http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 39  

PETITIONER: UJAGAR PRINTS ETC.

       Vs.

RESPONDENT: UNION OF INDIA & ORS. ETC.

DATE OF JUDGMENT04/11/1988

BENCH: VENKATACHALLIAH, M.N. (J) BENCH: VENKATACHALLIAH, M.N. (J) RANGNATHAN, S. PATHAK, R.S. (CJ) MUKHARJI, SABYASACHI (J) NATRAJAN, S. (J)

CITATION:  1989 AIR  516            1988 SCR  Supl. (3) 770  1989 SCC  (3) 488        JT 1988 (4)   330  1988 SCALE  (2)1115  CITATOR INFO :  RF         1991 SC 999  (8)  F          1991 SC1784  (7,9)

ACT:     Central Excises and Salt Act, 1944-Sections 2(f), 4  and Schedule   Items  19  and  22--‘Manufacture’  meaning   of-- Processors  carry  out 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 exemption--The exception--Excise duty of goods--Levied  upon manufacturer--lmposed 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 11 and 111--"With respect  to"--Inter-pretation of--‘ManuJacture’--Concept  of Entries  in  legislative lists--Not sources  of  legislative power--Merely  topics or fields of  legislation--Legislation could  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   of--Effect   of--Legislation  could   be   composite legislation--‘Rag-hag’    legislation--What    is--Competent legislature can always validate a law.     Words  and  phrases---‘Manufacture’--’In  respect   of-- Meaning of.

HEADNOTE:     Section   2(f)  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)  Ordinance  1979, which was  later  replaced  by Central Act VI of 1980, called the Central Excises and  Salt

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 39  

and  Additional Duties of Excise (Amendment) Act, 1980.  The                                                   PG NO 770                                                   PG NO 771 Amending  Act became effective from 24th February, 1979.  By section  2 of the Amending Act, Section 2 (f) 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.     Prior  to  the  Amending  Act, 1980,  the  levy  an  the processors, was challenged before the Gujarat High Court  in the case of vijay Textiles Mills v.  Union of India nd  Real Honest Textile v. Union of India, [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 Schedule  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 that processor. Following this  judgment  a large  number of similar claims of  ,processing-houses  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(f) even prior to its amendment, the  operations carried  on by the professors amounted to ‘manufacture’  and that,  at  all  events, the matter  was  placed  beyond  any controversy by the Amendment Act of 1980.     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. 1 SCR 292 and  it was held not to have been decided correctly. The view  taken by the Bombay High Court in New  Shakti Dye Works Pvt.  Ltd. v. Union of India & Anr. [1983] 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,  involve  common                                                   PG NO 772 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, rubberising, 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 indenticl.     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 owners of the  grey-fabric.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 39  

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 trader 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. In some cases, the manufacturers of the grey-fabric subject  it to  captive  consumption  and  process  them  in  their  own composite establishments.     At  the  time 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   processing of grey-fabric amounted to ‘manufacture’ within the  meaning of Section 2(f) 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.     In the petitions and appeals, the following points arise for determination.                                                   PG NO 773     A(i) Whether the process of bleaching, dyeing, printing, sizing, shrink-proofing etc. carried on in respect of cotton or  man-made  ‘grey-fabric’  amount  to  ‘manufacture’   for purposes,  and  within the meaning of Sect;on  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 JUDGMENT: that  these  operations amount to ‘manufacture’  is  wrongly decided and requires reconsideration.     (B)  Whether the amendment brought about by the  Act  of 1980  of Section 2(f) and to tariff-items 19 and 22  of  the Central  Excise  Act  is ultra-vires Entry 84  List  1  and, therefore, beyond the competence of the Union Parliament.     Whether, at all events, even if the expended concept  of manufacture introduced by the Amendment is beyond the  scope of  Entry 84 List 1, whether the impost is, at  all  events, referable  to  and supportable by the residual Entry  97  of List 1.     (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 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.     (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 173(b)  is  unjustified  and  illegal  in  respect  of   the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 39  

assessable  value of the processed grey-fabric done on  job- work-basis.     Allowing the appeals preferred by the Union of India,     HELD: (Per Majority)     The appeals preferred by the Union of India are  allowed and  the Judgment of the Gujarat High Court under appeal  is                                                   PG NO 774 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 recovery of the arrears. [810C-D]     Per    Sabyasachi   Mukharji,   J.   (Concurring    with Venkatachaliah. J.)     (1) A statutory charge should be measured by the  method of  its  computation as laid down in the statute and not  by any  other   method of computation. The  circumstances  that thereby  the  benefit  of any  computation  granted  by  the legislation  may  be lost and that in  some  cases  hardship might result are not matters which would influence courts on the Instruction of the statute. A tax payer is entitled only to such benefit as is granted by the legislature [811C-D]     (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 he wholesale dealer who purchases the goods from the manufacturer and in his turn sells the same in wholesale to  other dealers 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  on additional  factors  do not enter into  the  computation  of assessable  value  and as such the wholesale cash  price  at which  the  goods enter into the wholesale market  would  be independent of the value of the trade-marks.  [812G-H:8134A- 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  is  to say, the  value  at  which  the manufactured  goods  leave the factory and  enter  the  main stream. [813E]                                                   PG NO 775     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 goods. It is,  there- fore,  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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 39  

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; Union of India &  Ors.  etc. etc. v. Bombay Tyre  International  Ltd.  etc. etc.,  [1984] 1 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.,  11985] Suppl. 3 S.C.R. 165, followed.     Per Venkatachaliah, J. (for himself and on behalf of  R. S. Pathak, and S. Natarajan, J.)     1(i)  The  prevalent  and  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]     1(ii) The view taken in the Empire Industries case  that ‘grey-fabrics’  after they undergo the various processes  of bleaching,  dyeing sizing, printing, finishing etc.  emerges as  a commercially different commodity with its  own  price- structure,  custom and other commercial incidents  and  that there  was in that sense a ‘manufacture’ within the  meaning of  Section  2(f),  even  as  unamended,  is  an   eminently plausible view and is not shown to suffer from any  fallacy. [798A-B]     Union  of India v. Delhi Cloth & General  Mills,  [1963] Supp.  1 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 Food  Packers,  [1980]  3 S.C.R.  1271 at 1275; Sterling Foods v. State of  Karnataka,                                                   PG NO 776 [1986]  3 S.C.C 469 at 475 & 476; Kailash Nath v.  State  of U.P.,  8  S.T.C.  358;  Deputy  Commissioner  sales  Tax  v. Sadasivan, 42 S.T.C. 2 (Kerala); Swastic Products Baroda  v. Superintendent   of  Central  Excise,  [1980]   E.L.T.   164 (Gujarat);  Swan  Bangle  Stores  v.  Assistant  Sales   Tax Officer, 25 S.T.C. 122 (Allahabad); State of Andhra  Pradesh v.  Sri  Durga  Hardware  Stores,  32  S.T.C.  322   (Andhra Pradesh);  Extrusion  Process  Pvt.  Ltd.  v.  N.R.  Jadnav, Superintendent   of  Central  Excise,  [1979]   E.L.T.   380 (Gujarat);  In Health & Milligan Manufacturing Company,  The Sherwin-Williams Company, etc. v. J.H. Worst Director of the North  Dakota  Government Agricultural  Experiment  Station; Kailash Nath v. State of U.P., 8 S.T.C. 358; 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.     2(i)  Entries in the legislative lists. are not  sources of the legislative power but are merely topics or fields  of legislation and must receive a liberal construction 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 question of 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 legislation on  the  topic.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 39  

[799B-D]     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 sustenance could be drawn and  had from  a  number  of  entries. The  legislation  could  be  a composite  legislation drawing upon several entries. Such  a "rag-bag" legislation is particularly familiar in  taxation. [800F-G]     Diamond  Sugar Mills v. State of IJ.P., [1961] 3  S.C.R. 242  at 248; Statutory Interpretation, at page 644 and  Hari Krishna  Bhargav v. Union of India & Anr., [1966]  2  S.C.R. 22, referred to.                                                   PG NO 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 the particular topic of  legislation is in List 11 or List 111. If it is not, it is not necessary to  go any further or search for the field in List 1.  Union Parliament has exclusive power to legislate upon that  topic or field. Of course, it has concurrent power also in respect of the subjects in List 111. [801E-F]     2(iv)  Even  if the impost on process is not  one  under Entry 84, List 1, but Is an impost of ‘processing’  distinct from ‘manufacture’ the levy could yet be supported by  Entry 97,  List  1, even without the aid of  the  wider  principle recognised  and adopted in Dhillon’s case AIR 1972 SC  1061. [799F]     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  along  with the entries in the Schedules. What appears, therefore, clear is  that  what  applies to the main  levy,  applies  to  the additional duties as well. [803F]     Pandit  Ram  Narain v. The State of  Uttar  Pradesh  and Ors.,[1956]  S.C.R. 664 at 673; Macbath & Com. v.  Chisletr, [1910]  AC  220 at 224; Commissioner of  Sales  Tax,  Madhya Pradesh  v. Jaswant Singh Charan Singh, [19671 2 S.C.R.  720 at  725-26; Assistant Collector of Central Excise,  Calcutta Division  v.  National Tobacco Co. of India Ltd.,  [1973]  1 S.C.R.  822 at 835; Att.-Gen. v. Lamplough [1878] 3  Ex.  D. 214,  299;  Interpretation of States, 11th ed.  p.  156  and Bennion’s  Statutory Interpreation, p. 568-569, referred to.     4(i) A Competent legislature can always  validate a  law which has been declared by court to be invalid provided  the infirmities   and   vitiating   factors   noticed   in   the declaratory-judgment   are   removed  for  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 quit  often  applied,  in taxing statutes. It is necessary that the legislature should be  able  to cure defects in statutes.  No   individual  can                                                   PG NO 778 acquire a vested right from a defect in a statute and seek a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 39  

