# UJAGAR PRINTS ETC v. UNION OF INDIA & ORS. ETC

- **Citation:** [1988] Supp. 3 S.C.R. 770
- **Court:** Supreme Court of India
- **Decided:** 1988-11-04
- **Case number:** Writ Petition No. 12183 of 1985
- **Bench:** R.S. Pathak, Sabyasachi Mukharji, S. Natarajan, M.N. Venkatachaliah, S. Ranganathan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/ujagar-prints-etc-v-union-of-india-ors-etc-10185
- **Pages:** 56

## Headnote

Central Excises and Salt Act, 1944-Sections 2(f), 4 and Schedule
Items 19 and 22-'Manufacture' meaning of-Processors carry out
C operations on 'grey fabrics' on job work basis-Whether 'manufacture'-Central Excise and Salt Additional Duties Excise (Amendment)
Act, 1980--Effect of.
Taxation-Under the Act is the rule-Benefit and exemptionThe exception-Excise duty of goods-Levied upon manufacturerD Imposed on production/manufacture/producer in accordance with the
relevant rules.
Constitution of India, 1950, Article 245, 246 and Schedule VII
Lists I Entries 84, 97, Lists II and III-"With respect to"-Interpretation of-'Manufacture'-Concept of Entries in legislative lists-
£
Not sources of legislative power-Merely topics or fields of legislation- ,
Legislation co•ild be 'composite legislation'-'Rag-bag' legislation--
Familiar in taxation-Competent legislature can always validate law--
Retroactivity of legislation-Test of validity how applied.
Statutory Interpretation-Referential legislation-Types ofF
Effect of-Legislation could be composite legislation-'Rag-bag'
legislation-What is-Competent legislature can always validate a law.
Words and phrases-'Manufacture'-'In respect of-Meaning
of.
'
O
Section 2(0 of the Central Excise Act defines 'manufacture', to
include any process incidental or ancillary to the completion of a
manufactured product.
The President of India promulgated an Ordinance called the
Central Excises and Salt and Additional Duties of Excise (Amendment)
H
Ordinance 1979, which was later replaced by Central Act VI of 1980,
'
770
UJAGAR PRINTS v. U.0.1.
771
called the Central Excises and Salt and Additional Duties of Excise
(Amendment) Act, 1980. The Amending Act became effective from 24th
February, 1979. By section 2 of the Amending Act, Section 2(0 of the
Excise Act was amended by adding three sub-items in the definition of
'manufacture' so as to include activities like bleaching, dyeing, printing
etc. which were held not covered by two decisions of the Gujarat High
Court. Similar amendments were made in items 19 and 22 of the First
Schedule with retrospective effect. Section 5(2)(b) of the Amending Act
provided that 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 5 of the
Act had been in force on and from the appointed day as defined in the
Act.
A
B
c
Prior to the Amending Act, !980, the levy on the processors was
challenged before the Gujarat High Court in the case of Vijay Textiles
Mills v. Union of India and Real Honest Textile v. Union of India,
D
[1979] 4 E.L.E.J. 181. The Gujarat High Court held that cotton fabric
subjected to bleaching, dyeing and printing could not be subjected to
excise duty under items 19 and 22 of the First Schednle to the Central
Excises and Salt Act, 1944, and that processors were liable to pay duties
under tariff-entry 68 only on the value added by the processor. Following this judgment a large number of similar claims of processing-houses
E
were allowed by the High Court by its judgment dated 13.3.1979. However, the Bombay High Court, took a different view and held that even
under the concept of 'manufacture' envisaged in section 2(0 even prior
to its amendment, the operations carried on by the processors
amounted to 'manufacture' and that, at all events, the matter was
placed beyond any controversy by the Amending Act of 1980.
F
The judgment of the Gujarat High Court in the case of Vijay
Textiles and Real Honest Textiles was considered by a Bench consisting
of three judges of this Court in Empire Industries v. Union of India,
[ 1985] Supp. l SCR 292 and it was held not to have been decided ·
correctly. The view taken by the Bombay High Court in New Shakti
G
Dye Works Pvt. Ltd. v. Union of India & Anr., [I98J) ELT

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A
UJAGAR PRINTS ETC.
v.
UNION OF INDIA & ORS. ETC.
NOVEMBER 4, 1988
B
[R.S. PATHAK, CJ., SABYASACHI MUKHARJI,
S. NATARAJAN, M.N. VENKATACHALIAH AND
S. RANGANATHAN, JJ.]
Central Excises and Salt Act, 1944-Sections 2(f), 4 and Schedule
Items 19 and 22-'Manufacture' meaning of-Processors carry out
C operations on 'grey fabrics' on job work basis-Whether 'manufacture'-Central Excise and Salt Additional Duties Excise (Amendment)
Act, 1980--Effect of.
Taxation-Under the Act is the rule-Benefit and exemptionThe exception-Excise duty of goods-Levied upon manufacturerD Imposed on production/manufacture/producer in accordance with the
relevant rules.
Constitution of India, 1950, Article 245, 246 and Schedule VII
Lists I Entries 84, 97, Lists II and III-"With respect to"-Interpretation of-'Manufacture'-Concept of Entries in legislative lists-
£
Not sources of legislative power-Merely topics or fields of legislation- ,
Legislation co•ild be 'composite legislation'-'Rag-bag' legislation--
Familiar in taxation-Competent legislature can always validate law--
Retroactivity of legislation-Test of validity how applied.
