cess, (ii) "woollen fabrics", subjected to any process, (iii) "rayon or
c artificial silk fabrics" and "man-made fabrics" subjected to any pro·
cess, 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
D the period commencing with the appointed day and ending with day
immediately proceding 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) 'woollen fabrics'; (c) 'rayon or artificial silk fabrics', or as the
E case may be, 'man-made fabrics', shall have and shall be deemed to
have always bad 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
F Excise Act, as amended by this Actj 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 or duty
specified in such Act with respect to such cloth, cotton cloth, or
'cotton fabrics' had been specified separately with respect to each of
G the aforementioned sub-items thereof". Similar provision was also
made in clause (iii) of sub-section (I} 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
H of bleaching, dyeing and printing, in so far as the present petitions
are concerned, within the definition of the word "manufacture". It
is also colllmon sround that by making amendwent to Tariff Item
EMPIRE INDUSTRIES v. UNION (S. Mukharjl, J.) 30!1"

No. 19 I and by creating two separate categories of cotton fabrics,
that is, (I) not subjected to any process, and (2) subjected to the A
processes and by making these amendments retrospective recoveries
which have so far been made from the processors in question were
iought to be legalised. If these amendments can stand the test of
challenge of Article 19(1}(g) and 14 and if the amendments in section
2(f) are within the legislative competence of the Parliament, and the B
process of bleaching, dyeing and printing and other processes
mentioned in the newly introduced clause (v) of section 2(f) were
manufacturing processes, then the processors would become liable to
pay excise duty, and there cannot be any question of refund. This
is not disputed.
c
The amending Act has, however, been challenged and various
submissions on behalf of the respective parties were made and nume·
rous decisions were referred to us.

The following main points fall for consideration m these
applications and appeals : D

I. Whether cotton fabrics subjected to the process of
bleaching, mercerising, dyeing, printing, water·
proofing etc. specially the processes conducted and
carried out by the petitioner company as enumerated E
before in respect of cotton fabrics and woollen
fabrics/man-made fabrics as mentioned under Items
19 or 22 of the Schedule to the Central Excises and
Salt Act amount to 'manufacture' as the Act stood
prior to the impugned Act of 1980. In other words
whether these various processes carried out by the F
petitioner company amount to bringing into existence
different and distinct goods, commercially known as
such, to attract levy of duty under section 4 of the
Central Excises and Salt Act, 1944.
G
2. Whether and in any event after the impugned Act,
the levy is valid. In connection with the said
contention it has to be examined whether the impu-
gned Act is intra vires entry 84 of List I of the
Seventh Schedule to the Constitution and if not,
H
whether the said impugned Act can be said to be
valid in any event under entry 97 of List I of the
Seventh Schedule to the Constitution,
310

3.
SUPREME COURT REPORTS [1985) SUPPL. S.C.R.

Whether the impugned Act violates Article 14 or
l
'

A Article 19(1)(g) of the Constitution.

If the impugned Act is valid, then no other question need be
examined except the question as to what should be the actual levy of
the duties.
B
It is therefore necessary to examine the amendment of the
definition of 'manufacture' in section 2(f) of the Central Excise and
Salt Act, 1944 and Tariff Items 19(1) and 22(1) of the First Schedule
to the Central Excise Tariff.

c The main contention of the petitioner is that the impugned Act
is ultra vires of entry 84 of List I of the Seventh Schedule. It is not
necessary to set out in extenso entry 84 of list I of the Seventh
Schedule to the Constitution. It deals with duties of excise on
tobacco and other goods manufactured or produced in India. It
may be mentioned that the charging section ie. section 3 of the
D Central Excises and Salt Act, l 944 empowers the levy and collection
in such manner as may be prescribed duties of excise on aU excisable
goods other than salt which are produced or manufactured in India
and a duty on salt manufactured in, or imported by land into, any
part of India as they apply in respect of goods at rates set forth in
E the First Schedule to the said Act. "Excisable goods" under section
2(d) means goods specified in the First Schedule as being subject to
a duty of excise and includes salt. It was urged in support of this
application that Parliament was incompetent under entry 84 to enact
the impugned Act whereby an. artificial meaning to the word 'manu-
facture' was given. The word 'manufacture' must be given its
etymological meaning. It was urged that process of bleaching,
F
dyeing and printing are not processes which could properly be
described as manufacturing processes. Therefore it was submitted
that by making the said amendment to the word 'manufacture' and
by including such processes in the definition of manufacture and in·
effectuating the consequential amendments in Tariff Item Nos. J9 I
G
and 22(1), Parliament has gone beyond the scope of entry 84 of
List I of the Seventh Schedule to the Constitution and as such is ultra
vires. It was submitted that all that was being done was that fully
manufactured cotton fabrics is subjected to further process of bleach-
H ing, dyeing and printing and therefore the article still continues to be
cotton fabric and no different article having distinctive features,
character and use comes into existence. It was submitted that grey
llMPJRE INDUSTRIES Y. UNION (S. Mukharji, !.) 31i
cloth before it is processed is cotton fabric and after it is processed,
continues to be cotton fabrics. As such it cannot be said that there A
was any manufacture involved. Numerous decisions on the question
whether a particular process was a manufacturing process or not
were referred to. On the other hand on behalf of the revenue it was
urged that the processes of bleaching, dyeing and printing were
essentially manufacturing processes inasmuch as a result of these
B
processes, a new substance known to the market is brought into
being. In support of this contention, several decisions were also
referred to. Though it is not necessary to refer to all these decisions,
some of these may be noted.