wind-fall from the legislature’s mistakes. [804G-H; 805A-C]     Sri  Prithvi Cotton Mills Ltd. & Anr. v. Broach  Borough Municipality & Ors., [1970] 1 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  19(1)(g), the  factors  considered  relevant include the context in which retroactivity was  contemplated such  as  whether  the law is one of  validation  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  past  period  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 9(1)(g). [805E-G]     5(i)  Section  4 of the ‘Central Excise  Act’  envisages that the value of an article for the purposes of duty  shall be  deemed to be; (a) the wholesale cash price for 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 from the factory  or  premises  of manufacture for  delivery  at  the place  of  manufactures  or (b) where  such  price  was  not ,ascertainable  the  price at which an article of  the  like kind  and  quality as sold or capable of being sold  al  the time of removal of the article chargeable with duty [808F-G]     5(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]                                                   PG NO 779     5(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]     5(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 assessment 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 determining the measure of  the levy".  Any statutory standard which maintains a nexus  with the  essential  character of the levy can be regarded  as  a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 39  

valid  basis for assessing the measure of the tax.  [808G-H; 809A-B]     Atic  Industries Ltd. v. H.H. Dave, Assn.  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] 1 S.C.R. p. 347 at 375, referred to.     Per Ranganathan, J. (Concurring with Venkatatchlliah, J.     1(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 ot  the amendment actually effected. It was  considered  not necessary  or  possible  to  stretch  the  language  of  the definition  in  S. 4 beyond the ambit of  the  provision  as delineated  in the earlier decisions. The  question  decided was not that the legislature could not, but that it did  not make any redical change in the nature of the levy. [815F-G]     1(ii)  There  is nothing in the decision HMM  case  that supports  the  contention of the petitioners here  that  the amendment  of  the  definition of  ‘manufacture’  cannot  be sustained by reference to entry 97 of List 1 in the  Seventh Schedule  to  the  Constitution of India, if  it  cannot  be upheld  as  falling under the purview of  Entry  84.  [816H; 817A]                                                   PG NO 780     2(i)    The  words  ‘levied’  is  a  wide  and   generic expression.  One can 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  a  restricted meaning. In the context of sub-section (I) 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  (1). Section 3(3), therefore. also  covers  the entire gomut of s. 3(1) and cannot be construed as  becoming operative at some what later stage. Its operation cannot  be excluded in determining the scope of the charge. [818F-H]     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 consider section 3(1) of the 1957 Act--in contrast to the Finance  Act  of 1965--as covering the entire ambit  of  the charge imposed. 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 the 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 provisions are  all  self-contained  and completely  specify  the  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 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 1957 Act. [821E-H]    M/s  Mahendra  Pratap  Rama  Chandra  v.  Commercial  Tax officer & Others. A.I.R. 1965 Cal. 203, referred to.     3(i) Legislatures sometimes take a short cut and try  to reduce   the  length  of  statutes  by  omitting   elaborate provisions  where such provisions have already been  enacted earlier  and can be adopted for the purpose on hand.  While,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 39  

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 the expense of lucidity. However this legislative  device is quite well known and  the  principles applicable to it fairly well settled. [823C-D]                                                   PG NO 781     3(ii)  Referential legislation 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 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 generally 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 the earlier 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]     3(iii) Whether a particular statute falls into the first or  second  category is always a question  of  construction. [824B]     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 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; Mahindra and Mahindra Ltd.  v.  Union, A.I.R. 1979 S.C. 798; Bhajiva v. Gopikabai, [1978] 3  S.C.R. 561;  Collector  of  Customs v.  Nathella  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.( referred to.     3(iv)  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.                                                   PG NO 782 The  duration  of the applicability is  underfined  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 same provisions  shall  govern both the levies except that the duty under the later Act  is confined  to  certain goods only  und  its  distributability among the States may perhaps follow a different pattern from the principal duty. [825B-C]     3(v) The Finance Acts which levied special or regular or additional  excise  duties contained in themselves  all  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 39  

elements  of charge or duty. T he 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 the 1944 Act. All that was further  needed was  the applicability of the procedural provisions  of  the 1944  Act.  However, the 1957 Act is 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. [825D-F]

&     ORIGINAL  JURISDICTION: Writ Petition No. 12183 of  1985 etc. etc     (Under Article 32 of the Constitution of India)     K.  Parasaran.  Attorney General, Soli i  Sorabjee  A.J. Rana A.K Sen, S.K. Dholakia, Hari Swarup V.C.Mahajan, A.  K. Ganguli,  Mrs.  Shashi Rana, Mrs. J Wad, Ms.  Aruna  Mathur, Subhash  Parekh,  Dushyant Dave, P.H Parekh E. K. Jose  Ms. 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.  Anil Katiyar R.K.Kapur, B.R. Kapur. Anis  Ahmed  Khan. Ms.  Abha  Jain,  R.  Karanjawala,  Mrs.  Karanjawala,   Ms. Meenakshi.  Vishnu      Mathur, Kailash  Vasudev  P.D.Shah, Shri  Narain, Sandeep Narain, M.N. Shroff. Mrs P S.  Shroff, R.  Sasprahbu,  S.A.Shroff, S.S Shroff, Praveen  Kumar,  M.N Chowdhary M.D. Chowdhary, N. Das Gupta, Rajesh Chibber,  K.K Bhaduri,  Rajiv Dutta. E.C. Agarwala, Harjinder Singh,  R.K. Nambiar  P  Paremeswaran, Ms. Bina Gupta, K.Swami  and  V.N. Ganpule for the appearing parties.     The following Judgments of the Court were delivered                                                 PG NO. 783     VENKATACHALIAH  J.  These  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  are  heard together and disposed of by this common judgment as they all involve  questions--common to them--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 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  Cotton- fabric’ and ’Man-made fabric belonging to their customers     The Amending Act which became effective from  24.12.1979 sought  to  render  the  processes  of  Bleaching,   Dyeing, Printing  Sizing,  Mercerising etc "Manufacture  within  the meaning  of the Section 2(f) of the Central Excise  Act  The amendment was necessitated by the Judgment of the High Court of  Gujarat which has 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.     The processors who carry-out these operations on  cotton

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 39  

fabrics  or "man-made fabrics which are popularly go by  the name  ’Grey-fabric 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 Act) 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  main  impost. the levy of additional duties  also  fails and,  that  at  all cvents, even  after  the  amendment  the concept  of manufacture under the said Additionl Duties  Act had  not  been  correspondingly widened  by  an  appropriate amendment.     2.  The  present  hatch of  appeals  and  writ-petitions comprise 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 in  these                                                   PG NO 784 cases,   who  may  conveniently  be  referred  to   as   the processors" 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   from these processing-houses on payment  of processing  charges. The Grey-fabric, after  processing,  is returned by the processing-house to the customers.     The facts of W P. No. 12 183 of 1985 ’M/s. Ujagar Prints v.  Union  of India and Ors.), in which the  petitioner  has challenged  the levy by a petition under Article 32  of  the Constitution  are  typical and representative of  all  other similar cases The petitioner is a firm of partners with  its Head  Office  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   not   capable   of manufacturing  Grey-fabric The man-made grey-fabric such  as Art  Silk  Grey--fabric, it is stated,  is  manufactured  in mills  and  on power looms and that letter- is  exempt  from excise duty on its manufacture Petitioners further over that the  Art  Silk  (Grey-fabrics which  are  processed  in  the petitioner’  factory 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 sales stream.  The  point  that the  petitioners seek to made is that the processing of  the grey-fabric is not a part, a 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. It is also averred that the firm M/s. 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.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 39  