Statutory Interpretation-Referential legislation-Types ofF
Effect of-Legislation could be composite legislation-'Rag-bag'
legislation-What is-Competent legislature can always validate a law.
Words and phrases-'Manufacture'-'In respect of-Meaning
of.
'
O
Section 2(0 of the Central Excise Act defines 'manufacture', to
include any process incidental or ancillary to the completion of a
manufactured product.
The President of India promulgated an Ordinance called the
Central Excises and Salt and Additional Duties of Excise (Amendment)
H
Ordinance 1979, which was later replaced by Central Act VI of 1980,
'
770
UJAGAR PRINTS v. U.0.1.
771
called the Central Excises and Salt and Additional Duties of Excise
(Amendment) Act, 1980. The Amending Act became effective from 24th
February, 1979. By section 2 of the Amending Act, Section 2(0 of the
Excise Act was amended by adding three sub-items in the definition of
'manufacture' so as to include activities like bleaching, dyeing, printing
etc. which were held not covered by two decisions of the Gujarat High
Court. Similar amendments were made in items 19 and 22 of the First
Schedule with retrospective effect. Section 5(2)(b) of the Amending Act
provided that 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 5 of the
Act had been in force on and from the appointed day as defined in the
Act.
A
B
c
Prior to the Amending Act, !980, the levy on the processors was
challenged before the Gujarat High Court in the case of Vijay Textiles
Mills v. Union of India and Real Honest Textile v. Union of India,
D
[1979] 4 E.L.E.J. 181. The Gujarat High Court held that cotton fabric
subjected to bleaching, dyeing and printing could not be subjected to
excise duty under items 19 and 22 of the First Schednle to the Central
Excises and Salt Act, 1944, and that processors were liable to pay duties
under tariff-entry 68 only on the value added by the processor. Following this judgment a large number of similar claims of processing-houses
E
were allowed by the High Court by its judgment dated 13.3.1979. However, the Bombay High Court, took a different view and held that even
under the concept of 'manufacture' envisaged in section 2(0 even prior
to its amendment, the operations carried on by the processors
amounted to 'manufacture' and that, at all events, the matter was
placed beyond any controversy by the Amending Act of 1980.
F
The judgment of the Gujarat High Court in the case of Vijay
Textiles and Real Honest Textiles was considered by a Bench consisting
of three judges of this Court in Empire Industries v. Union of India,
[ 1985] Supp. l SCR 292 and it was held not to have been decided ·
correctly. The view taken by the Bombay High Court in New Shakti
G
Dye Works Pvt. Ltd. v. Union of India & Anr., [I98J) ELT 1736, was
approved.
The present appeals, by special leave, preferred against the judgments of. the High Court of Gujarat and the High Court of Bombay, and
the batch of writ petitions under Article 32 of the Constitution of India,
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SUPREME COURT REPORTS
[1988] Supp. 3 S.C.R.
A involve common questions of law concerning the validity of the levy of
duties of excise under tariff-items 19 and 22 of the Schedule to the'
Central Excises and Salt Act 1944 ("Central Excise-Act") as amended
by the Central Excises and Salt Additional Duties Excise (Amendment)
1980 Act ("Amending Act") treating as 'manufacture' the process of
bleaching, dyeing, printing, sizing, mercerising, water-proofing, rubB
berising, shrink-proofing, organdie processing etc. done by the processors who carry out these operations in their factories on job-work basis
in respect of 'cotton-fabric' and 'Man-made fabric' belonging to their
customers. The facts in all the cases are identical.
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The petitioners/appellants carry out the operations of bleaching
dyeing, printing sizing, finishing etc. of grey fabric on job-work
against payment of processing charges to it by the customers who are
the ownerii of the grey-fabric. The machinery and equipment installed
in the petitioners' factories are suited for and appropriate to the processing of grey-fabric and are not capable to manufacturing grey-fabric.
The man-made grey-fabric, such as, Art Silk Grey-fabric is
manufactured in mills and on power looms and that latter Is exempt
from excise duty on its manufacture. The Art Silk Grey-fabrics which
are processed in the . petitioners/appellants factories are those
manufactured on power looms and not by the mills and that the Art Silk
Grey:fabric received do not come from the manufacturers of the grey.
fabric through the manufacturing-stream but from the various traden
through the sales-stream.
The present writ petitions/appeals also include cases where the
grey-fabric is also purchased by some of the processing houses and are
sold by them, after processing. Io some cases, the manufacturers of the
grey-fabric subject it to captive consumption and process them In their
F
own composite establishments.
At the 11me of hearing, the correctness of the view taken In the
Empire Industries case on certain aspects having been doubted by
another Bench of this Court, these appeals/writ petitions were referred
to a Bench of five judges on two questions namely (1) whether the
G
processing of grey-fabric amounted to 'manufacture' within the meaning of Section 2(1) as it stood prior to Its amendment, and (2) whether,
even If such processing did amount to 'manufacture' what should be the
proper basis for determining the assessable value of the processed
fabrics.
H
In the petitions and appeals, the following points arise for
determination.
