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Writ Petition No. 471 of 1956, decided on 26th March 1957 under Article 170 of the Constitution.
S. 6 -----Calendering of cloth is neither "production" nor the "manufac ture" of cloth‑Not covered by S. 6‑License not required‑---Central Excise Rules, Rule 174 (1) (c)‑Central Excise and Salt Act (I of 1944). S. 2 (f).
Held, that the calendering of cloth is neither the "pro duction" nor the "manufacture" of cloth within meaning of section 6, Central Excises and Salt Act (I of 1944), and the business of calendering cannot be brought within section 6 of the Act, or Rule 174 (1) (c) of the Central Excise Rules, 1944.
When the cloth is given to a calenderer, it is either cloth or cotton cloth as envisaged by entry 15 of the Central Excises and Salt Act, 1944, and it remains the same article even after it has been calendered because, though the cloth may get a finer look and may fetch more price, its relevant contents remain precisely the same. If the contents of the cloth do not change by the process of calendering the process can not be deemed to be a process in the manufacture or production of cloth.
Requiring the petitioner to take out a license for his business of calendering was therefore illegal.
Taxing Statutes‑Must be very strictly construed‑[Central Excises and Salt Act (1 of 1944)].
M. B. Zaman, Advocate for Petitioner.
Sh. Bashir Ahmad, Advocate for Respondent.
Dates of hearing : 30th and 31st January, 1957.
By this petition under Article 170 of the Constitution of the Islamic Republic of Pakistan. Faqir Muhammad, proprietor of Aftab Calendering and Finishing Mills, Samundari Road, Lyallpur, seeks a writ of mandamus or any other appropriate writ or direction against the Superintendent, Central Excise, Lyallpur, prohibiting that officer from asking the petitioner to take out a licence under Rule 174 (1) (c) of the Central Excise Rules, .1944, because the demand was not warranted by law.
The business that the petitioner carries on is that he takes mill‑manufactured and handloom‑made cloth and washes and presses the same in his factory. He neither sells nor buys the cloth and only charges calendering wages which amount approximately to Re. 1 per hundred yards of cloth. It was alleged in the petition that the petitioner's concern was not a part of any textile mill or factory for manufacture of cloth and was an independent concern. In the written statement put in by the respondent this allegation of the petitioner was neither denied nor admitted on the ground that the respondent had no knowledge about the correctness or otherwise of the petitioner's assertion, It was pleaded, however, that even if the assertion of the petitioner in that respect be accepted, the legal position would not alter.
An order calling upon the petitioner to take out a licence was passed under Rule 174 (1) (c) of the Central Excise Rules. 1944, as amended to date. The relevant part of the rule. which occurs in Chapter VIII, bearing the heading "Licensing", reads as follows :‑
' Operation requiring possession of a licence.‑Every manufacturer, trader, dealer, or person hereinafter men tioned, shall be required to take out a licence :‑
(a) Matches.‑* * * * * * * *
(b) Unmanufactured products.‑--* * * * * * *
(c) Other excisable goods except salt.‑All manufac turers, and shall not conduct his business in regard to such goods otherwise than by the authority and subject to the terms and conditions of a licence granted by a duly authorised officer in the proper Form."
The petitioner's case is that he is not a manufacturer of the cloth which he calenders and, therefore, cannot be called upon to take out the licence contemplated by Rule 174 while the case of the respondent is that the operation conducted by the petitioner with regard to the cloth which he calenders brings him within the ambit of the Central Excise and Salt Act, 1944, and the rules made thereunder
The provision of the Statute on which the decision of the case mainly rests is contained in section 6 of the Central Excises and Salt Act, 1944, which reads as follows :‑
" The Central Government may, by notification in the Official Gazette, provide that, from such date as may be specified in the notification, no person shall, except under the authority and in accordance with the terms and conditions of a licence granted under this Act, engage in‑
(a) the production or manufacture or any process of the production or manufacture of any specified excisable goods or of saltpetre or 'of any specified component parts or ingredients of such goods or of specified containers of such goods, or
(b) the wholesale purchase or sale (whether on his own account or as a broker or commission agent) or the storage of any excisable goods specified in this behalf in Part A of the Second Schedule."