   It   is  contended  that  these  job   work   processing operations do not amount to "manufacture" as the petitioners do  not carry out any spinning or weaving  operations;  that what  they  receive from their customers for  processing  is                                                   PG NO 785 therwise fully manufactured man-made fabric 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,  for,   in conceivable  cases  the  duty itself might  far  exceed  the processing-charges that the processors stipulate and get.     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  In  some  cases  the manufacturers  of  the  grey-fabric subject  it  to  captive consumption    and    process   them    in    their    own compositeestablishments .     The  essential  question is whether  these  situational- differences   have   a   bearing  on   the   principles   of determination  of  the assessable-value  of  processed  grey- fabric  and whether the assessable value could be  different in the different fact-situations which would be the  logical corollary  if the contention of the processing-houses  which do  not processing work for charges on the goods  not  their own, is accepted and the assessable value determined on  the basis of mere processing-charges.     But   the   main  questions  that  arise   are   whether "processing" of the kind concerned in these cases amounts 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  l; whether  at  all  events, the imposition of a  tax  on  such 1processing  is  referable to Entry 97 List l;  and  if  the import on the processors is justified under tariff-items  19 and  22, according as whether the Grey-fabric is  cotton  or ’man-made, what should 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. Union of India held that  the  processes that  the processing-houses imparted to the Grey-fabric  did not  amount to ’manufacture’ and did not attract  ad-valorem duty under tariff-items 19 and 22, and that processors  were liable  to pay duty under tariff-entry 68 only on the  value added by the processing.                                                  PG NO. 786     Following this judgment a large number of similar claims of  processing-houses were allowed by the High Court by  its judgment dated 13.3.1979. Civil Appeals 1685 to 1766 of 1979 are preferred by the Union of India challenging this view of the High Court. 5.   The   Bombay  High  Court  on  the  contrary   by   its judgment,dated 16th June, 1983 in writ petition 1623 of 1979 New  Shakti Dye Works Pvt. Ltd. v. Union of India  and  Anr. took a view different from the one that commended itself  to the  Gujarat  High Court. Bombay High Court held  that  even under the concept of "manufacture’ envisaged in Section 2(f) 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 39  

mending Act i.e. Act of 1980. The aggrieved processors  have come  up in appeal by Special Leave in Civil Appeal No  6396 of 1983.     6. Some of the processors have, as stated earlier, filed writ-petitions  under  Article  32 directly  in  this  court challenging the impost on grounds that commended  themselves for acceptance to the Gujarat High Court.     7. Before its amendment by the Amending Act Central  Act VI of 1980) Section 2(f) of the Central Excise ACt,  defined ’manufacture’  in  its  well  accepted  legal-sense--nomen-- juris--and   not  with  reference  to  an   artificial   and statutorily expanded import     "2(f) ’manufacture ’ includes any process, incidental or ancillary to the completion of a manufactured product; and     (i) ]     (ii) ] Omitted as unnecessary"     The  reasoning  of the Gujarat High Court was  on  these lines     "In  the  instant case, the excise duty claimed  on  the basis of the market value of the processed cotton fabrics or manmade  fabrics  cannot be levied  because,  assuming  that process  amounts to manufacture, all that they have done  is to  manufacture  processed cloth, processed  fabric,  either cotton or man-made and that not being a taxable event in the light  of  Section 3 read with section 2(d) of the  Act  and                                                   PG NO 787 Items 19 and 22 levy of excise duty on this basis was  ultra vires and contrary to law ..    "     This  view, according to the Revenue, was incorrect  and caused   serious  prejudice  to  the  legitimate   financial interests  of the State. Accordingly the President of  India promulgated an Ordinance called the ’Central Excise and Salt and Additional Duties of Excise (Amendment) Ordinance’, 1979 (Central  Ordinance No. 12 of 1979)--sub-sequently  replaced by   Central  Act  VI  of  1980  of  the  same   name   with retrospective  effect from 24.2.1979--amending Section  2(f) of the Central Excise Act and tariff-items 19(1) and  22(1). The  relevant  entries in the Schedule  to  the  ’Additional Duties  Act’  were  also amended. So  far  as  amendment  to Section  2(f)  was concerned, Section of  the  Amending  Act introduced   three   sub-items   in   the   definition    of ’manufacture’.  Two  of them are material  for  the  present purpose:     "(v) in relation to goods comprised in Item No. 19(1) of the First schedule, includes bleaching, mercerising, dyeing, printing,   water-proofing,  rubberising.   shrink-prcofing, organdie processing 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, shrink-proofing,  tentering, heat-setting,  crease resistant processing or any other process or any one or more of  these processes."     Similarly, amendments were affected by Section 3 of  the Amendment Act which amended the original tariff-items 19 and 22  by  sub-stituting  the  following  provisions  in  their respective places:     "  1  Cotton fabrics other than (i)  embroidery  in  the piece.  strips or in motifs, and (ii)  fabrics  impregnated, coated   or   laminated  with  preparations   of   cellulose derivatives or of other artificial plastic materials     (a) cotton fabrics. not subjected to any process  Twenty per cent ad-valorem     (b)   cotton  fabrics,  subjected  to  the  process   of bleaching,  mercerising, dyeing,  printing,  water-proofing,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 39  

rubberising,  shrink-proofing,  organdie processing  or  any other process or any two or more of these processes.  Twenty per cent ad-valorem                                                   PG NO 788             XXX             XXX            XXX"     "22(1) Man-made fabrics other than (i) embroidery in the piece,  in  strips or in motifs, (ii)  fabrics  impregnated, coated   or   laminated  with  preparations   of   cellulose derivatives or of other artificial plastic materials--     (a)  man-made  fabrics, not subjected  to  any  process: Twenty  per  cent  ad-valorem plus rupees  five  per  square metre.     (b)  man-made  fabrics,  subjected  to  the  process  of bleaching,  dyeing,  printing,  shrink-proofing,  tentering, heat-setting,  crease  resistant  processing  or  any  other process  or  any two or more of these processes  Twenty  per cent ad-valorem plus rupees five per square metre."     Section  4  of  the Amending Act  amended  the  relevant entries  in  the  Schedule to  the  Additional  Duties  Act. Section-5(2) of the Amending Act provided:     "5  Special provisions as to duties of excise on  cotton fabrics,  woollen  fabrics, man-made fabrics, etc  during  a certain past period and validation:-     (1)....................     (2) Any rule or notification or any action or thing made issued,  taken  or  done or purporting to  have  been  made. issued,  taken  or done under a Central Act referred  to  in sub-section (I) before the date of commencement of this Act, with  respect  to or in relation 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  case may  be,  "man-made  fabrics", shall for  all  purposes  be                                                   PG NO 789 deemed  to  be  and  to have always  been,  as  validly  and effectively made, issued taken or done as if the  provisions of this section had been in force at all material times and, accordingly,  notwithstanding any judgment, decree or  order of any court, tribunal or other authority--     (a)  all duties of excise levied, assessed or  collected or  purported  to  have been levied  assessed  or  collected before the date of commencement of this Act, on--     (i)   "cloth",  "cotton  cloth"  and  "cotton   fabrics" subjected to any process,     (ii) "woollen fabrics" subjected to any process,     (iii)  "rayon or artificial silk fabrics" and  "man-made fabrics" subjected to any process,     under  any such 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 this  section had been in force on and from the appointed day;     (b)  no suit or other proceeding shall be maintained  or continued in any court for the refund of, and no enforcement shall be made by any court of any decree or order  directing the  refund  of, any such duties of excise which  have  been collected and which would have been validly collected if the provisions of this section had been in force on and from the appointed day;     (c) ....................     (d) ...................."     8.  Indeed,  the  correctness of  the  judgment  of  the Gujarat High Court in the cases of Vijaya Textiles and  Real Honest  Textiles  were considered by a Bench  consisting  of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 39  

three judges of this court in Empire Industries v. Union  of India, [1985]SUPP. I SCR 292 by the judgment dated 6.5.1985, one  of us (Sabyasachi Mukharji J ) speaking for  the  Court upheld  the validity of the impost Vijaya Textiles Mills  v. Union of India, (1979] 4 ELTJ 181, was held not to have been                                                   PG NO 790 decided  correctly. The view taken by the Bombay High  Court in  New Shakti Dye Works Pvt. v. Union of India &  Anr.  was approved.     The  pronouncement  of this court in  Empire  Industries case  otherwise  covers,  and  is  a  full  answer  to,  the contentions  raised  in this batch of  cases.  However,  the correctness of the view taken in the Empire Industries’ case on  certain  aspects was doubted by another  Bench  of  this court  and the matter was, accordingly, referred to a  Bench of five judges.     9. It is, perhaps, necessary to refer to the order dated 9.12.1986 made by the Division Bench referring the cases  to a larger bench. What came before the Division Bench were  WP 12183/1985 (M/s. Ujagar Prints v. Union of India & Ors.) and CA  Nos. 1685-1766/1979 (Union of India & Ors.  v.  Narendra Processing  Industries & Ors.). Two questions  arose  before and  were  examined by the Referring Bench.  The  first  was whether   the   processing  of   Grey-fabric   amounted   to ’manufacture’ within the meaning of Section 2(f) as it stood prior  to  its amendment. The second question  was  whether, even  if  such processing did amount to  ’manufacture’  what should  he the proper basis for determining the  assessable- value  of  the processed fabrics. Both these  questions  had earlier been examined and answered in the Empire  Industries case. It is necessary to ascertain as to the precise  points on which the Empire Industries’ decision was required to  be reconsidered. The Referring Bench did not disagree with  the decision in Empire Industries’ case on the question  whether processing’  did  amount  to  ’manufacture’.  Indeed,   the Referring  Bench  appears to have proceeded on  the  premise that  the view taken in Empire Industries case on the  point was the correct one. Referring Bench said this on the point:     "....  So far as the first question is concerned it  was agitated  before  this  Court in Empire  Industries  Ltd.  v Union  of  India and this Court held that the  processes  of bleaching,  mercerising, dyeing,  printing.  water-proofing. etc. carried out by the processors on job-work basis  amount to  manufacture both under the Act as it stood prior to  the amendment as also under the Act subsequent to the  amendment and  the  processed  fabrics are liable to  be  assessed  to excise  duty  in the hands of what may be  called  jobbers’. Since this was a decision given by a Bench of three  Judges, the petitioners and appellants who are carrying on  business of processing on job-work basis could not contend that these                                                   PG NO 791 processes  do  not  amount  to  manufacture  and  that   the processed  fabrics are not liable to be assessed  to  excise duty  in  the hands of the jobbers. But, it was  the  second question which provoked serious controversy before us . .     It  is  only on the second question  touching  valuation that  it expressed some doubts. Nevertheless, in par.  6  of the order, the Referring Bench made a further observation to this effect:     ".... Of course, when. ,n se writ petitions and  appeals are  referred  to the larger Bench it will be  open  to  the larger   Bench  to  consider  not  only  the   question   of determination  of  the assessable value but also  the  other question,  namely,  whether processing of grey fabric  by  a processor on job work basis constitutes manufacture, because