In Union of India v. Delhi Cloth & General Mills,( 1) this Court c
was concened with the question as to whether manufacture of
'refined oil' from raw materials undertaken by the manufacturers of
Vegetable products known as Vanaspati was liable to excise duty.
The manufacturers purchased ground-nut and til oil from open
markets and the oils thus. purchased by thooi were subjected D
to different processes in order to turn these into Vanaspati. Their
contention was that at no stage they produced any new
products which co.uld 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 revenue was that the E
manufacturers in the course of manufacture of Vanaspati which was
a vegetable product from the raw ground-nut and ti! oil, brought
into existence what 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 "vegetable non-essential oils" and as such was F
liable to duty. And in that context it was pointed out by this Court
that excise duty was a duty on the manufacture of goods and not on
sale. After referring to the arguments of respective parties, this
Court noted at page 596 of the report the contention on behalf of
the revenue that manufacture was complete as soon as by the
application of one or more process, the raw material underwent some G
change. It further stated -

"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 II

(I) [1963] l Supp. s.C.R. 586.
312 SUPREME COURT REPORTS [1985) SUPPL. S.C.R.

under stood to mean as "bringing into existence a new
A substance" and does not mean merely "to produce some
change in a substance", however, minor in consequence
the change may be. The distinction is well brought about
in a passage thus quoted in Permanent Edition of Words
and Phrases, Vol. 26, from an American Judgment. The
B 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 trans-
c formation; a new and different article must emerge
having a distinctive name, character or use."

Hence according to this decision, if a new substance is brought
into existence or if a new or different article having a distinctive
name, character or use results from particular processes, such process
D or processes would amount to manufaciure. This view point has been
reiterated in numerous decisions. Reference in this connection may
be made to the decision in the case of Union of India v. H. U.F.
Business known as Ram/a/ Mansukhrai, Rewari & Anr.(1) This Court
at pages 941-942 of the report observed as follows:-
E
"The word "manufacture" is defined in Section 2(f)
of the Act as including any process incidental or ancillary
to the completion of a manufactured product. The
rolling of a billet into a circle is certainly a process in the
course of completion of the manufactured product, viz.,
F circles. In the present case, as we have already indicated
earlier, the product, that is sought to be subjected to
duty, is a circle within the meaning of that word used in
Item 26A(2). In the other two cases which came before
this Court, the articles mentioned in the relevant items of
G the First Schedule were never held to have come into
existence, so' that the completed product, which was
liable to excise duty under the First Schedule, was never
produced by any process. In the case before us, circles
in any form are envisaged as the completed product
H produced by manufacture which are subjected to excise
duty. The process of conversion of billets into circles

(I) (1971) I s.c.R. 937.
l!MPiilB INDUSTRIES v. UNION (S. Mukharji) 313'

was described by the legislature itself as manufacture of
circles." A
The question of 'manufacture' was also considered by this
Court in the case of Allenburry Engineers v. Ramakrishna Dalmia &
Ors.( 1)

It may be noted in the case of Hirata/ Jitmal v. Commissioner B
of Sales Tax( 2 ), a Division Bench of Madhya Pradesh High Court in
considering the meaning of the expression 'manufacture' for the
purpose of the Madhya Bharat Sales Tax Act, 1950, was of the view
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 became commercially known as a
c
different article from the raw materials and all that was required was
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 is
apparent that the concept of 'manufacture' in that decision has been D
given a wide meaning. It is not necessary to go into this aspect any
further. It may be mentioned that this Court in the case of
Commissioner of Sales Tax, U.P. Lucknow v. Harbilas Rai and Sons(')
pointed out that the word 'manufacture' has various shades of
meaning, and in the context of sales tax legislation, if the goods to E
which some labour was applied remained essentially the same com·
merial article, it could not be said that the final product was the
result of manufacture. Referring to the Madhya Pradesh High
Court decision in the case of Hira/a/ Jitma/ (supra), this Court
observed at page 20 as follows :
F
" .... 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.

This is precisely the position here. On behalf of the revenue, G
great emphasis was laid on the view that even according to this
Court, printed or dyed cloth was a commercially different article
from the cloth which is purchased and printed or dyed.
B
(1) [1973] 2 S.C.R. 2S7.
(2) [19S7J S.T.C. Vol. VIII, 32S (M.P.).
(3) [1968) S.T.C. Vol. 21 p. 17 (S.C.).
314 SUPIUlME COURT REPORTS (1985] SUPPL. s.c.il.

A similar view was taken by the Punjab and Haryana High
A Court in the case of East India Catton Manufacturing Campany
Private Limited v. The Assessing Authority-cum-Excise and Taxation
Officer, Gurgaan and Another.(1} The Division Bench in that case
positiv~ly took the view that sizing, bleaching or dyeing of raw cloth
turns it into a different marketable commodity, and, as such, amount-
B ed to "manufacture" of a commercially new product. Reference
may also be made to a decision of the Bombay High Court in Kore;
(India) Limited v. Union of India and Others('). where the Division
Bench was considering the question whether the ·process of cutting
large rolls of paper into specific sizes dan dimensionsand to roll these
into teleprinter rolls with the aid of power driven machines amount-
c ed manufacture under section 2(f) of the Central Excise Act. The
Division Bench held that teleprinter rolls are different commodities
or articles from the one u1ed as the base m1terial which is large size
or jumbo rolls writing or printing papers.