UJAGAR PRINTS v. U.0.1.
773
A(i) Whether the process of bleaching, dyeing, printing, sizing,
shrink-proormg etc. carried on in respect or cotton or man-made 'greyfabric' amount to 'manufacture' for purposes, and within the meaning
of Section 2(f) of the Central Excises and Salt Act 1944 prior to the
amendment of the said Section 2(f) by section 2 of the Amending Act VI
of 1980.
A(ii) Whether the decision in Empire Industries Limited & Ors.
v. Union of India, (198~] Supp. 1SCR292holding that these operations
amount to 'manufacture' is wrongly decided and requires reconsideration.
A
B
(B) Whether the amendment brought about by the Amending Act of
C
19110 of Section 2(1') and to tariff-items 19 and 22 of the Central Excise
4.ct is ultra-vires Entry 84 List I and, therefore, beyond the competence
of the Union Parliament.
Whether, at all events, even if the expended concept of manufac-
;ure introduced by the Amendment is beyond the scope of Entry 84 List
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I, whether the impost is, at all events, referable to and supportable by
the residual Entry 97 of List I.
(C) Whether, at all events even if the amendments to ·Central
Excise Act are valid, the levy under the Additional Duties Act is unsupportable and without the authority of law as there is no corresponding E
enlargement of the definition of 'manufacture' under the Additional
Duties Act.
·
(D) Whether the retrospective operation of the Amending Act is
an unreasonable restriction on the fundamental right of the 'processors'
under Article 19(1)(g) of the Constitution.
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(E) Whether, even if the levy is justified, at all events, the computation of the assessable-value of the processed grey-fabric on the basis of
the whole-sale cash selling-price declared under classification list under
Rule l 73(b) is unjustifie.d and illegal in respect oft.he assessable value ot
the processed grey-fabric done on job-work-basi,,
G
Allowing the appeals preferred by the Union of India,
HELD: (Per Majority)
The \appeals preferred by the Union of India are allowed and the
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SUPREME COURT REPORTS
[1988] Supp. 3 S.C.R.
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Judgment of the Gujarat High Court under appeal is set-aside. The
appeals preferred by the processors against the judgment of the
Bombay High Court and the Writ Petition filed by the processors
directly in this Court are dismissed. The Union of India and its
authorities shall be entitled to take necessary steps to seek the enforcement of the bank guarantees, if any, for the rerovery of the arrears. [810C-D]
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Per Sltbyasachi Mukharji, J. (Concurring with Venkatacbaliab,
J.)
(1) A statutory charge should be measured by the method of its
own computation as laid down in the statute and not by any other
method of computation. The circumstances that thereby the benefit of
any exemption granted by the legislation may be lost and that in some
cases hardship might result are not matters which would influence
courts on the construction of the statute. A tax payer is entitled only to
such benefit as is granted by the legislature. l811C-Df
(2)(i) Where a manufacturer sells the goods manufactured by him
in wholesale to a wholesale dealer at the arms length and in the usual
course of business, the wholesale cash price charged by him to the
wholesale dealer less trade discount would represent the value of the
goods for the purpose of assessment of excise. But the price received by
the wholesale dealer who purchases the goods from the manufacturer
and in his turn sells the same in wholesale to other dealer, would be
irrelevant for determination of the value of the goods and the goods
would be charged on that basis. [812E-F]
(2)(ii) The valuation must be on the basis of wholesale cash price
at the time when the manufactured goods enter into the open market.
The value of the trade-marks is not to be taken into account in computing the assessable value as the affixation of the trade-marks of a particular brand was extraneous to manufacture. The values of such extraneous or additional factors do not enter into the computation of assessable
value and as such the wholesale cash price at which the goods enter into
thJ.> wholesale market would be independent of the value of the trademarks. [812G-H; 813A-B]
(2)(iii) The assessable value would, therefore, include the value of
the grey cloth in the hands of the processors plus the value of the
job-work done plus manufacturing profits and manufacturing expenses
whatever would be included in the price at the factory gate. The· correct
assessable value must be the value of the fabric at the factory gate, that
'
.
.
UJAGAR PRINTS v. U.0.1.
775
is to say, the value at which the manufactured goods leave the factory
A
and enter the main stream. [813E]
·
3. Computation of the assessable-value is one question and as to
who should be liable for the same is another. Duties of excise are
imposed on production or on manufacture of goods and.are levied upon
· the manufacturer or the producer in accordance with the relevant
rules. This is quite independent of the ownership of goo,!Js. it is, therefore, necessary to reiterate that the value for, the assessment under
Section 4 of the Act will not be the processing charge along but the
intrinsic value of the processed fabric which is the price at which the
fabrics are sold for the first time in the wholesale market. The rules are
clear on the computation of that value. [813F-H)
Atic Industries Ltd. v. H.H. Dave, Asstt. Collector of Central
Excise and Ors., [1975) 3 S.C.R. 563; U;;ion of India & Ors. etc. etc. v .
. Bombay Tyre International Ltd. etc. etc., [1984) I S.C.R. 347 at 375;
Union of India & Ors. v. Cibatul Ltd., [1985) Suppl. 3 S.C.R. 95 and
Joint Secy. to the Govt. of India & Ors. v. Food Specialities Ltd.,
[1985) Suppl. 3 S.C.R. 165, followed.