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 16 of 39  

the  judgment  in Empire Industries case which  has  decided this  question  in  favor of the  revenue  and  against  the processor is a judgment of a Bench of only three Judges  and now the present writ petitions and appeals will be heard  by a Bench of five Judges ."     10.  This is how the first question which is,  otherwise concluded by the pronouncement in Empire Industries case  is sought  to be reagitated before us Out of deference  to  the learned  counsel who vigorously argued this aspect at  great length  and  we though we should examine the  submission  on this  point  also, though, the matter could by no  means  be considered to have been referred to a larger bench.     On the second question also the matter is within a short compass.   The   Referring  Bench   clearly   excluded   any possibility  of  the assessable-value being limited  to  the mere  processing-charges.  It contemplated  the  alternative possibilities of valuation thus:     "It  was  common  ground between the  parties  that  the procedure  followed by the Excise authorities was  that  the trader,  who  entrusted cotton or man made  fabrics  to  the processor  for  processing on job-work basis  would  give  a declaration  to the processor as to what would be the  price at  which  he would be selling the processed  goods  in  the market and that would be taken by the Excise authorities  as the  assessable  value of the processed fabrics  and  excise duty would be charged to the processor on that basis. This may be illustrated by giving the following example:                                                   PG NO 792     (i)  Value of grey cloth in the hands of the  processor: Rs. 20.00     (2)  Value of job-work done: Rs.5.00 Value  of  finished cloth returned to the trader ( 1+2): Rs.25.00     (3)  Trader’s  selling price inclusive  of  his  selling profits, etc.: Rs.30.00     The  assessable value in the case given in this  example would be taken by the Excise authorities at Rs.30 which  was the sale price of the trader . . .’’     The view of the Referring Bench on the point was this:     "We cannot accept the contention of the learned  counsel on  behalf  of the petitioners and the appellants  that  the value of the grey cloth which is processed by the  processor should  not  be  included in the  assessable  value  of  the processed  fabric  since the grey cloth is one  of  the  raw materials  which goes into the manufacture of the  processed fabric  and  the  value of the processed  fabric  cannot  be computed  without  including the value of the  raw  material That goes into its manufacture. The assessable value of  the processes  fabric cannot therefore be limited merely to  the value  of  the job-work done but it must  be  determined  by reference  to  the  wholesale cash price  of  the  processed fabric gate of the factory of the processor . . .     The  Referring  Bench was of the view that  the  correct assessable-value should be:     ".....        Thus  in  the  example  given  above   the assessable value of the processed fabric must be taken to be Rs.  20 + 5 that is Rs. 25 and the profit of Rs.5 which  the trader  may make by selling the processed fabric  cannot  be included  in  the assessable value. The element  of  selling profit of the trader would be entirely an extraneous element and  it  cannot  be taken into account for  the  purpose  of determining  the  assessable value of the  processee  fabric which  would  comprise the value of the grey cloth  and  the                                                   PG NO 793 job-work charges but exclude the profit at which the  trader may sub-sequently sell the processed fabric."

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 17 of 39  

   11. We have heard Sri A.K Sen, Sri Soli J. Sorabjee, Dr. Chitale  and Sri Dholakia, learned Senior Advocates  in  the appeals and writ-petitions preferred by the processors;  and Sri  K.  Parasaran, learned Attorney-General  and  Sri  A.K. Ganguli, learned Senior Advocate for the Union of India  and its  authorities. On the contentions urged, the points  that fall for determination are:     (a)  (i)  Whether the processes  of  Bleaching,  Dyeing, Printing, Sizing, Shrink-proofing etc. carried on in respect of cotton or man-made ’Grey-fabric’ 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, [1985] Suppl. 1  SCR  282 holding  that  these operations amount to a  manufacture  is wrongly decided and requires reconsideration.     (b) Whether the amendment brought about by the  Amending Act of 1980 of Section 2(f) and to tariff-items 19 and 22 of the  Central Excise Act is ultra-vires Entry 84 List I  and, therefore, beyond the competence of the Union Parliament.     Whether, at all events, even if the expanded concept  of manufacture introduced by the Amendment is beyond the  scope of  Entry 84 List l, 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 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.                                                   PG NO 794     (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 173(b)  is  unjustified  and  illegal  in  respect  of   the assessable-value  of the processed Grey-fabric done on  job- work-basis.     12. Re: Contention (a)     The  essential condition to be satisfied to justify  the levies,   contend   counsel,  is  that   there   should   be ’manufacture’  of  goods and in order that  the  concept  of ’manufacture’  in Entry 84 List I is satisfied there  should come  into  existence  a  new  article  with  a  distinctive character  and  use, as a result of the  processing.  It  is contended  that  nothing  of the  kind  happens  when  ’Grey fabric’  is  processed;  it remains ’grey  fabric’;  no  new article with any distinctive character emerges.     A  number of authorities of this Court and of  the  High Courts were cited. Particular reference was made to Union of India v. Delhi Cloth & General Mills, [1963] Supp. ( I)  SCR 586  at  597;  Tungabhadra  Industries  Ltd.  v.  Commercial Officer  Kurnool, L 1961] ? SCR 14;  Deputy Commissioner  of Sales  Tax v. Pio Food Packers, [1980] 3 SCR 1271 at  1275; Sterling  Foods v. State of Karnataka, [1986] 3 SCC  469  at 475 & 476; Kailash Nath v. State of U.P., 8 STC 358;  Deputy Commissioner  Sales Tax v. Sadasivan, 42 STC  201  (Kerala); Swastic Products Baroda v. Superintendent of Central Excise, [1986]  E.L.T 164 (Gujarat). Swan Bangle Stores v  Assistant

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 18 of 39  

Sales Tax Officer, 25 STC 122 ’(Allahabad); Stale  of Andhra Pradesh  v.  Sri Durga Hardware Stores, 32 STC  322  (Andhra Pradesh)  and  Extrusion Process Pvt. Ltd. v.  N.R.  Jadhav, Superintendent of Central Excise, [19791 ELT 380 (Gujarat ).     13. The following observations of this Court in Union of India  v. Delhi Cloth and General Mills, AIR 1963 SC p.  791 at 794 were emphasised:     "According  to  the  learned  counsel  "manufacture   is complete  as  soon  as by the application  of  one  or  more processes.  the raw material undergoes some change.  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  understood to mean  as  "bringing  into existence  a  new substance ’ and does not  mean  merely  to produce  some  change  in  a  substance.  however  minor  in consequence the change may be. ’                                                    PG NO 795     These  observations in Health &  Milligan  Manufacturing Company,  the Sherwin-Williams Company, etc. v. J.H.  Worst, Director   of  the  North  Dakofa  Government   Agricultural Experiment  Station which were referred to with approval  by this  Court  in  the case of Pio Food  Packers’  supra,  was relied upon:     "At some point processing and manufacturing will  merge. But  where  the commodity retains a  continuing  substantial identity through the processing stage we cannot say that  it has been "manufactured".                                        (Emphasis Supplied)     The  following observations of Bhagwati J. in  Pio  Food Packers case were cited:     " .....     manufacture is the end result of one or more processes  through which the original commodity is  made  to pass  ....      Where there is no essential  difference  in identity  between the original commodity and  the  processed article it is not possible to say that in one commodity  has been consumed in the manufacture of another. Although it has undergone  a  degree of processing, it MUSt be  regarded  as still retaining its original identity."                                           (Emphasis Supplied)     The  observations  of this (’court in  Kailash  Nath  v. State  of  U.  P.,  3  STC  358  made  while  repelling  the contention of the revenue urged in that case that when cloth is  printed and coloured it gets transformed to sorne  other material  and that therefore when such printed and  coloured cloth  is exported what was exported was not the same  cloth and that by such printing and dyeing the original cloth  got transformed into different material were relied on:     The  cloth exported is the same as the cloth  sold  with this  variation or difference that the colour has change  by printing  and  processing. In view which we take  the  cloth exported  is the same as the cloth sold by the  petitioners, there  can  be no question above the  exemption  clause  not applying to it . .                                           (Emphasis Supplied)     The following passage in the permanent Edition of ’Words and  Phrases’ referred to with approval in Delhi  Cloth  and General  Mills’ AIR 1963 SCp. 791 at 795 case  was  referred to:                                                   PG NO 796     "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  transformation;  a  new  and different  article  must emerge having a  distinctive  name, character or use."