Fabric itself means woven materials. It was contended that
D processing the manufactured fabric does not bring into existence any
new woven material but the question is : does new and different
goods emerge having distinctive name, use and character? The
Madras High Court in the case of K Venkataraman and Campany
and others v. Deputy Commercial Tax Officer, Coimbatore IV and
E others(') had to consider that cinders do not fall within the expres-
sion "coal, including coke in all its form" in item I of the Second
Schedule of the Tamil Nadu General Sales Tax Act, li59. Where
the words used in an entry are comprehensive or wide enough to
include all kinds or types of particular goods falling within the
description, the question was whether their scope should be restrict-
F ed and in that coatext it was held that mere change in form or colour
of the goods by reason of any processing cannot be held to be
sufficient ground for removing it from its original classification.

In the case of Commissioner of Sales Tax, U.P. Lucknow v.
G Harbilas Rai and Sons (supra), it was held that the word 'manufac-
ture' has various shades of meaning, and in the context of sales tax
legislation, if the goods to which some labour is applied remain
essentially the same commercial article, it cannot be said that the

H (lJ [19721 s.r.c. Vol. 30 p. 489 (Pb. & Har.).
(2) [19821 E.L.T. Vol. 10, p, 253.
(3) [1972] s.r.c. Vol. 30 p. 57 (Mad.).
Ei.!PIRB INDUSTRIES v. UNION (S. Mukharji, J.) 3!S

final product is the result of manufacture. There the assessees,
dealers in pig bristles, bought bristles plucked by Kanjars from pigs, A
boiled them, and washed them with soap and other chemicals, sorted
them out according to their sizes and colours, tied them in separate
bundles of different sizes and despatched them to foreign countries
for sales. It was held that the sales made to foreign countries were
not taxable as the bristles were not manufactured goods within B
Explanation II(ii) to section 2(h) of the U.P. Sales tax Act, 1948.

In Deputy Commissioner, Sa/es Tax (Law) Board of Revenue
(Taxes) Ernakulam v. Pio Food Packers(') arising out of Kerala
General Sales Tax Act 1963 where the expression used under section
5-A(l)(a) was "consumes such goods in the manufacture of other
c
goods for sale or otherwise", and meaning of the expression under
section 5-A(l) la) fell for consideration for exigibility to tax of pine·
apple fruit when processed into slices for the purpose of being sold in
sealed cans. Though in the facts of that case in the context of Sales
Tax Law, it was held that there was no manufacture, the principles D
enunciated by this Court are in the following terms :

"There are several criteria for determining whether a
commodity is consumed in the manufacture of another.
The generally prevalent test is whether the article
produced is regarded in the trade, by those who deal
E
in it, as distinct in identity from the commodity
involved in its manufacture. Commonly, manufacture
is the end result of one or more processes, through
which the original commodity is made to pass. The nature
and extent of processing may vary from one case to
another, and indeed there may be several stages of pro· F
cessing and perhaps a different kind of processing at each
stage. With each process suffered, the original commodity
experiences a change, But it is only when the change or
a series of changes, take the commodity to the point
where commercially it can no longer be regarded as the
G
original commodity but instead is recognised as a new
and distinct article that a manufacture can be said to take
place. ·Where there is no essential difference in identity
betweeu the original commodity and the processed artiple
H
it is not possible to say that one commodity has been

(1) [1980] 3 S.C.R, 1271.
316 SUPREME COURT REPORTS (1 !)SS] SUPPL. s. C.&.

consumed in the manufacture of another. Although it
A has undergone a degree of processing, it must be regarded
as still retaining its original identity."

It may be noted that the taxable event iu the context of Sales
Tax Law is 'sale'. The taxable event under the Excise Law is
B 'manufacture'. The moment there is transformation into a new
commodity commercially known as a distinct and separate
commodity having its own character, use and name, whether he it
the result of one process or several processes 'manufacture' takes
place and liability to duty is attracted. Though in the facts of that
case perhaps it was not necessary and as such the attention of the
c Court was not drawn to the definition of the term 'manufacture'
under section 2(f) of the Central Excise Act nor was the Tariff Item
IB placed before the Court.

This decision was referred to and followed in the case of
D Chowgule & Co. Pvt. Ltd. and Another v. Union of India & Others.(1)
Whatever may be the operation, it is the effect of the operation on
the .commodity that is material for the purpose of determining
whether the operation constitutes such a process which will be part
of 'manufacture Any process or processes creating something else
having a distinctive name, character and use would be manufacture.
E
It is appropriate now to refer to Gujrat High Court's decision
in the case of Vijay Textile, v. Union of India.(') Gujarat High
Court held that cotton fabrics subjected to bleaching, dyeing and
printing could not be subjected to excise duty under Item 19 (I). The
F Gujarat High Court proceeded on the footing that the processes
of bleaching, dyeing and printing were manufacturing processes and
held that excise duty would be leviable under residuary Item No. 68
of the First Schedule. This decision has two aspects one which was
emphasised on behalf of the revenue i.e. that Gujarat High Court
accepted the position that processes of bleaching, dyeing and printing
G were manufacturing processes and such on the strength of that deci·
sion, it could not be said that thesa processes do not amount to
manufacture and on the other, which was stressed on behalf of the
petitioners, was that such processes could not transform the cloth