Per Venkatachaliah, J. (for himself and on behalf of R.S. Pathak,
CJ and S. Natarajan, J.)
I (i) The prevalent abd generally accepted test to ascertain that
there is 'manufacture' is whether the change or the series of changes
brought about by the application of processes take the commodity to the
point where, commercially; it can no longer be regarded as the original
commodity but is, instead, recognised as a distinct and new article that
has emerged as a result of the processes. [797E-F)
l(li) The view taken in the Empire Industries case that 'greyfabrics' after they undergo the various processes of bleaching, dyeing,
sizing, printing, finishing etc. emerges as·'ll commercially different commodity with its own price:-structure, Custom and other conimerCial inci·
dents and that there.was in that sense a 'manufacture' within the meaning of Section 2(1), even as unamended, is an eminently plausible view
and is not shown to suffer from any fallacy. [798A-B]
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Union of India v. Delhi Cloth & General Mills, [1963) Supp. I
S.C.R. 536 at 597; TUngabhadra Industries Ltd. v. Commercial Officer
Kurnool, [1961) 2 S.C.R. 14; Deputy Commissioner of Sales Tax v. Pio
.l-i
Food Packers, [1980) 3 S.C.R. 1271at1275; Steriing Foods v. State of
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776
SUPREME COURT REPORTS
[ 1988] Supp. 3 S.C.R.
Karnataka, (1986] 3 S.C.C 469 at 475 & 476; Kai/ash Nath v. State of
U.P., 8 S.T.C. 358; Deputy Commissioner sales Tax v. Sadasivan, 42
S.T.C. 2 fKerala); Swastic Products Baroda v. Superintendent of Central Excise, (1980] E.L.T .. 164 (Gujarat); Swan Bangle Stores v. As~
sistant Sales Tax Officer, 25 S.T.C. 122 (Allahabad); State of Andhra
B Pradesh v. Sri Durga Hardware Stores, 32 S.T.C. 322 (Andhra
Pradesh); Extrusion Process Pvt. Ltd. v. N.R. ladnav, Superintendent
of Cen:ral Excise, (1979] E.L. T. 380 (Gujarat); In Health & Milligan
Man.ufacturing Company, The Sherwin-Williams Company, etc. v.
J.H. Worst Director ·of the North Dakota Government Agricultural
Experiment Station; Kai/ash Nath v. State of U.P., 8 S.T.C. 358;
q Commissioner of Sales Tax, U.P. (Lucknow) v. Harbilas Rai, 21
S.T.C. 17; Hiralal Jitmal v. Commissioner of Income-Tax, 8 S.T.C.
325 at 326 and Kores (India) Ltd. v. Union of India and Ors., (1982]
10 E.L.T. 253, referred to.
0
2(i) Entries in the legislative lists, are not sources ofJhelegislative
power but are·merely topics ·Or tields of legislation and must receive a
liberal costruction inspired by a broad and generous spirit and not in a
narrow pedantic sense. The expression "with respect to" in Article 246
brings in the doctrine of "Pith and Substance" in the understanding of
the exertion of the legislative power and wherever the qnestion of
E
legislative-competence is raised, the test is whether the legislation,
looked at as a whole, is substantially 'with respect to' the particular
topic. of legislation. If the legislation has a substantial and not merely a
remote connection with the entry, the matter may well be taken to be
legfslatfonon the topic. (799B,D]
F
2(ii) Competence to legislate flows from Articles 245, 246 and the
other Articles following in Part XI of the Constitution. In defending the
validity of a law questioned on ground of legislative-Incompetence, the
State can always show that the law was supportable under any other
entry within the competence of the legislature. Indeed in supporting a
legislation snstenance could be drawn and had from a number of
entries. The legislation could be a composite legislation drawing upon
G several entries. Such a "rag-bag" legislation is particularly familiar in
taxation. [800F-G]
·
Diamond Sugar Mills v. State of U.P., [1961] 3 S.C.R. 242 at 248;
Statutory Interpretation, at page 644 and Hari Krishna Bhargav v.
l;I Union of India & Anr., [1966] 2 S.C.R. 22, referred to.
UJAGAR PRINTS v. U.0.1.
777
2(iii) So far as, 'the exclusive competence of the Union Parliament
to legislate is concerned, all that is necessary is to find out whether th•
particular topic of legislation is in List II or List III. If it is not,
it ·is not necessary to go any further or search for the fie.Id in List 1.
Union Parliament has· exclusive power to legislate upon that topic or
field. Of course, it itas eoiicurrent power also in respect of the subjects in List III • .[801E-F]
2(iv) Even if the impost on prqcess is not one under Entry 84, List
I, but is an impost on 'processing' distinct from 'manufacture' the levy
could yet be supported by Entry 97, List I, even without the aid of the
wider principle recognised a11d· adopted in Dhillon's case AIR 1972 SC
1061. [799FJ
.
.