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 19 of 39  

   Further,   learned   counsel   placed   reliance    upon Tungabhadra Industries’ case where it was held that  ground- nut  oil after the process of hydrogenation  which  improved its keeping-qualities and shelf life yet remained  basically ground-nut  oil  and that the quality of the  oil  had  been improved  by  the  processes it was subjected  to,  did  not detract from its continuing identity as ground-nut oil.  The change  brought  about in the oil, it was observed  by  this Court,  rendered  it  more acceptable to  the  customers  by improving  its  quality,  but  did  not  render  the  oil  a commodity other than ground-oil which still continued to  be "groundnut  oil"  notwithstanding the processing  which  was merely for the purpose of rendering the oil more stable thus improving  its  keeping qualities for those  who  desire  to consume  ground-nut  oil. Likewise the  processing  such  as bleaching,  dyeing. printing, finishing etc., it was  urged, merely  improved the quality of Grey-fabric and rendered  it more  acceptable  to the customers while  not  shedding  its basic character as ’cotton fabric’ or ’man-made fabric’.  It was  also urged that the affidavits filed by person  engaged in  and familiar with the textile-trade indicated  that  the finished fabric was not a commercially different commodity.     14.  We have carefully considered these submissions.  In the  Empire Industries case, this court  considered  similar submissions  in an almost identical context  and  situation. Learned  judges referred to the observations of this  Court in  Commissioner of Sales Tax UP (Lucknow) v. Harbilas  Rai, 21 STC 17 in which the view expressed by the Division  Bench of  the  Madhya  Pradesh High Court  in  Hiralal  Jitmal  v. Commissioner  of  Income-tax,  8 STC 325  at  326  was  held supportable on the reasoning that:     "  .  . . The decsion of the Madhya Pradesh  High  Court might  perhaps be justified on the ground that a printed  or dyed cloth is commercially different article from the  cloth which is purchased and printed or dyed."                                                   PG NO 797     The Division Bench also referred to, with approval,  the decision  of the Bombay High Court in Kores (India)  Limited v. Union of India and Ors., [1982] 10 ELT 253. The  Division Bench noticed the question arising for decision:     "Fabric  itself means woven materials. It was  contended that 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?"     Answering, the Bench said:     "It appears in the light of the several decisions and on the  construction  of  the expression that  the  process  of bleaching,  dyeing  and printing etymologically  also  means manufacturing processes ..      ’     15. It is strenuously urged for the processors that  the view  taken by the Division Bench in the  Empire  Industries case suffers from fallacies both of reasoning and conclusion and requires to be reconsidered.     The  prevalent and 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.  The principles  are  clear.  But  difficulties  arise  in  their application in individual cases. There might be  border-line case  where  either conclusion with equal  justification  be reached.  Insistence on any sharp or  intrinsic  distinction

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 20 of 39  

between processing’ and ’manufacture, we are afraid, results in  an over simplification of both and tends to  blur  their interdependence  in  cases  such as  the  present  one.  The correctness of the view in the Empire Industries case cannot be tested in the light of material--in the form of affidavit expressing  the opinion of persons said to be engaged in  or connected  with  the  textile-trade  as  to  the  commercial identity of the commodities before and after the processing- -placed  before  the  court in  a  sub-sequent  case.  These opinions  are, of course, relevant and would be amongst  the various  factors  to be taken into account in  deciding  the question.                                                   PG NO.798     16.  On a consideration of the matter, we are  persuaded to  think that the view taken in the Empire Industries  case that ’Grey fabric’ after they undergo the various  processes of  bleaching,  dyeing,  sizing  printing,  finishing   etc. emerges  as a commercially different commodity with its  own price-structure,  custom and other commercial incidents  and that  there  was in that sense a  ’manufacture’  within  the meaning of Section 2(f), even as unamended, is an  eminently plausible view and is not shown to suffer from any  fallacy. Indeed,  on this point the Referring bench did not  disagree or have any reservations either. It is to be noticed that if the amending law is valid, this aspect becomes academic.     We think, we should reject Contention (a).     17. Re: Contention (b)     The concept of manufacture’ embodied in Entry 84 of List I,  it  is urged, should be construed not in  an  artificial sense,  but in its recognised legal sense and  so  construed artificial  dimensions  sought to be imparted to it  by  the amendment  would  be  impermissible.  Learned  counsel  drew attention  to  the following observations of this  Court  in Diamond Sugar Mills v. State of UP, [1961] 3 SCR 242 at 248.     ".....       we have, on the one hand, to bear  in  mind the  salutary  rule  that  words  conferring  the  right  of legislation  should be interpreted liberally and the  powers conferred should be given the widest amplitude; on the other hand  we  have  to guard  ourselves  against  extending  the meaning of the words beyond their reasonable connotation, in an anxiety to preserve the power of the legislature.                                       (Emphasis supplied)     Though  entries  in  the legislative  lists  are  to  be construed liberally and the widest possible amplitude  given to  them, however, no artificial or arbitrary extensions  of the  meaning  of the words in the entry. it  is  urged,  are permissible.  It  is submitted the  concept  manufacture  in Entry  84 List I has a well accepted legal connotation   and in  construing  the entry the precise connotation  which  it possesses and conveys in law must be kept in mind. There  is in law no ’manufacture’ unless as a result of the process  a new  and  commercially distinct product  with  distinct  use emerges.  The  idea of manufacture might imply  change,  but every   change  is  not  necessarily  manufacture.  It   is. accordingly,  contended  that the amendment which  seeks  to equate  "processing "with "manufacture" is beyond the  scope of Entry 84 List I.                                                  PG NO. 799     18.  In the Empire Industries’ case a  similar  argument was urged but without success. Learned Judges were  persuaded to  the view that such processes which were referred  to  by the amendment were not so alien or foreign to the concept of ’manufacture’ that they could not come within that concept.     Entries  to the legislative lists, it must be  recalled, are  not  sources of the legislative power  but  are  merely

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 21 of 39  

topics  or fields of legislation and must receive a  liberal construction 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 question of  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 legislation on the topic.     In Empire Industries case, it was held:     "As has 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 that concept."     19. At all events, even il the impost on process is  not one under Entry 84, list l, but is an impost on ’processing’ distinct from "manufacture" the levy could yet be  supported by  Entry  ’97. List l, even without the aid  of  the  wider principle recognised and adopted in Dhillon’s case AIR  1972 SC l061. It was, however, contended that the levy of tax  on an  activity  which  cannot reasonably  be  regarded  as  an activity  of ’manufacture’ cannot be described as a levy  of duties  of  excise under Entry 84, List I. If it is  a  non- descript  tax under Entry 97, the Parliament, it  is  urged, has  not  chosen1 to enact any such law in  this  case.  The charging  section  does  not,  it is  urged.  bring  such  a taxable-event to charge. This argument was noticed in Empire Industries case thus:     "  ..       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  powers enumerated under Entry 97 of List I of the Seventh  Schedule                                                   PG NO 800 then it was submitted that there was no charging section for such an activity and as such the charge must fail, and there cannot be any levy ..   "     The contention was rejected holding:     "....         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 manufactured. "Manufactured" under 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 of List l of Seventh Schedule. We are,  therefore, of the opinion that there is no substance in this contention     We respectfully agree.     20. If a legislation purporting to be under a particular legislative  entry  is  assailed for  lack  of  legislative- competence, the State can seek to support it on the basis of any  other  entry within the legislative competence  of  the legislature. It is not necessary for the State to show  that the  legislature, in enacting the law,  consciously  applied its mind to the source of its own competence. Competence  to legislate  flows  from   Article 245,  246,  and  the  other Articles  following,  in  Part XI of  the  Constitution.  In defending  the  validity of a law questioned  on  ground  of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 22 of 39  