H
(!) (1981] l s.cc .. 653.
(2) (1979] 4 E.L.T. J. 181.
EMPIRE INDUSTRIES v. UNION (S. Mukharjl, J.) 317

into item 19(1). The Gujarat High Court's decision which is repor-
ted at page 193 of the report is as follows:-

"In the instant case, the excise duty claimed on the
basis of the market value of the processed cotton fabrics
or man-made fabrics cannot be levied because, assuming
that process amounts to manufacture, all that they have B
done is to manufacture processed cloth, processed fabric,
either cotton or man-made and that not b-.ing a taxable
event in the light of Section 3 read with section 2 (d) of
the Act and Items 19 and 22. levy of excise duty on this
basis was ultra vires and contrary to law. Therefore, the
petitioners are entitled to the refund of the excess of C
excise duty paid by them during the period of last three
years immediately preceding the filing of the Special Civil
Application over what they were bound to pay on the
footing that processing of cotton fabrics is an excisable
activity covered by Item 68. Item 68 refers to "All other D
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 E
processing because the only manufacturing activity which
they have done is the manufacturing of processed fabrics
from fabric which was already in existence. The Excise
authorities are therefore directed to calculate the ad valo·
rem excise duty during the period of three years imme-
diately preceding the institution of each petition before F
us and calculate the excise duty payable by each of these
petitioners under Item 68 only in respect of the value
added by each of the petitioners by the processing of the
fabric concerned. The excise duty paid in excess of such
ad valorem duty under Item 68 during the period of three G
years immediately preceding the institution of the respec-
tive Special Application is ordered to be refunded to the
petitioners concerned in each of their petitions."

The main question that fell for consideration before the Guja- H
rat High Court was whether the articles fell within Tariff Entry 19 or
~2 as contended by the revenue or under residuary Entry 68.
318 SUPREME COURT REPORTS [1985] SUPPL. s.c.R.

It appears in the light of the several decisions and on the cons-
A truction of the expression that the process of bleaching, dyeing and
printing etymologically also means manufacturing processes. In
support of this contention reliance on behalf of the petitioners was
also placed on the case of Extrusion Process Pvt. Ltd. v. N.R. Jadhav,
Superintendent of Central Excise (') where the Gujarat High Court
B had held that printed and lacquered aluminium tubes did not have,
in relation to a plain extruded tubes any distinctive name, character
or use as both could be used for the same purpose, both enjoy the
same name, and therefore, these could not be said to be new subs·
tance distinguishable from plain extruded tubes. This decision,
however, cannot be of assistance in the instant case. The petitioners
c 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 these and there by manufactured tubes.
It was held that printing and lacquering were not even remotedly
connected with the manufacture of aluminium tubes. It was a process
D independent of the m1nufactilre of aluminium tubes. The question
whether a particular process is a process of manufacture or not has
to be determined naturally having regard to the facts and circums·
tances of each case and having regard to the well-known tests laid
down by this Court. Similarly the facts of the decision in the case
E of Swastic Products, Baroda v. Superintendent of Central Excise(') are
also distinguishable.

The decision of this Court in the case of Kai/ash Nath and
Another v. The State of U.P. and fJthers(') was on the question of
interpretation of a notification issued by the U.P. Government
F
exempting sale of manufactured cloth or yarn with a view to export
such cloth or yarn. The notification provided that with effect from
Ist 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 !st December, 1949, with a view to
G export such cloth or yarn outside the territories of India on the con-
dition that the· cloth or yarn was actually exported and proof of such
actual export was further furnished. This Court in that case held
that although the colour of the cloth had changed by printing and

H
(I) [1979] 4 E.L.T. J. 380 (Gujarat).
(2) [1980] 6 E.L.T. 164 (Gujarat).
(3) [1957) S.T.C. Vol. VIII p. 358 (S.C.).
EMPIRE INDUSTRIES v. UNION (S. Mukhari, J.) 319

processing, the cloth exported was the same as the cloth sold by the
petitioners in that case and they were therefore not entitled to exemp· A
tion under the notification. ·As would be apparent from the facts
mentioned herein-before, the question for consideration before this
Conrt was the identity of cloth purchased and exported having
regard to the use of the words "cloth" in the notification. These
words were construed by this Court to mean that the Legislature did
B
not intend that the identical thing should be exported in bulk quan·
tity or that any change in appearance would be crucial to alter it. It
was also pointed out that the expression "such cloth or yarn" would
mean cloth or yarn manufactured in Uttar Pradesh and sold and
those words had nothing to do with the transformation by printing
and designs on the cloth. It is implicit in the decision of this Court c
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, the decision would not be of
assistance in disposing of the present case. This question has been
elaborately considered by the Bombay High Court in the case of
0
New Shakti Dye Works Private Ltd. and 24 other petitions heard
along with the same and are under appeals to this Court by special
leave. We are in respectful agreement with the conclusions reached
by the learned Acting Chief Justice of the Bombay High Court in
that decision. E
In England, in the case of McNicol and Another v. Pinch,(1)
the "manufacture of saccharin" in the Finance Act, 1901 and the
Revenue Act, 1903 was · held to mean the "bringing into being as
saccharin". There the appellants bad subjected certain "330 sacc·
barin" (i.e., saccharin 330 times as sweet as sugar) to a chemical
F
process, the result of which was that in some cases "550 saccharin"
(i.e., saccharin 550 times as sweet as sugar) was produced, in others
a mixture sweeter than 330, but not so sweet as 550 saccharin, and
in few cases a mixture Jess sweet than 330 saccharin was there. It
was held by the Court of Appeal by Bray and Darling JJ., Ridley, J. G
dissenting that the appellants were not manufacturing saccharin
within the meaning of the Finance Act, 1901, so as to be compelled
to take out the excise licence required bys. 9 of that Act ands. 2 of
the Revenue Act, 1903, and to obtain from an officer oflnland Re·
venue a book such as was prescribed by the Regulation No. 633 of H
(I) [1906) 2 K.B 352.
320 ·SUPREME COURT REPORTS (1985) SUPPL. s.c.R.