3. Section 4 of the Amending Act VI of 1980 has amended the
relevant items in the schedule to the Additional Duties Act, the expressions' 'produce' or 'manufacture' in Section 3(1) of the Additional
Duties Act must be read alongwith the entries in the Schedules. What
appears; tl!erefore, dear is th>1t what applies to the main levy, applies to
the additional duties as well. [803FJ
Pandit Ram Narain v. The State of Uttar Pradesh and Ors., [1956]
S.C.R. 664 at 673; Macbath & Com. v. Chislett, [1910] AC 220 at 224;
Commissioner of Sales Tax, Madhya Pradesh v. Jaswant Singh Charan
Singh, [1967] 2 S.C.R. 720 at 725-26; Assistant Collector of Central
Excise, Calcutta Division v. National Tobacco Co. of India Ltd., [1973]
l S.C.R. 822 at 835; Att.-Gen. v. Lamplough, '[1878] 3 Ex. D. 214, 299;
Interpretation of Statutes, 11th ed. p. 156 and Bennion"s Statutory
Interpretation, p. 568-569, referred to.
4(i) A Competent legislature can always validate a law which has
been declared by courts to be invalid, provided the infirmities and
vitiating factors noticed in the declaratory-judgment are removed or
cured. Such a validating law can also be made retrospective. If in the
light of such validating and curative exercise made by the Legislature--
granting legislative--competence--the earlier judgment becomes
irrelevant and unenforceable, that cannot be called an impermissible
legislative overruling of the judicial decision. All that the legislature
does is to usher in a valid law with retrospective effect in the light of
which earlier judgment becomes irrelevant. Such legislative expedience
of validation of laws is of particular significance and utility and is quite
often applied, in taxing statutes. It is necessary that the legislature
should be able to cure defects in statutes. No individual can acquire a
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SUPREME COURT REPORTS
[1988] Supp. 3 S.C.R.
vested right from a defect in a statute and seek a wind-fall from the
legislature's mistakes. [804G-H; SOSA-CJ
Sri Prithvi. Cotton Mills Ltd. & Anr. v. Broach Borough Municipality & Ors., [1970] l S.C.R. 388, referred to.
4(ii) Validity of legislations retroactively curing defects in taxing statutes is well recognised and courts, except under extraordinary
circumstances, would be reluctant to override the legislative judgment
as to the need for and wisdom of the retrospective legislation. [805C]
4(iii) In testing whether a retrospective imposition of a tax
operates so harshly as to violate fundamental rights under article
I9(J)(g), the factors considered relevant include the context in which
retroactivity was contemplated such as whether the law is one of valida·
tion of taxing statute struck-down by courts for certain defects; the
period of such retroactivity, and the decree and extent of any unforeseen or unforeseenable financial burden imposed for the j>ast jleriod etc.
Having regard to all the circumstances of the present case, this Court in
Empire Industries' case rightly held that the retroactivity of the Amending provisions was not such as to incure any infirmity under Article
19(l)(g). [SOSE-GJ
S(i) Section 4 of the 'Central Excise Act' envisages that the value
of au article for the purposes of duty shall he deemed to be; (a) the
wholesale cash price fgr which an article of the like kind and quality
was sold or was capable of being sold at the time of removal of the
article froin the factory or premises of manufacture for delivery at the
place of manufacture,.or (b) where such price was not ascertainable,
the price at which an article of the like kind and quality was sold or
capable of being sold at the time of removal of the article chargeable
with duty. [808F-G]
S(ii) Consistent with the provisions of Section 4 and the Central
Excise (Valuation) Rules, 1975, framed under sec. 37 of the Act, it
cannot be said that the assessable-value of the processed fabric should
comprise only of the processing-charges. This extreme contention, if
accepted, would lead to and create more problems than it is supposed to
solve,· and produce situations. which could only be characterised as
anomalous. The incidence of the levy should be uniform, uninfluenced
by fortuitous considerations. The view taken in the matter in Empire
'Industries case does not call for reconsideration. [809C-D]
UJAGAR PRINTS v. U.0.1.
779
S(iii) The question whether the producer or the manufacturer is
or is not the owner of the goods is not determinative of the liability.
The essential and conceptional nature of the tax is to be kept
clearly distinguished from both the extent of the power to impose
and the stage at which the tax is imposed. Though the levy is on
the production or manufacture of the goods, the imposition of the
duty could be at the stage which the law considers-most convenient
to Impose as long as a rational relationship with the nature of the tax
is maintained. [806B-D]
S(iv) The nature of the excise duty is not to be confused with, or
tested with reference to, the measure by which the tax is assessed. The
standard adopted as the measure of assessment may throw light on the
nature of the levy but is not determinative of it. When a statutory
measure for assess~ent of the tax is contemplated, it "need not contour
along the lines which spell out the levy itself", and "a broader based
standard of reference may be adopted for the purposes of lletermining
the measure of the levy". Any statutory standard which maintains a
nexus with the essential character of the levy can be regarded as a valid
basis for assessing the measure of the tax. [808G-H; 809A-B]
Atic Industries Ltd. v. H.H. Dave, Asstt. Collector of Central
Excise and Ors., [1975] 3 S.C.R. p. 563 and Union of India & Ors. etc.
etc. v. Bombay Tyre International Ltd. etc., [1984] l S.C.~. p. 347 at
375, referred to.