legislative-incompetence, the State can always show that the law  was  supportable  under  any  othe  entry  within   the competence  of  the  legislature.  Indeed  in  supporting  a legislation sustenance could be drawn and had from a  number of entries. The legislation could be a composite legislation drawing  upon several entries. Such a "rag-bag"  legislation is particularly familiar in taxation.     Bennion in his "Statutory Interpretation" (at page  644) refers such a composite legislation, though the observations must  be under-stood in the context of the supremacy of  the British Parliament and one of unlimited powers and which is, under   no   inhibitions  unlike  a   federal   polity,   of                                                   PG NO 801 distribution  of legislative powers. Learned  author  refers to:     " ’Ragbag’ Acts: Some Acts are ’rag bag’ Acts,  covering many areas. The annual Finance Act is an extreme example. It is divided into Parts, dealing respectively with customs and excise duty, value added tax, income tax, capital gains tax, stamp  duty, capital transfer tax and so on. Even  within  a Part  of  a  Finance Act  the  various  provisions  havnuite different aims...." In Hari Krishna Bhargav v. Union of India and Anr., [1966] 2 SCR 22, this Court said:     "........     There  is  no  prohibition   against   the Parliament enacting in a single statute, matters which  call for the exercise of power under two or more entries in  List I of the Seventh Schedule. Illustrations of such legislation are  not wanting in our statute book, and the fact that  one of such entries is the residuary entry does not also attract any disability ..       .."     21.  So  far as, the exclusive competence of  the  Union Parliament  to legislate is concerned all that is  necessary is  to find out whether the 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 field in List I.  Union Parliament has exclusive power to legislate upon that  topic or field. Of course, it has concurrent power also in respect of the subjects in List III.     Contention (b) is, therefore, insubstantial.     22. Re: Contention (c)     This  pertains  to the validity of  levy  of  additional duties. The contention proceeds on the pre-supposition  that processing  does not amount to ’manufacture’  under  Section 3(1)  of the Additional Duties Act. If it does, as has  been held on point (a), this argument does not survive at all.     The  point,  however, sought to be put across  is  that, even if the concept of ’manufacture’ for purposes of levy of excise  duty  under  the ’Central  Excise  Act’  is  validly expanded  or  that  a  tax  on  processing  is,   otherwise,                                                   PG NO 802 supportable  under  Entry  97(1),  the  position  under  the ’Additional Duties Act’ ;s quite different. The  ’Additional Duties  Act’  does  not  expressly  invoke  or  attract  the definition of ’Manufacture’ in Section 2(f) of the  ’Central Excise  Act’;  nor does the ’Additional Duties  Act’  itself contain a definition of ’manufacture’ in the broad terms  in which Section 2(f), as amended, contains. The result is,  it is   urged,   that  the  ordinary   legal   connotation   of ’manufacture’, contained in the charging Section 3(1) of the ’Additional  Duties Act’ can alone support the levy.  It  is not,  it is urged, permissible to import the artificial  and expanded  definition of ’manufacture’ containing in  Section 2(f), as amended, into Section 3(1) of the Additional Duties Act.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 23 of 39  

   The  following observations of this court in Pandit  Ram Narain  v. The State of Uttar Pradesh and Ors.,  l1956]  SCR 664 at 673 are pressed into service:     ".....It  was  rightly pointed out that it is  no  sound principle  of construction to interpret expressions used  in one Act with reference to their use in another Act ...."     Again,  the  observations in Macbeth & Co.  v.  Chisten, [1910] AC 220 at 224 referred to with approval by this court in  Commissioner  of Sales Tax, Madhya  Pradesh  v.  Jaswant Singh  Charan Singh, [1967] 2 SCR 720 at 725-26 were  relied upon:     ".....It would be a new terror in the construction  Acts of  Parliament  if we were required to limit a  word  to  an unnatural   sense   because  in  some  Act  which   is   not incorporated or referred to such an interpretation is  given to it for the purposes of that Act alone’....."     It  is  further contended that a mere amendment  of  the schedules  to  the  ’Additional  Duties  Act’  purported  by Section 4 of the Amending Act VI of 1980 would be inadequate to  serve  the purpose of a valid levy on  the  activity  of processing.  It  was  also urged that Section  3(3)  of  the ’Additional  Duties Act’ which provides that the  provisions of ’Central Excise Act’ and the rules made thereunder shall, so  far  as  may  be, apply in relation  to  the  ’levy  and collection"  of the Additional Duties would not also  enable the wider definition of ’manufacture’ in Section 2(f) to  be imported  into Section 3(1) of the Additional Duties Act  to justify levy of Additional Duties on ’processing’.     23. The contention was neatly and attractively presented and   appeared,   at  first  blush,  to  merit   a   serious                                                   PG NO 803 consideration  of  the validity of the  levy  of  additional duties.  But on a closer examination of the concept of,  and the scheme for, levy and collection of the additional duties and the specific statutory provisions, the tensile  strength of  the  argument  breaks  down.  There  are  at  least  two circumstances  which render the definition of  ’manufacture’ under  Section  2(f)  attracted to  the  additional  levies. Section 3(3) of the Additional Duties Act provides:     ".....Ievy  and collection of the additional  duties  as they  apply  in relation to the levy and collection  of  the duties of excise on the goods specified in sub-section (l) . " It  is plain that the statute expressly makes the  provision in  the "Central Excise Act" apply in relation to ’levy  and collection’  of  the  additional  duties.  The  question  is whether this provision is sufficient to attract Section 2(f) of the main Act as amended. This, in turn, depends upon what the expression "levy" connotes and carries with it. The term ’levy’  it  is  held, is an expression of  wide  import.  It includes   both  imposition  of  a  tax  as  well   as   its quantification  and  assessment. In Assistant  Collector  of Central Excise, Calcutta Division v. National Tobacco Co. of India Ltd., [ 1973] I SCR 822 this  Court held:     "The term "levy" appears to us to be wider in its import than the term "assessment". It may include both of a tax  as well  as assessment. The term imposition" is generally  used for  the  levy  of a tax or duty  by  legislative  provision indicating  the subject matter of the tax and the  rates  at which it has to he taxed .....     24.  That  apart, Section 4 of 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 along with the entries in the schedules.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 24 of 39  

   In  Att. -Gen v. Lamplough, [1878] 3 Ex. D. 214, 229  it is observed:     ’A schedule in an Act is a mere question of drafting,  a mere  question of words. The schedule is as much a  part  of the  statute,  and  is as much an enactment,  as  any  other part."                                                 PG. NO. 804     Maxwell says (in Interpretation of Statutes 11th ed.  p. 156):     "  ....if  an  enactment in a  schedule  contradicts  an earlier clause it pevails against it." Bennion (in Bennion’s Statutory Interpretation, p.  568-569) referring to the place of schedules in statutes observes:     "The  Schedule  is  an extension of  the  section  which induces  it. Material is put into a Schedule because  it  is too lengthy or detailed to be conveniently accommodation  in a section, ....."     "A  Schedule must be attached to the body of the Act  by words  in one of the sections (known as inducing words].  It was formerly the practice for the inducing words to say that the Schedule was to be construed and have effect as part  of the  Act.  (See,  e.g. Ballot Act 1872 s. 28.)  This  is  no longer done, being regarded as unnecessary. If by  mischance the  inducing words were omitted, the Schedule  would  still form part of the Act if that was the apparent intention. "     " ....The schedule is as much a part of the statute, and is as much an enactment, as any other par. (See also. to the like  effect, Flower Freight C o. Ltd. v. Hammond [19633]  1 QB  275; R v. Legal Aid Committee No. I [London]  Legal  Aid Area. ex p. Rondel, [1967] 2 QB 482 and metropolitan  Police Commr. v. Curran., [1976] WLR 87.]"     What  appears. therefore, clear is that what applies  to the main levy, applies to the additional duties as well,  we find no substance in Contention [c] either.     25. Re: Contention [d]     There  is really no substance in the grievance that  the retroactivity  imparted  to the amendments is  violative  of Article  19  [l]  (g). A Competent  legislature  can  always validate  a  law  which has been declared by  courts  to  be invalid,  provided the infirmities and  vitiating  infactors 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                                                   PG NO 805 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. (See Sri  Prithvi Cotton  Mills Ltd. & Anr. v. Broach Borough  Municipality  & Ors., [1970] 1 SCR, 388)     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 vested right from a defect  in  a statute and seek a windfall from the legislature’s mistakes. 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. In Empire Industries  Limited &  Ors. Etc. v. Union of India & Ors. Etc., [ 19851 l  Supp. 292 at 327 this court observed:

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 25 of 39  

   ".....  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 amongst those who benefit from it". In  testing  whether  a retrospective imposition  of  a  tax operates  so harshly as to violate fundamental rights  under Article  l9(1)(g), the factors considered  relevant  include the context in which retroactivity was contemplated such  as whether  the  law  is one of validation  of  taxing  statute struck-down  by  courts for certain defects; the  period  of such  retroactivity,  and  the  degree  and  extent  of  any unforeseen  or unforseable financial burden imposed for  the past  period etc. Having regard to all the circumstances  of the present case, this court in Empire Industries’ case held that  the retroactivity of the Amending provisions  was  not such  as to incur any infirmity under Article 19( l)(g).  We arc in respectful agreement with that view.     There is no merit in contention (d) either. 26. Re: Contention (e)     This  concerns  the question of the correctness  of  the determination  of the assessable-value. The  processors  say that  they have filed classification lists under rule 173  B                                                   PG NO 806 of  the Central Excises and Salt Rules 1944 as they  had  no other   choice  and  that  if  the  proper   principles   of determination of the assessable-value do not legally justify the consequences flowing from the classification, it is open to   them   to   contend  against  the   validity   of   the determination and they are not estopped from doing so.     Duties  of  excise  are imposed  on  the  production  or manufacture of goods and are levied upon the manufacturer or the producer in respect of the commodity taxed. 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 conceptual 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  covenient to impose as long as  a  rational relationship with the nature of the tax is maintained.     27.  The processors contend that,  the  assessable-value could only be the job-work charges received by them for  the processing  of ’Grey-fabric’ and cannot be the selling-price at  which  the  customer who entrusts the  Grey  fabric  for processing  ultimately sells it in the market. Such a  sale- price, it is said, would, quite painly. include the value of the  Grey  fabric,  the  processing-charges  and  also   the selling-profit of the customer. Even in regard to the  price of  the  Grey fabric itself which comes to  the  processing- houses  in fully manufactured condition would  again  depend upon  how  many  hands it has changed  before  reaching  the particular  customer  who brings them  for  processing.  The determination   of   assessable-value  at  the   actual   or hypothetical  selling-price  of  goods of  like  nature  and quality  in  the wholesale market would  include  the  post- manufacturing   profits   of   the   trader   which   cannot legitimately be regarded as part of the assessable-value.     28.  This contention was considered in detail in  Empire Industries  case [ 1985] 1 Supp. SCR 293 at 327  wherein  it was held:     "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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 26 of 39  