the Statutory Rules, 1904, inasmuch as the substance with which the
f
A appellants dealt was always saccharin both before and after their
treatment of it. Bray J. observed at pages 359-360 of the report as
follows:-

"We have to determine whether upon the facts stated
B in the case the appellants did manufacture saccharin.
Let us see what those facts are. One of the admitted
facts is that saccharin is a substance produced from to-
luene sulphonamide. That is the definition of saccharin.
This saccharin was not produced by the appellants from
toluene sulphonamide; it was produced (if it can be said
c to have been produced) from saccharin itself. The
appellants have not manufactured saccharin from toluene
sulphonamide. The case states that 330 saccharin is
produced without eleminating certain para products, or
only eleminating them to a very small extent. Then, in
D order to convert 330 saccharin into 550, certain of the
para compounds have to be eliminated. · Then it states
that "this mixture" (that is, the 330) "is known commer-
cially as 330 saccharin " The other mixture is known
commercially as 550 saccharine. In both cases it is sacc~
harin, and as a dutiable article 330 saccharin does not
E differ in the smallest degree from 550 saccharin. The
same duty is payable on 550 saccharin as on 330 sacc-
harin. What the appellants do is stated thus : "The
appellants subjected certain 330 saccharin to a chemical
process . . This amount of 330 saccharin was not treated
F in one bulk, but in separate quantities. The result of
this treatment was that in some cases 550 saccharin was
produced, and in some cases a mixture sweeter than 330
saccharin but not so sweet as 550 saccharin was pro-
duced," and in some cases less sweet. But it was always
saccharin ; it was saccharin before it was treated, and it
G was saccharin after it was treated."

Darling J. at pages 361-362 of the report made the following
interesting observations:- '
H "I do not say that to use the word "manufacture"
as exactly synonymous with the word "make," or to use
I
EMPIRE INDUSTRIES v. UNION (S. Mukharji, J.) 321

the words "to manufacture" as exactly synonymous with
the words "to make" is strictly grammatical, but I think A
that is what the statute has done. I think it possible that
in a literary sense "to make" and "to manufacture" may
not have precisely the same meaning. One can put cases
where the word "manufacture" might be used in a some-
what strained way, but perhaps a little more scientifically.
B
Take the case of a carpenter. A carpenter uses wood;
he begins with wood ; he makes the wood into boxes.
What would you say if you wanted to talk of his manu-
facturing? Ordinary people would not say that he
manufactured wocd ; they would say he manufactured
boxes. But I am not quite sureit might not be strictly c
said that he manufactures the wood. He applies a pro-
cess to it. I suppose etymologically "to manufacture"
is "to make by band." Everybody knows that you can-
not absolutely make a thing by band in the sense that
you can create matter by band, because in that sense you
can make nothing : "Ex nihilo nihil fit." You can only D
make one thing out of another. I think the essence of
making or of manufacturing is that what is made shall be
a different thing from that out of which it is made. Even
if it could be strictly said that the carpenter "manufactures"
wood it could not be said thot he "makes'' wood. 11ie E
same with a man who makes boots; he takes leather, and
he makes it into boots. If he simply made leather into
leather nobody could possibly say that he was a leather
manufacturer, hut it would be possible to say that a man
took leather and make it into boots manufactured leather
but made boots. I think it would be possible to say that, F
and I am not sure it would not be strictly accurate but I
cannot read this statute in that way. (emphasis supplied).
Whether it would be possible to read "manufacture"
etymologically as something very different from "make,"
• I think the Act of 1901 uses "manufacture" and "make" G
as being convertible terms, and that a man who manufac-
tures saccharin under s. 9 is doing the same thing as is
called the making of saccharin under s. 5 or the manufac-
turing of glucose or saccharin under sub·s. 2 of s. 5, and
that the appellants did not make saccharin, because tbey H
began and ended with saccharin. They did not "make"
saccharin, and in my opinion, from the way in which the
322 iUPREME COURT REPORTS [1985] SUrPL. s.c.R.

word is used by the statute, they did not manufacture
A saccharin, and therefore did not require a licence,"

It may, however, be pointed out that when Darling J. dealt
with the example of a carpenter, the learned judge thought it was
right that it could not be said that when ·box' is prepared that the
B carpenter was manufacturing 'wood' but transforming 'wood' into
'box' would certainly be manufacturing 'boxes' It is well-settled that
one cannot absolutely make a thing by hand in the sense that
nobody can create matter by hand, it is the transformation of a
matter into something else and that something else is a question of
c degree, whether that something else is a different commercial
commodity having its distinct character, use and name and
commercially known as such from that point of view is a question
depending upon the facts and circumstances of the case. Plain wood
is certainly different from 'box' made of wood. Rindley J. it may
be pointed out, disagreed with the view and observed at page 362 of
D the report that where any process of art is used upon some subs-
tance, it is "manufactured." He observed as follows:-

