The Supreme Court has held that a unit that bleaches, dyes and processes fabrics received from powerloom and handloom units on a job-work basis does not “manufacture” textiles. Such a unit is therefore not liable to pay textile cess under Section 5A of the Textiles Committee Act, 1963.
A Bench of Justice S.V.N. Bhatti and Justice N.V. Anjaria dismissed an appeal by the Assessing Officer, Textiles Committee, and upheld a 2013 Allahabad High Court order that had quashed a cess demand of ₹2,68,293 against Premium Suiting Pvt. Ltd.
Background
Premium Suiting bleaches, dyes and processes 100% man-made fabrics supplied by powerloom and handloom units. After a 2001 audit communication found that most independent textile processors in Uttar Pradesh were not paying cess, the Textiles Committee issued the company a show cause notice dated 20.08.2001 demanding ₹2,68,293.
The company replied that it was an independent processor working on job-work basis for small weavers who had fewer than 50 powerlooms, and that their products were exempt from cess. The Committee rejected this and passed an assessment order on 21.11.2001. Its inspecting officer clarified that powerloom and handloom fabrics were exempt only at the loom stage, not once they were processed further.
The Textiles Committee Cess Appellate Tribunal dismissed the company’s appeal, relying on its own decision in Chandok Textile Exporters Pvt. Ltd., which held that processing amounted to manufacture. On 06.03.2013, the Allahabad High Court allowed the company’s writ petition and quashed the demand.
Arguments
Chirag M. Shroff appeared for the Textiles Committee and Tanmaya Agarwal for Premium Suiting.
The Committee’s stand was that “manufacture”, which the 1963 Act does not define, should take its meaning from Section 2(f) of the Central Excise Act, 1944. That definition includes any process incidental or ancillary to the completion of a manufactured product. On this basis, it argued that bleaching and dyeing amounted to manufacture and the cess was justified.
Definition Cannot Be Borrowed From Another Statute
The Court agreed with the High Court that a word not defined in one Act cannot be read with its definition from another statute, unless the legislature provides for this by reference or incorporation. It relied on Union of India and Others vs. R.C. Jain and Others, Jagatram Ahuja vs. Commissioner of Gift Tax, Hyderabad (2000) 8 SCC 249 and Maheshwari Fish Seed Farm vs. T.N. Electricity Board and Another (2004) 4 SCC 705.
The Bench held that “it is neither safe nor permissible in law to advert to and adopt the connotation ‘manufacture’ as defined in another statute”. The word “manufactured” in Section 5A must therefore be understood in its common parlance meaning.
Job Worker An “Extended Arm” Of Exempt Manufacturers
The Court noted that the proviso to Section 5A expressly exempts textiles manufactured out of the handloom or powerloom industry. The company receives fabric from these manufacturers, processes it and returns it to them. The Court said, “No ‘manufacturing’ takes place at the end of or by respondent No.1.”
Describing the company’s role, it observed, “Respondent No.1 only works as an extended arm for the manufacturers of the textile of the powerloom industry.” It held that the activity is supplementary and ancillary to the manufacturing done by the powerloom industry, which is itself exempt.
The Court concluded that bleached and dyed fabric is “At the best, it is the textile upgraded, not to become ‘manufacture'” in the sense applicable to Section 5A, and that the company could not be made liable to pay cess as there is no “textile manufactured” in its units.
Outcome
The Supreme Court dismissed the appeal as meritless and upheld the High Court’s order quashing the cess demand.
Case Title: The Assessing Officer, Textiles Committee vs. M/s. Premium Suiting Pvt. Ltd. & Another
Case No.: Civil Appeal No. 785 of 2016
Bench: Justice S.V.N. Bhatti and Justice N.V. Anjaria
Date: October 26, 2026