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  of  the  processed fabrics  which is the price at which such fabrics  are  sold                                                   PG NO 807 for  the  first time 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  pro forma  credit to the independent processors to  be  utilised for the payment on the processed fabrics in accordance  with the  Rules  56A or 96D of the Central Excise Rules,  as  the case may be." Even  the Referring Bench did not doubt the  correctness  of the inclusion in the assessable-value the cost of the  Grey- fabric and the processing charges. The Referring Bench held:     "We cannot accept the contention of the learned  counsel on  behalf  of the petitioners and the appellants  that  the value of the grey cloth which is processed by the  processor should  not  be  included in the  assessable  value  of  the processed fabric ...... "     29. In the argument, as presented, that the  assessable- value  would  include  what is referred  to  as  the  "post- manufacture  profits", there is an obvious fallacy. In  Atic Industries  Ltd. v. H.H. Dave, Asstt. Collector  of  Central Excise  and Ors., [ 1975] 3 SCR p. 563 Bhagwati J.  speaking for the Court said:     "The  value of the goods for the purpose of excise  must  take  into  account  only the manufacturing  cost  and  the manufacturing  profit and it must not be loaded  with  post- manufacturing cost or profit arising from post-manufacturing operation ..... "     "  ....  It  may be noted that  wholesale  market  in  a particular  type  of goods may be in several tiers  and  the goods  may  reach the consumer after a series  of  wholesale transactions. In fact the more common and less expensive the goods,  there would be greater possibility of more than  one tier of wholesale transactions....."     " ......If excise were levied on the basis of second  or subsequent  wholesale price, it would load the price with  a post manufacturing element, namely, selling cost and selling profit  of  the  wholesale dealer.  That  would  be  plainly contrary  to the true nature of excise as explained  in  the                                                   PG NO 808 Voltas’ case (supra). Secondly, this would also violate  the concept  of  the  factory gate sale which is  the  basis  of determination  of  value  of the goods for  the  purpose  of excise......"     "There  can,  therefore,  be  no  doubt  that  where   a manufacturer   sells  the  goods  manufactured  by  him   in wholesale  to a wholesale dealer at 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 .... "     Explaining   what   really  is  the   idea   of   "post- manufacturing profit" referred to in Atic’s case this  court in   Union  of  India  &  Ors.  etc.  etc.  v  Bombay   Tyre International  Ltd. etc. etc., [ 1984] l SCR, p. 347 at  375 aid:     ".....When it refers to post-manufacturing expenses  and post-manufacturing  profit arising  from  post-manufacturing operations, it clearly intends to refer not to the  expenses and profits pertaining to the sale transactions effected  by

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 27 of 39  

the  manufacturer but to those pertaining to the  subsequent sale transactions effected by the wholesale buyers in favour of other dealers."                                        (Emphasis Supplied) The principles for the determination of assessable-value are laid  down  under  section 4 of the Act. Section  4  of  the Central  Excise Act’ envisages that the value of an  article for  the  purposes of duty shall be deemed to  be;  (a)  The wholesale  cash price for 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 from 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.     The  nature  of the excise duty is not  to  he  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 assessment of the tax is contemplated, it "need not  contour                                                   PG NO 809 along  the lines which spell out the levy itself.",  and  "a broader  based standard of reference may be adopted for  the purposes  of  determining  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.     30. In the case of processing-houses, they become liable to  pay excise duty not because they are the owners  of  the goods but because they cause the ’manufacture’ of the goods. The  dimensions  of the Section 4(1)(a) and  (b)  are  fully explored in number of decisions of this Court. Reference may be made to the case of Bombay Tyres International.     Consistent  with  the provisions of Section  4  and  the Central Excise (Valuation) Rules, 1975, framed under Section 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  method  of determination  of  the  assessable-value  suggested  by  the processors  would lead to the untenable position that  while in one class of Grey-fabric processed by the same  processor on   bailment,  the  assessable-value  would  have   to   be determined differently dependent upon the consideration that the   processing-house  had  carried  out   the   processing operations  on job-work basis, in the other class of  cases, as it not unoften happens, the goods would have to be valued differently  only for the reason the  same  processing-house has  itself  purchased the Grey-fabric and  carried-out  the processing operations on its own. It is to solve the problem arising out of the  circumstances that goods owned by one person are "manufacture ’ by another that at a certain stage under rule 174A, a notification  was issued   by  the  Central  Government  exempting  from   the operation of the rule 174A:     ".... every manufacturer who gets his goods manufactured on  his  account  from  any other  person,  subject  to  the conditions that the said manufacturer authorises the person, who  actually manufactures or fabricates the said  goods  to comply with all procedural formalities under Central Excises

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 28 of 39  

and  Salt  Act,  1944  (  l of  1944)  and  the  rules  made thereunder,  in respect of the goods manufactured on  behalf                                                   PG NO 810 of  the  said  manufacturer  and, in  order  to  enable  the determination of value of the said goods under section 4  of the  said Act, to furnish information relating to the  price at which the said manufacturer is selling the said goods and the person so authorised agrees to discharge all liabilities under the said Act and the rules made thereunder."     31. On a consideration of the matter, the view taken  in the  matter in the Empire Industries case does not call  for reconsideration.  Contention (e) is also held  and  answered against the petitioner.     32. In the result the appeals preferred by the Union  of India  are   allowed and the 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 petitions filed by the processors directly  in this court are dismissed. There will, however, be no  orders as to costs in the appeals and the writ-petitions.     The Union of India and its authorities shall be entitled to recover the amounts due by way of arrears of  excise-duty and  shall be entitled to take necessary steps to  seek  the enforcement of the bank guarantees, if any, for the recovery of the arrears.     SABYASACHI  MUKHARJI,  J. I have had  the  advantage  of reading in draft the judgment proposed to be delivered by my learned brother Venkatachaliah, J. I respectfully agree with him. There is, however, one aspect of the matter in  respect of which I would like to say a few words. Contention (e)  as noted  by my learned brother in his judgment deals with  the determination of the assessable-value. The processors in the cases  before  us say that they  have  filed  classification lists under rule 173B of the Central Excises and Salt Rules, 1944  as  they had no other choice and that  if  the  proper principles  of determination of the assessable-value do  not legally   justify   the  consequences   flowing   from   the classification  it  is open to them to contend  against  the validity of the determination and they are nOt estopped from doing  so. The processors are right in contending  that  the true  principle  should  be  followed  in  determining   the assessable-value. Then what is the true principle? Section 4 of  the Act deals with the valuation of excisable goods  for purposes of charging of duty of excise. Section 4 [l] (a) of the Act stipulates that the value should be subject to other provisions of the Section the normal price thereof, that  is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery  at the time and place of removal, where the  buyer                                                   PG NO 811 is  not  a  related  person  and  the  price  is  the   sole consideration for the sale. For the present purpose, we  are not concerned with the provisos nor the situation where  the normal price of goods is not ascertainable for any reason.     In  Empire Industries Limited & Others etc. v. Union  of India  and Others etc., L [1988] Suppl. S.C.R. 292,  it  was held  that where for the purpose of  calculating  assessable value, a notional sum is laid down by the legislature to  be arrived  at one 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 unless  the  said  deduction or  allowance  or  addition  is authorised elsewhere in the Act or in the Rules. A statutory charge  should  be  measured  by  the  method  of  its   own computation as laid down in the statute and not by any other

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 29 of 39  

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. It was emphasised  that  the taxation  under  the  Act is the rule and  the  benefit  and exemption, the exception. And it was held that there was  no hardship in these cases. It was further reiterated that 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  for the  purposes  of  assessment  under section  4  of  the  Central Excise  Act  will  not  be  the processing  charge  alone  but the intrinsic  value  of  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  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 on the processed fabrics in accordance  with the relevant rules.     In  M/s. Ujagar Prints v. Union of India, [1986]  Suppl. S.C.C.  652  Bhagwati  C.J.  held  that  the  processes   of bleaching, dyeing, printing, mercerising etc. carried on  by a  processor  on job-work basis in respect  of  grey  cotton fabrics  and manmade fabrics belonging to the  customer  and entrusted  by him for processing amount to manufacture  with the  meaning  of  the Act prior to its amendment  so  as  to attract levy of excise duty on the processed fabrics and  in any  event, after the Amendment Act, these processes  amount to manufacture and excise duty is leviable on the  processed fabrics. The learned Chief Justice also dealt with the other                                                   PG NO 812 question, namely, what is the value of the processed fabrics liable  to be assessed. Referring to the aforesaid  decision of  the  Empire  Industries,  (supra),  he  illustrated  the problem by reference to the example set out in the  judgment (Page  654  of  the  report at  para  2).  In  that  example illustrated by him the value of the grey cloth in the  hands of  the processor was Rs.20. The value of the  job-work  was Rs.5.  B  Trader’s selling price inclusive  of  his  selling profits etc. was put at Rs.30. Bhagwati C.J. at page 655  of the  report  observed  that  the  assessable  value  of  the processed fabric must obviously be taken to he the wholesale cash price of the processed fabric at the factory gate  that is  when  the  processed fabric leaves the  factory  of  the processor and it cannot possibly include the selling  profit of the trader who subsequently sells the processed  fabrics. The learned Chief Justice reiterated that it is at the point when  the  processed  fabric  leaves  the   factory  of  the processor that its assessable value has to be determined and that  assessable value cannot include the selling profit  of the trader. Empire Industries, (supra) did not say that  the post-manufacturing profits or post-manufacturing costs could be included in the assessable-value of the processed fabric. If  the trader who entrusted cotton or man-made  fabrics  to the processor for processing on job-work basis, would give a declaration  to the processor as to what would be the  price at  which  he would be selling the processed  goods  in  the market that would be taken by the Excise authorities as  the assessable-value  of the processed fabrics and  excise  duty would  be  charged to the processor on that basis.  Where  a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 30 of 39  