"To say that a person does not "manufacture."
a thing because it has the same name after the
E process has been passed upon it as it had before
seems to me-but J suppose I am wrong-to be simply a
question of words. If there had happened to be another
word for saccharin of the strength of 550, different from
saccharin of the strength of 330, it would almost-I will
not say quite follow from the reasoning of my learned
F brothers that this would have been a manufacture. I
cannot· think that that is so. Take the case of the manu-
facture of steel; and let it be steel before it goes into
works: apply some process to it and it become a parti-
cular short of steel. But it is steel both before and after,
G although steel of different qualities. Is not that the manu-
facture of steel? I should have thought so. Take the
manufacture of wool, it is wool when it is on the sheep's
back; it is wool when it has passed through the process
of sorting and picking which it bas to go through in the
H mill. Is not that the manufacture of wool ? I should have
thought it most certainly was, although the name "wool"
is applied to it both before the process begins and afW it
bas ende<J,"
EMPIRE INDUSTRIES v. UNION (S. Mukharji, J.) 323

The learned judge further observed that in that case saccharin
was "manufadured" and manufacture of saccharin does cover a A
process that was done in that case.

In that view of the matter etymologically the word "manufac-
ture" properly construed would doubtless cover the transformation.
In support of the question whether actually there is manufacture or B
not various documents were attempted to be utilised at the hearing
of the application before us. Most of these pieces of evidence cannot
be admitted at this stage but indisputably in the Indian Standard
Glossary of terms which deals with various expressions, 'Bleached
Fabric' has been defined as a fabric which has undergone bleaching
treatment and is treated by the India Standard Institution as some-
c
thing different from fabric which has not undergone the bleaching
operations. Different standards are set out by the same and the views
of the Indian Standard Institution can be looked into by the Court
with certain amount of creditability. See in this connection Union
of India v. Delhi Cloth & General Mills (supra). So far as other D
evidence is concerned, as mentioned, hereinbefore, it may not be safe
to deal with the same as these were produced at a very late stage and
all the materials are not on the record.

After the impugned Act was passed these processes in the E
present case indubitably fill within the expression "manufacture"
if the impugned Act is valid, and within the competence of the
Parliament. Arguments, however, were advanced on behalf of the
petitioners that in entry 84 of List 1 of Seventh Schedule, the
expression "manufacture" cannot be extended to include processes
which were not "manufacture". Large number of decisions were F
cited at the Bar on this aspect of the matter. It is true that entries
though should be widely construed, these should not be so construed
as to bring in something which has nothing to do with the
"manufacture". It was submitted that legal concept and connotation
of "manufacture.' were well-settled. Reliance was placed on several G
decisions for this purpose.

As bas been noted, processes of the type which have been
incorporated by the impugned Act were not so alien or foreign to
the concept of "manufacture" that these could not come within
H
that concept.
324 IUPREMB COURT REPORTS (19851 SUPPL. s.c.R.

The question whether the impugned Act is covered by entry
A 84 can be looked from another point of view namely the actual
contents of entry 84. In the case of Aluminium Corporation of India
Ltd. v. Coal Board( 1), a Division Bench of Calcutta High Court had
to consider this question in the context of Coal Mines (Conservation
and Safety) Act, 1952. The objection of the petitioner in that case
was that although coal might be a material or a commodity, it was
B not something which was produced and therefore the entry which
applied to the goods produced in India could not apply to coal. No
question of manufacture obviously arose. It was submitted that the
coal produced itself. This was rejected. The, word 'produced' appearing
in entry No. 84 of List I of the Seventh Schedule is used in juxtapo-
c sition with the word 'manufactured' according to the Division Bench
and used in connection with duty of excise and consequently it
would appear to contemplate some expenditure of human skill and
labour in· bringing the goods concerned into the condition which
would attract the duty. It was not required that the goods would be
manufactured in the sense that raw material should be used to turn
D out something altogether different. It would still require that these
should be produced in the sense that some human activity and energy
should be spent on them and these should be subjected to some pro-
cesses in order that these might be brought to the state in which they
might become fit for consumption. To speak of coal, the Division
E Bench was of the opinion, as produced in the sense to its being made
a material of consumption by human skill and labour was entirely
correct and had sanction of approved usage. Reference was made to
the observations of The King v. Caledonian Collieries, Limited.(')
Where the Judicial Committee held that the respondents before them
were 'producers of coal'. If that aspect of the matter is kept in mind
F then expenditure of human skill and material have been used in the
processing and it may not be that the raw material was first trans-
formed but over the transformed material, further transformation
was done by the human labour and skill making this fit for human
consumption.
G
In any event under entry 97 of List I of the Seventh Schedule
this would apply if it is not under entry 84. It was then argued that
if the legislation was sought to be defended on the ground that
it is a tax on activity like processing and would be covered by the
H
(I) A.J.R. 1959 Cal. 222.
(2) [1928] A.C. 358,

•
l!Mfo\B INDUSTRIES v. UN!Oll (S. Mukharjt, J.) 325

p0wers enumerated under entry 97 of List I of the Seventh Schedule
then it was submitted that 'there was no charging section for such an A
activity and as such the charge must fail, and there cannot be any
levy. This argument proceeds on an entire misconception. The
charging section is the charging section 3 of the Central Excises and
Salt Act, 1944. It stipulates the levy and charge of duty of excise on
all excisable goods produced or manfactured. "Manufactured" under B
the Act after the amendment would be the 'manufacture' as amended
in section 2 (f) and Tariff item 19 I and 22 and the charge would be
on that basis. Therefore it is difficult to appreciate the argument that
the levy would fail as there will be no appropriate charging section
or machinery for effectuating the levy on the activity like the method
of processing even if such an activity can be justified under entry 97 C
of List I of Seventh Schedule. We are, therefore, of the opinion that
there is no substance in this contention. As mentioned hereinbefore
under each of these points several authorities were cited but in the
view we have taken on principles which are well-settled, it is not
necessary to multiply these authorities. D

