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Petition for Special Leave to Appeal No. 262 of 1967, decided tan 6th October 1967.

(On appeal from the judgment and order of the High Court of West Pakistan, Lahore, dated the 26th May 1967, in Writ Petition No. 617 of 1967).

S. 2(f) and First Sched, item 15(c)‑Word "manufacture" Includes any process incidental or ancillary to CA a con of manufactured product "Calendaring" of woollen fabrics on power driven machines‑Mere fact drat fabrics woven with yarn on hand looms‑Would not exempt goods from payment of excise duty under item 15(c) of First Schedule.

M. A. Zullah, Senior Advocate Supreme Court (S. A. Khalid, Advocate Supreme Court with him) instructed by Maqbool Ahmad Rana, Attorney for Petitioner.

Nemo for Respondents.

Date of hearing: 6th October 1967.

The subject is the levy of excise duty under the Central Excises and Salt Act I of 1944, hereinafter called the Act, on the manufacture of woollen fabrics by the petitioner Messrs Chenab Woollen and Textile Mills Limited, Lyallpur. .

Woollen yarn is manufactured by the petitioner on power driven spindles which under the Act is exempt from excise duty. They, however, manufacture fabrics with the yarn on hand looms and calender and finish them by power driven machines. Woollen fabrics manufactured on hand looms being exempt from excise duty under the Act this intermediary process of spinning cloth on a large number of hand looms by the petitioner was visibly adopted to avoid taxation. For sometime this device worked, but on 17‑2‑1966 the Superintendent, Central Excise, Circle III, Lyallpur on notice to the petitioner raised a demand of Rs. 1,95,692.50 against them for the period 26‑10‑1960 to 25‑10‑1964 at the prescribed rate of 10 % as per item 15(c) of the First Schedule to the Act. Aggrieved by the levy the petitioner filed an appeal before the Collector, Central Excise, Lahore, contending that as woollen fabrics were manufactured by them on hand looms they were , under Article 15(c) not liable to pay duty on them.

The construction placed by the petitioner on the definition of "manufacture" in section 2 (f) and the exemption clause in Article 15(c) of the first Schedule to the Act was ruled out by the Collector and the appeal dismissed. The petitioner then filed a revision petition before the Central Government which too was rejected with the modification that the demand in respect of goods before 13‑2‑1963 was set aside as barred by time.

Finally the petitioner moved the High Court in writ jurisdic tion for quashment of the assessment reiterating the plea that the woollen fabrics produced by them were manufactured' on hand looms and as such were exempt from payment of excise duty under the Act. The term "manufacture" is defined in section 2(f) of the Act as follows:

"2(f) "manufacture" includes any process incidental or ancillary to the completion of a manufactured product;".

In Superintendent of Central Excise, Lyallpur v. Faqir Muhammad ((1 P L D 1959 S C (Pak.) 103 this Court considered, the above definition and held that "calendering" was a process ancillary to the manufacture of cloth and that the notification issued by the Central Govern ment under section 6(a) of the Act providing that no person shall engage, in the production or manufacture of the goods. specified therein except under the authority and in accordance with the terms and conditions of a licence granted under the Act was applicable to the process of calendering. Relying on thus view the High Court held that the calendering and finishing being ancillary to the completion of the woolen fabrics by the petitioners they were not entitled to the exemption under Article 15(c) of the First Schedule to the Act. The writ petition was, accordingly, dismissed in limine.

The petitioner seeks leave to appeal from the order of the High Court contending utter alia that the process of manufacture' was confined to spinning alone and that in the alternative spinning being one of the processes the exemption clause applied to their fabrics notwithstanding the other processes employed in the course of completion.

There is little force in the argument raised in support of the petition. The definition of manufacture' includes any process incidental or ancillary to the completion of a manufactured product and not to separate process employed in the course of manufacture'.

The construction placed by the High Court on the definition of manufacture' was thus plainly correct, A fortiorari the goods produced by the petitioner were not exempt from payment of excise duty under Article 15‑C of the First Schedule to the Act.

The petition is dismissed.

Leave refused.

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