Per Ranganathan, J. (Concurring with Venkatachaliah, J.)
l(i) Hindustan Milkfood Manufacturers Ltd. v. Union, (The
HMM case) [1980] ELT 480, was based not on the scope of legislative
entry 97 in List I but on the language and scope of the amendment
actually effected. It was considered not ne.cessary or possible to stretch
the language of the definition in S. 4 beyond the ambit ofthe provision
as delineated in the earlier decisions. The question decided was not that
the legislature could not, but that i.t did not make any redical change in
the nature of the levy. [815F-G]
l(ii) There is nothing in the decision HMM case thafimpports the
contention of the petitioners here that the amendment of the definition
of 'manufacture' cannot be sustained by reference to entry 97 of List I
in the Seventh Schedule to the Constitution of India, if it cannot be
upheld as falling under the purview of Entry 84. lliiiiH; 817AJ
A
B
c
D
E
F
G
H
780
SUPREME COURT REPORTS
[1988] Supp. 3 S.C.R.
2(i) The words 'levied' is a wide and generic expression. One can
A
say with as much appropriateness that the Income Tax Act levies a tax
on income as that the Income Tax Officer levies the tax in accordance
with the provisions of the Act. It is an expression of wide import and
takes in all the stages of charge, quantification and recovery of duty,
though in certain contexts it may have " restdded meaning. ·in the
B
context of sub-section (l) the word 'levied' admittedly means 'charged'
as well as 'assessed'. The words 'levy and collection' in sub-section (3)
cannot be construed differently from the words 'levied and collected'
used in sub-section (I). Section 3(3), therefore, also covers the entire
gomut of s. 3(1) and cannot be construed as becoming operative at
somewhat later stage. ~ts operation cannot be excluded in determining
the scope of the charge. [818F -Hl
c
2(ii) Having regard to the nature and content of the levy indicated
in s. 3(1), -it is obvious that s. 3(3) has to have the effect of attracting not
only the purely procedural and machinery provisions of the 1944 Act
•but also some of its charging provisions. It is, therefore, difficult to
-0 -consider section 3(1) of.the 1957 Act-in contrasno the Finance Act of
1965-as covering the entire ambit of the charge linposed. In short, the
language of s. 3(3) has to be given a wider meaning than under the
'Finance Act, 1965. A provision similar to that in s. 80 of ihe Finance
Act, 1965_ is also found in other Finance Acts. On perusal of these provisions, it will be found that a like position exists there also. These provi-
-E
sions are all self-contained and completely specify ihe scope of the
charge either as a percentage of the excise duty normally chargeable
under the Central Excises & Salt Act, 1944 or as a percentage of the
'assessable value determined under s. 4 of the 1944 Act.' This is a very
-important reason why the observations in the Associated Cement Co. 's,
case [1985]_ 2 S.C.C. _719 cannot be of application in the context of the
F
1957 Act.1821E-HJ
Mis Mahendra Pratap Rama Chandra v. Commercial Tax Officer
& Othet:s, A.I.R. 1965 Cal. 203, referred to.
3(i) Legislatures sometimes take a short cut and try to reduce the
G · length of statutes by omitting elaborate provisions where such provi·
sions have already been enacted earlier and can be adopted for the
purpose on hand. While, on the one hand, the prolixity of modern
statutes and the necessity to have more legislations than one on the same
or allied topics render such a course useful and desirable, the attempt to
legislate by reference is sometimes overdone and brevity is achieved at
H_
the expense of lucidity. However this legislative device is quite well
UJAGAR PRINTS v. U.0.1.
781
known and the principies applicable to it fairly well settled. [823C-D]
A
3(ii) Referential legis.lation is of two types. One is where an
earlier Act or some of its provisions are incorporated by reference into a
later Act. In this event, the provisions of the earlier Act or those so
incorporated, as they stand in the earlier Act at the time of incorporation, will be read into the later Act. Subsequent changes in the earlier B
Act or the incorporated provisions will have·to be ignored because, for
all practical purposes the existing provisions of the earlier Act have
been re-enacted by such reference into the later one, rendering irrelevant what happens to the earlier statute thereafter. On the other hand,
the later statute may not incorporate the earlier provisions. It may only
make a reference· of a broad nature as to the ·law on the subject generC
ally or contain a general reference to the terms of an earlier statute
which are to be made applicable. In this case any modification, repeal
or re-enactment of tbe eadier statute will also be carried into in the
later, for here, the idea is that certain provisions of an earlier statute
which become applicable in certain circumstances are to be made use of
for the purpose of the later Act also .. [823E-H]
D
3(iii) Whether a particular statute falls into the first or second.
category is always a question of construction. [824B I
In the present case, the legislation falls into the second category.
S. 3(3) of the 1957 Act does not incorporate into the 1957 Act any
E
specific provisions of the 1944 Act. It only declares generally that the
provisions of the 1944 Act shall apply "so far as may be"; that is, to the extent
necessary and practical, for the purposes of the 1957 Act as well. [824B"C)
Secretary of State v. Hindustan Cooperative Insurance Society,
A.I.R. 1941 P.C. 149; Solani Ores Ltd. v. State, A.I.R. 1975 S.C. 17;
F
Mahindra and Mahindra Ltd. v. Union, A.I.R. 1979 S.C. 798; Bhajiva
v. Gopikabai, (1978] 3 S.C.R. 561; Collector of Custom' v. Nathe/la
Sampathu Chetty, (1962] 3 S.C.R. 786; New Central Jute Mills Ltd. v.