The validity of the impugned Act was challenged on the ground
that by giving retrospective effect, unreasonable restrictions have
been imposed on the petitioners' fundamental rights under Articles
14 and 19 (1) (g) of the Constitution. In this connection, it may be
appropriate to refer to the statement of objects and reasons wherein E
it was stated that the Central excise duty was levied for the first time
·on cotton fabrics in 1949, on man-made fabrics (rayon of artificial
silk fabrics) in 1954 and on woollen fabrics in 1955. From the very
early stages of the textile tariff, with a view to achieving progression
in the rate structure and to aligning excise control with the demands
of different producing sectors, duties had been levied not only on
grey fabrics but also at the stage of processing such as bleaching,
dyeing and printing. In the judgment of the Gujarat High Court in
the case of Real Honest Textiles and others v. Union of India, it was
held that 'fabric' as used in the tariff dr script ion "cotton fabric"
would refer to something that was woven; hence it could relate only G

L to cloth in the grey stage; processing of the grey cloth either by
bleaching, dyeing or printing did not amount to manufacturing as
both before and after processing it remained a fabric falling within
the same item of Central Excise Tariff (Item 19-cotton fabrics, of
the First Schedule to the Central Excises and Salt Act). The Court H
had arrived at a similar conclusion with regard to man-made fabrics
326 SiJPIUlME COURT REPORTS (l 98SJ SUPPt. s.C.R.

falling under item No. 22 of the same Schedule. After the pronoun-
A cement of the above judi:ment, several writ petitions were filed in
various courts. This decision of the Gujarat High Court, according
to the statement of objects and reasons of the Act, had upset the
arrangements regarding levy of excise duties on textile fabrics. The
judgment also had the effect of disturbing the balance evolved bet-
B ween different sectors of the textile industry. Furthermore, it was
made clear that in so far as past assessments were concerned, refund
of excise duties to manufactures as ordered by the High Court would
have only meant a fortuitous windfall so as to benefit such persons
without any relief to the ultimate consumers who had purchased the
fabrics and had borne the burden of the duties. Jn order to avoid
c this, the Act was passed.

It has therefore to be borne in mind that the petitioners have
already paid excise duty demanded of them from time to time and the
present petitioners have gathered the duties from the consumers.
D
Imposition of tax by legislation makes the subjects pay taxes.
It is well-recognised that tax may be imposed retrospectively. It is
also well-settled that that by itself would not be unreasonable restric-
tion on the right to carry on business. It was urged, however, that
unreasonable restrictions would be there because of the retrospec-
E
tivity. The power of the Parliament to make retrospective legislation
including fiscal legislation are well-settled. (See M/S. Krishnamurthi &
Co. etc. v. State of Madras & Anr.( 1) Such legislation per se is not
unreasonable. There is no particular feature of this legislation which
can be said to create any unreasonable restriction upon the petitoners.
F
In the view we have taken of the expression 'manufacture', the
concept of process being embodied in certain situation in the idea of
manufacture, the impugned legislation is only making 'small repairs'
and that is permissible mode of legislation. In 73rd volume of Har-
ward Law Review p. 692 at p. 795, it has been stated as follows:-
G
"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'.
H Moreover, the individual who claims that a vested right

(I) [1973] 2 S.C.R. 55.
EMPIRE INDUSTRIES v. UNION (S. Mukharil, J.) 321
has arisen from the defect is seeking a windfall since had
the legislature's or administrator's action had the effect it A
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 out·
weighs the individual's interest in benefiting from the
defect. .. The Court has been extremely reluctant to over· B
ride the legislative judgment as to the necessity for retros-
pective 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 amount those who benefit from c
it".

The impugned legislation does not act harshly nor there is any
scope for arbitrariness or discrimination.
D
It was contended on behalf of the petitioners that they are
carrying on only the processing activity and the wholesale cash price
is not theirs on the entire product. Section 4 of the Act is the sec-
tion which deals with the valuation of excise goods for the purpose
of charging duty of the same would be applicable. Where for the
purpose of calculating assessable profits, a notional and conventional
E
sum is laid down by the legislature to be arrived at on a certain
basis, it is not permissible for the courts to engraft into it any other
deduction or allowance or addition or read it down on the score that
the said deduction or allowance or addition was authorised elsewhere
in the Act or in the Rules. A conventional charge should be mea· F
sured by its own computation and not by facts relating to other
method of computation. The circumstances that thereby the benefit
of any exemption granted by the legislature may be lost and that in
some cases hardship might result are not matters which would influ-
ence courts on the construction of the statute. A tax payer subject
• is entitled only to such benefit as is granted by the legislature. Taxa· G
tion under the Act is the rule and benefit and exemption, the excep·
tion. And in this case there is no hardship. When the textile
fabrics are subjected to the processes like bleaching, dyeing and
printing etc. by independent processes, whether on their own account
or on job charges basis, the value of the purposes of assessment under H
section 4 of the Central Excise Act will not be the processing
charges alone but the intrinsic value of the processed fabrics
328 SUPREME COURT REPORTS /1985] SUPPL, s.c.I\,

which is the price at which such fabrics are sold for the first time
A in the wholesale market. That is the effect of section 4 of the
Act. The value would naturally include the value of grey fabrics
supplied to the independent processors for the processing. However,
excise duty, if any, paid on the grey fabrics will be given proforma
credit to the independent processors to be utilised for the payment
B on the processed fabrics in accordance with the Rules 56A or 96D
of the Central Excise Rules, as the case ·may be.