The case for the respondent is that clause (a) of section 6, which has been reproduced above, read with clause (c) of subrule (1) of Rule 174 of the Central Excise Rules, 1944. is applicable to the petitioner's case. It is obvious that if what the petitioner does with regard to the cloth does not fall within clause (a) of section 6 of the Central Excise and Salt Act, 1944, the demand of the respondent that the peti tioner should take out a licence before conducting his business of calendering of cloth would be entirely unjustified and illegal. There is no definition in the Central Excise and Salt Act of the word "produce" and its derivatives. and the dictionary meaning of the word, which has, in the absence of any definition in the Statute, to be applied for interpretation of that word, cannot help the respondent, because the petitioner does not produce cloth but only calenders it and cannot be considered to be a producer of the cloth which he calenders. It was, however, contended on behalf of the respondent that the petitioner is a manufacturer of cloth and, therefore, governed by section 6 of the Central Excise and Salt Act and Rule 174 made under that Act. In support of his contention that the petitioner was a manufacturer of cloth, the learned counsel for the respondent relied on the definition of the word "manufacture" contained in clause (f) of section 2 of the Central Excise and Salt Act, 1944, wherein the term is stated to include inter alia any process incidental or ancillary to the completion of a manufactured product.
The definition relied upon by the learned counsel for the respondent is, no doubt, very comprehensive but the question for decision is whether it can make the activities of the petitioner fall within section 6 of the Central Excise and Salt Act, 1944. Before the taking out of a licence can be insisted upon, it should be established that the process of calendering amounts to manufacture of cloth because section 6 (a) makes it clear that it is only if any excisable goods are produced or manufactured that the section has application. Clause (d) of section 2 of the Central Excise and Salt Act, 1944, defines " excisable goods" as goods specified in the First Schedule as being subject to a duty of excise and to include salt. I have carefully gone through the First Schedule of the Act and have arrived at the conclusion that the only entry which could be invoked by the respondent is entry 15 which was mentioned by the learned counsel for the respondent to be the relevant entry for the purposes of the present case. As amended by the Finance Act 1955‑56 (Act XXX of 1956), this entry reads as follows :‑
" Cloth produced in a factory ordinarily using power in the course of production of cloth‑
'Cotton cloth ' means cloth of any description manufac tured either wholly or partly from cotton and containing not less than 10 per cent. of cotton by weight‑
(i) 'Coarse cotton cloth' that is to say, all cloth in which the average count of yarn does not exceed 17s ;
(ii) 'Cotton cloth' not otherwise specified.
Explanation I.‑'Count' means count of grey yarn.
Explanation II,‑For the purpose of determining the average count of yarn, the following rules shall apply, namely :‑
(a) Yarn used in the borders or selvedges shall be ignored.
(b) For multiple fold yarn, the count of the basic single yarn shall be taken and the number of ends per inch in the reed or the number of picks per inch, as the case may be, shall be multiplied by the number of plies in the yarn.
(c) The average count shall be obtained by applying the following formula, namely :‑
(Count of warp X number of ends per inch in the reed) plus (count of weft X number of picks per inch).
(Number of ends per inch in the reed) plus Number of picks per inch)
the result being rounded off, wherever necessary, by treating any fraction which is one‑half or more as one, and disregarding any fraction which is less than one‑half."
At first I. could not see the necessity of including the defini tion of "cotton cloth" and "coarse cotton cloth" in the entry reproduced above but after considering the matter I have arrived at the conclusion that these definitions were given so that the definitions of these articles should not be attempted by rules which the Central Government can make under section 37 of the Central Excise and Salt Act, 1944. Now, when the cloth is given to the petitioner for calendering, it is either cloth or cotton cloth as envisaged by entry 15 of the Central Excise and Salt Act, 1944 and there is no doubt that it remains the same article even after the petitioner has, calendered it because, though the cloth may get a finer look' and may fetch more price, its relevant contents remain pre cisely the same. If the contents of the cloth do not change by the process of calendering to which the petitioner subjects it, I fail to see how that process can be deemed to be a pro cess in the manufacture or production of the cloth. If the First Schedule of the Central Excise and Salt Act had made calendered cloth, as distinguished from cloth dealt with in entry 15 of the Schedule an excisable article, it is obvious that the process of calendering would have altered the goods for the purposes of the Schedule but as the only entry which can be invoked by the respondent is entry 15 of the Schedule, which concerns itself only with cloth, I cannot see how the respondent can claim, as was claimed by his learned counsel, that because the price of the cloth after calendering would be more than it was before it was calendered the process of calen dering was manufacture of cloth within the meaning of the definition of that term contained in section 2 (f) of the Act. It is well settled that taxing Statutes‑and it is hardly open to question that the Central Excise and Salt Act, 1944, is a taxing Statute should be very strictly construed so that the Government does not get money for a thing which the Legislature did not intend to be liable to tax. But even if that strict interpretation is not applied to the case of the petitioner, the business of calendering cannot be brought within section 6 of the Central Excise and Salt Act, 1944, orb Rule 174 (1) (c) of the Central Excise Rules, 1944
In view of what I have said above, I would accept the petition and direct the respondent not to call upon the petitioner to take out a licence for his business of calendering cloth. The petitioner shall have his costs from the respondent.,
A. H, Petition accepted.
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