Assistant Collector, (1971] 2 S.C.R. 92; Special Land Acquisition
Officer v. City Improvement Trust, [1977] 1 S.C.R. 569 and Madhya
Pradesh v. Narasimhan, (1976] I S.C.R. 6, referred to.
G
3(ivJ The legislation presently in question is clearly in pari
materia with the 1944 Act. It is also merely supplemental. While the
1944 Act imposes a general levy of excise duty on all goods
manufactured and produced, and aim of the present Act is to supplement the levy by an additional duty of the same nature on certain goods. H
782
SUPREME COURT REPORTS
[19881 Supp. 3 s:c.R.
A
The duration of the applicability is undefined but the ·statute is clearly enforceable as long as it is in the statute book side by side with. the normal
excise duties. The clear intention is that the sanie provisions shall
govern both the levies except that the duty under the later Act is confined to certain goods only and its distribntability among the States may
B
c
D
perhaps follow a different pattern from the principal duty. [8258-C]
3(v) The Finance Acts which levied special or regular or additional excise dnties contained in themselves all the elements of charge or
duty. The goods were mentioned and the duty has to be levied either at a
percentage of the normal excise duty payable under the 1944 Act or at ·a
percentage of the value of the assessable goods as determined under t~e
1944 Act. All that was further needed was the applicability of the pro;
cedural provisions oftbe 1944 Act. However, the 1957 Act'ls Incomplete
as to the basis of the charge and its provisions would become totally
unworkable unless the concepts of 'manufacture' and 'assessable value'
as determined under the 1944 Act are carried into it.· [8250-J?]
ORIGINAL JURISDICTION: Writ Petition No. 12183 of 1985
etc. eic.
(Under Article 3~ of the Constitution of India).
E
K. Parasaran, Attorney General, Soli J. Sorabjee, A.J. Rana,
· A.K. Sen, S.K. Dholakia, Hari Swarup, V.C. Mahajan, A.K.
F
G
Ganguli, Mrs. Shashi Rana, Mrs. J. Wad, Ms. Aruna Mathur, Subash
Parekh, Dushyant Dave, P.H. Parekh, E.K. Jose, Ms1 Rashmi
Chandrachud, Sanjay Bharthri, Sarve Mitter, C.L. Beri, S.K. Beri,
R.C. Bhatia, Ravi P. Wadhwani, P.C. Kapur, Sukumaran, D.N.
Mishra, .B.V. Desai, M.B. Lal, Mukul Mudgal, B. Kanta Rao, Mrs.
H. Wahi, Mrs. V.D. Khanna, Aruneshwar Gupta, Mrs. AnilKatiyar,
R.K. 'Kapur, B.R. Kapur, Anis Ahmed Khan, Ms. Abha Jain,
R. Karanjawala, Mrs. M. Karanjawala, Ms. Meenakshi, Vishnu
Mat)ll!r, Kail,ish V:asudev,, P.O. Shah, Shri Narain, Sandeep Narain,
M.N. Shroff, Mrs. P.S. Shroff, R. Sasprabbu, S.A. Shroff, S.S.
Shroff, Praveen Kumar, M.N. Chowdhary, M.D. Chowdhary,
N. Das Oupta, Rajesh Chibber, K.K. Bhaduri, Rajiv Dutta,
E.C. Agaiwala, Harjinder Singh, R.K. Nambiar, P. Paremeswaran,
Ms. Bina Gupta, K. Swami and V.N. Ganpule for the appearing
parties.
H
The following Judgments of the Court were delivered:
. ,;· ..
UJAGAR PRINTS v. U.O.I. [VENKATACHALIAH, J.I
783
VENKATACHALIAH J, These appeals, by Special Leave, preferred against the Judgments of the High Court of Gujarat and the
High Co.urt of Bombay and. the batch of writ-petitions under Article 32
of the Constitution of India are heard together and disposed of by this
common judgment as they all involve questions-common to themconceming the validity of the levy of duties of excise under tariff-items
19 and 22 of the Schedule to the Central Excises and Sali Act 1944
("Central-Excise-Act") as amended by the Central Excise and Salt
Additional Duties Excise (Amendment) 1980 Act ("Amending Act")
treating as ''Manufacture" the process of Bleaching, Dyeing, Printing,
Sizing, Mercerising, water-proofing, rubberising, Shrink-Proofing.
Organdie, Processing, etc. done by the processor who carry out these
operations in. their factories on Job-work basis in respect of 'Cottonfabric' and 'Man-made fabric' belooging to their customers.
the Amending Act which became effective from 24.2. 1979
i'
sought to render the processes of Bleaching, Dyeing, Printing, Sizing,
Mercerising etc. "Manufacture" within the meaning of the Section 2(f)
B
c
of the Central Excise Act. The amendment was necessitated by the
D
Judgment of the High Court of Gujarat which had declared the levy on
such 'processing' as illegal as, according to the.High Court, the processing did not bring into-being a new and commercially different article
with a distinctive character and use and did not, therefore, constitute
·'manufacture' for purposes, and within the meaning, of the charging
section.