Read in that context and in the context of the prevalent practice
followed so long until the decision of the Gujrat High Court in Real
Honest case, there is no hardship and no injustice to the petitioners or
c the manufacturers of grey fabrics. The fact that the petitioners are not
the owner> of the end product is irrelevant. Taxable event is manufac-
ture-not ownership. See In re The Bill to amend section 20 of the Sea
Customs Act, 1878 and uction 3 of the Central Excise & Salt Act
1944.( 1)
D
The conclusion that inevitably follows that in view of the
amendment made in section 2(f) of the Central Excises & Salt Act as
well as the substitution of new Item 19 I and Item 22(1) m Excise
Tariff in place of the original items, the contentions of the petitioners
cannot be accepted. Section 3 of the Central Excises and Salt Act
E clearly indicates that the object of the entries in the First schedule is
firstly to specify excisable goods and secondly to specify rates at which
excise duty will be levied. Reference has already been made to Rule
56A. Under sub-rule (2) of Rule 56A, it is expressly provided that a
manufacturer will be given credit of the duty which is already paid on
F the articles used in the manufacture subject to certain conditions. It is
stated before us that excise duty will be charged on processed printed
material. Processors will be given credit for tbe duty already paid
on the grey cloth by the manufacturer of the grey cloth. In this
view of the matter we are of the opinion that the views expressed by
the Bombay High Court in the case of New Shakti Dye Works Pvt.
G Ltd. & Mahalakshmi Dyeing and Printing Works v. Union of India
and Anr. (Writ Petition Nos. 622 and 623 of 1979) are correct. The
views expressed by the Gujarat High Court in Vijay Textiles v.
Union of India in so far as it held that the processed fabrics could
only be taxed under residuary entry and not Item 19 I or Item 22 of
H the First Schedule of the Central Excise Tariff cannot be sustained.

(I) {1964] 3 S.C.C. 787 at 822.
lMPJRE INDUSTR!~ ~· UNION (S. Mukharli,J.) 329

We are also unable to accept the view of the Gujarat High
Court in the case of Union of India & Ors. v. M/s Real Honest Tex- A
tiles & Ors. (Civil Appeal Nos. 586 to 562of1979).

Writ Petition (Civil) No. 11728 of 1984 therefore fails and is
dismissed with costs. The connected applications viz. Civil Appeal
No. 3564 of 1984 and 6414 of 1983 and Writ Petition Nos. 13556,
B
13792, 13788, 15438-39 of 1984 also fail and are dismissed with
costs. Interim orders, if any, are vacated. Arrears of duties should
forthwith be paid and future duties should also be paid as and when
goods are cleared.

Civil Appeal Nos. 586 to 592 of 1979 are allowed with costs. c
Good deal of arguments were canvassed before us for variation
or vacation of the interim orders passed in these cases. Different
courts sometimes pass different orders as the courts think fit. It is a
matter of common knowledge that the interim orders passed by
particular courts on certain consideration are not precedents for D
other cases may be on similar facts. An argument is being built up
now-a-days that once an interim order bas been passed by this court
on certain factors specially in fiscal matters, in subsequent matters on
more or less similar facts, there should not be a different order
passed nor should there be any variation with that kind of interim
E
order passed. It is submitted at tbe Bar that such variance creates
discrimination. This is an unfortunate approach. Every Bench

, hearing a matter on the facts and circumstances of each case should
have the right to grant interim orders on such terms as it considers
fit and proper and if it bad granted interim order at one stage, it
should have right to vary or alter such interim orders. We venture
to suggest, however, that a consensus should be developed in matter
of interim orders.
F

If we may venture to suggest, in fiscal matters specially in
.. cases involving indirect taxes where normally taxes have been realised
G
from the consumers but have not been paid over to the exchequer or
where taxes are to be realised from consumers by the dealers or
others who are parties before the court, interim orders staying the
payment of such taxes until final disposal of the matters should not
be passed. It is a matter of balance of public convenience. Large H
amounts of taxes are involved in these types of litigations. Final
disposal of matters unfortunately in the present state of affairs in our
330 SUI'REMB COdRT REPORTS [198S] SUPPL. s.c.ll..

courts takes enormously long time and non-realisation of taxes for
A long time creates an upsetting effect on industry and economic life
causing great inconvenience to ordinary people. Governments are
run on public funds and if large amounts all over the country
are held up during the pendency of litigations, it becomes
difficult for the governments to run and become oppressive to the
B people. Governments' expenditures cannot be made on bank gua·
rantees or securities. In that view of the matter as we said before, if
we may venture to suggest for consideration by our learned brothren
that this Court should refrain from passing any interim orders stay-
ing the realisations of indirect taxes or passing such orders which
have the effect of non-realisation of indirect taxes. This will be
c healthy for the country and for the courts.

S.R. CM/ Appeal Nos. 586 to 592 of 1979
allowed and Petitions di;missed.

•