E
The processors who carry-out these operations on cotton fabrics
01 "man-made" fabrics which are popularly go by the name 'Greyfabric' in the particular trade also challenged the levy of the additional
duties of excise under the provisions of the Additional Duties of
Excise goods (of special importance) Act 1957 (Additional Duties Art)
F
on the ground, first, that.if the processes carried on by. them do not.
amount to "manufacture" under Section 2(f) as it originally stood,
then, consistent with the impermissibility of the main impost, the levy
of additional duties also fails and, that at all events, even after the
amendment the concept of 'manufacture' under the said Additional
Duties Act had not been correspondingly widened by an appropriate G
amendment.
2. The present batch of appeals and writ-petitions comprises of a
large number of cases. It is not, having regard to the questions requiring to be decided in these matters, necessary to go into, in any particular detail, the fact-situation of each individual case. The processors
H
784
SUPREME COURT REPORTS
[1988] Supp. 3 S.C.R.
·in th~se cases, who may convenie~tly be referred .to as the "procesA
sors" or "jobbers", mainly carry out these operations of Bleaching,
. Dyeing, Printing, Sizing, Finishing etc. of 'Grey-fabric' on 'job-work'
against payment of processing charges to them by the customers who
are the owners of the Grey-fabric. The ownership of the cloth rests
with the customers who get these processes' done to their specifications
-8,
from these processing-houses on payment of processing charges. The
Grey:fabric, after processing, is returned by the processing-house to
the customers.
D
E
F
a
The facts of W.P. No .. 1218,3 of 1985 '.Mis. Ujagar Prints v. Union
of !ndia·and Ors.), in which the petitioner has challenged the levy by a
petition' under Article 32 of the Consiitution are typical and representative of all oiher similar cases. The petitioner is a firm of
partners with its Head bffice at 51, Sheikh Memon Street, Bombay. It
has a factory at Sunder Baug, Deonar, Bombay, which is equipped
'with machinery and plants for processing of man-made grey: fabric.·
The machinery and equipment installed in the petitioners' factory, it is
averred-and that is not disputed either-are suited for and
appropriate to the processing of Grey-fabric and are ~ot capable of
manufacturing Grey-fabric. The man-made grey-fabric such as Art
Silk Greifabric, it is stated, is manufactured in mills and on power
looms and that latter is exempt from excise d\Jty on iis manufacture.
Petitioners further aver that the Art Silk Grey-fabrics which are processed in the petitioner' faetory are those manufactured on power
looms and not by the mills and that the Art Silk Grey-fabric received
do not come from the manufacturers of the grey-fabric through the
manufacturing-stream but from the various traders through the salesstream. The point that the petitioners seek to make is that the processing of the grey-fabric is not a part, or continuation, of the process of
manufacture in the manufacturing-stream, but is an independent and
distinct operation carried out in respect of the Grey-fabric, after it has
left manufacturing-stage and has become part of the common-stock of
goods in the market. lt-is also averred that the firm Mis. Ujagar Prints
does not purchase the Grey-fabric but is only engaged in processing it
for charges 'and that in many cases the Grey-fabric would have passed
on from trader to trader with the attendant increase in the prices with
each successive change of hands and is entrusted to the petitioner by
the last purchaser for processing against stipulated processing-charges
·on job work basis.
It is contended that these job work processing operations do· not
H amount to "manufacture" as the petitioners do not carry out any spinning or weaving operations; that what they receive from their custo-
-
UJAGAR PRINTS v. U.0.1. [VENKATACHALIAH, J.]
785
mers for processing is othel'Wise fully manufactured man-made fabr;c
and that what is returned to the customers after processing continues
to remain man-made fabric. The imposition of excise duty on the
processor on· the basis of the full-value of the processed material,
which reflects the value of grey-fabrics, the processing-charges, as well
as the selling profits of the customers is, at once unfair and anamolous,
fpr, in conceivable cases the duty itself might far exceed the processing-charges that the processors stipulate and geL
·
3. The batch of cases also includes cases where the grey-fabric is
also purchased by these processing-houses and are sold by them, after
processing. ln some cases the manufacturers of the grey-fabric subject
A
B
it to captive consumption and. process them in their own compositeC
establishments.
The essential question is whether these situational-differences
have a bearing on the principles -of determination .of the ·assessablevalue of processed grey-fabric and whether the assessable value could
'be different in the different fact-situations which would be the 'logical D
corollary -if the contention of the processing~houses which do not processing work fot charges on the goods not their .own, is accepted and
the assessable value determined on the basis of mere processingcharges.
·
But the main questions that arise are whether "processing" of E
the kind concerned in these cases ambunts to "manufacture", whether
the provisions of section 2 of the Amending Act which impart an
artificial-dimension to the concept of "manufacture" is ultra-vires
Entry 84 List I; whether, at all events, the imposition ·of a tax on such
'processing' is referable to Entry 97'List I; and if the impost ·on .the
processors is justified under tariff-items 19 and 22,· according as F
whether the Grey-fabric is cotton ·or 'man-made', what shmild be.the
assessable-value for purposes of levy of ·duty so far as processors are
concerned.
4. Prior to the Amending Act of 1980, the levy on the processors
was challenged ·before the •Gujarat High Court. The Gujarat High (}
Court by its judgment dated 24. 1.1979 in the cases of Vijaya Textiles
Mills v. Union of India and Real Honest Textiles v.