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 not be charged on that basis. This  has been explained in Atic Industries Ltd. v. H.H. Dave.  Asstt. Collector of Central Excise and Ors., [ 1975] 3 S.C.R . 563. This  has also been explained in Union of India & Ors.  etc. etc. v. Bombay Tyre International Ltd. etc. etc. . [1984]  l S.C.R.  347  at  375.  It has  to  he  reiterated  that  the valuation  must be on the basis of wholesale cash  price  at the  time  when the manufactured goods enter into  the  open market.  See in this connection the ratio of this  Court  in Union of India and Ors. v. Cibatul Ltd., [ 1985] Suppl 3 SCR 95  and the Joint Secy. to the Govt of India & Ors. v.  Food Specialities   Ltd.,  11985]  Suppl  3  SCR  165.   It   was emphasised in Union of India & Ors. v. Cibatul, (supra) that the  value of the trade-marks was not be taken into  account                                                   PG NO 813 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 the wholesale market would be  independent of  the  value of the trade-marks. So that cannot  be  taken into the computation of the assessable value. Similarly,  in the case of Joint Secretary to the Govt. of India and others v.  Food  Specialities Ltd., (supra), it was held  that  the value of Nestle’s trade marks could not be to the  wholesale price  charged by the dealer to Nestle’s for the purpose  of computing the value of the goods manufactured. The goods  in both  these  cases were manufactured  independently  of  the addition  of  the  trade-marks. The  price  thereof  at  the factory gate was not after taking into account the value  of the  trade-marks. If that was the position the value of  the trade-marks  cannot  be added to the  wholesale  cash  price charged  by  the  dealer.  Affixation  of  trade-marks   for enhancement  of  the  value thereof  is  extraneous  to  and independent  of the process of manufacture. The charges  for the  same  are not part of the assessable value  and  cannot enter  into computation of the whole-sail cash price on  the basis of which excise duties ale to be levied.     In  the  aforesaid view of the law and tor  the  reasons mentioned by my learned brother, l agree with his answer  to this  contention.  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  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 is to  say,  the value at which manufactured  goods  leave  the factory and enter the main stream.     One more aspect will have to be reiterated.  Computation of the assessable-value is one question and as to who  would be  liable  for the same is another. Duties  of  excise  are imposed  on production or the 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 goods. It is, therefore. necessary to reiterate

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 31 of 39  

that  the value for the assessment under section of the  Act will  not be the processing charge alone but  the  intrinsic value  of the processed fabrics 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.  If the valuation is made according to the  rules  as adumbrated in Empire Industries (supra) and as clarified  by my  learned  brother in this judgment no  difficulty  should arise.                                                   PG NO 814     RANGANATHAN,  J. I agree but I should like to add a  few words on two of the points argued before us.     First,  I  should  like to clarify  the  nature  of  the decision in Hindustan Milkfood Manufacturers Ltd. v.  Union, (the  HMM  case) 1980 E.L.T. 480 (to which I was  a  party), since learned counsel for the petitioners sought to rely  on my  judgment in that case as supporting his contention  that the  Union cannot seek to uphold the amendment presently  in question  by reference to Entry 97 of List I in the  Seventh Schedule  to the Constitution. In that case, the Delhi  High Court was concerned with the interpretation of the amendment to S. 4 of the Central Excises and Salt Act, 1944 by Act  22 of   1975.   The  pre-amendment   section   postulated   the determination  of excise duty on the basis of the  wholesale cash  price  of the excisable goods at "the  factory  gate"; and,  an  explanation  provided that,  in  determining  this price, no abatement or deduction shall be allowed in respect of trade discount and the amount of duty payable at the time of  the  removal of the goods from the  factory.  The  post- amendment  section  made certain changes in the  concept  of sale  at  the  factory gate  by  excluding  therefrom  sales effected  in  favour  of a category of  persons  defined  as "related persons" with which we are not concerned here.  The amendment  also  defined  the assessable "value"  so  as  to include packing charges but to exclude the amount of  excise duty,  sales tax and other taxes as well as trade  discount. The  question  was  whether  this  amendment  precluded  the deduction,  from the wholesale factory gate price, of  post- manufacturing  expenses and profits. The question  had  been answered by several High Courts in the negative  principally on  the ground that the duty sought to be levied  under  the Act was an excise duty, the very nature of which required  a proximate connection with production or manufacture and that what had passed beyond this region and entered the domain of sale could not pass as excise duty. Counsel for the Union of lndia.  with  a  view  to  overcome  these  decisions,   had contended  that  since  Entry 97 of List I  in  the  Seventh Schedule  to the Constitution enabled Parliament to enact  a legislation  even  beyond  the purview  of  an  excise  duty covered by Entry 84 of that list, the Court should not  read into  the  amended  section the limitations  that  had  been considered inherent in the section before its amendment.  It was  in repelling this contention that certain  observations were  made by me in paras 30 to 32 of the judgment to  which Sri  Soli Sorabjee drew our attention. It will, however,  be clear  from  the discussion in the  paragraphs  referred  to that the contention was repelled not on the ground that  the legislature  could  not make a wider levy  by  reference  to Entry  97 but only on the ground that the  history,  context and  language  of the amendment did not  warrant  the  wider interpretation.  This will be clear from the  following  two sentences in para 31 where I said:                                                   PG NO 815     "Mr.  Chandrasekharan’s  contention ..       that  the language  of  the new section should be  given  an  enlarged

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 32 of 39  

scope and interpretation by relating it to Entry 97 of  List I  of Seventh Schedule cannot, in our opinion, be  accepted. We  do not think, in considering this amendment, that it  is necessary  for us to discuss whether, if Parliament were  to enact  a  law imposing on goods manufactured or  produced  a duty  based not only on the manufacturing cost/profits,  but also including in the dutiable value the whole or some part, post  manufacturing cost/profits, such a law would be  intra vires or not: because it appears to us that no such law  has been  enacted  in  this  case.  We  shall  assume  with  Mr. Chandrasekharan, that in view of Entry 97 in the Union  List under the Constitution, it is open to and competent for  the legislature to expand or even modify the nature of the levy. The question, however, will be whether it has done so." It  was concluded, after referring to the previous  position as  well  as the statement of objects and  reasons  for  the amendment,   that  there  was  nothing  to  show  that   the legislature  had intended to make ally change and  that  the rule against a presumption of implicit alteration of the law should  be invoked in the context. In other words,  the  HMM decision was based not on the scope of legislative Entry  97 in  List  1 but on the language and scope of  the  amendment actually  effected.  It  was  considered  not  necessary  or possible  to stretch the language of the definition in s.  4 beyond  the  ambit  of the provision as  delineated  in  the earlier  decisions.  The question decided was not  that  the legislature could not, but that it did not, make any radical change in the nature of the levy.     The   position  considered  in  the  HMM  case  may   be illustrated by an analogy. Entry 82 in List I of the Seventh Schedule  to the Constitution permits the enactment, by  the Union  Legislature,  of  a  law  relating  to  taxation   of ’income.  The entry does not restrict such laws only to  the income of a ’previous year’, though this was the pattern  of the  prevelent Income Tax Acts activated by  annual  Finance Acts.  Between  1948  and 1955, however,  the  Finance  Acts purported  to impost a tax on "excess dividends"  which,  in brief,  was  a tax on dividends declared out of  profits  of past years. The effect of these enactments was considered by the  Bombay High Court as well as this Court. In  C.I.T.  v. Elphinstone Spinning & Weaving Mills Co. Ltd., [1960] 3  SCR 953,  this  Court  held that the language  of  the  relevant provision  in the Finance Acts was so framed that  it  could not  be read as an independent charging section. It will  be appreciated  that the Finance Acts were also  enactments  of the  Union  Legislature and a taxation of profits,  even  of past  years, by an independent and specific enactment  could certainly have been brought within the scope of Entry 97, if not Entry 82 itself. Nevertheless, the enactments were  held ineffective not because they could not but because they  did not  contain the words necessary to effectuate  the  result. The  position  in  the HMM case was  somewhat  similar.  The legislature retained the levy on the basis of the  wholesale cash price at the factory gate as before and only introduced a  definition  of the expression ’value’ in terms  a  little more  elaborate but basically not very different  from  what had been contained in the earlier section. The Court saw  no reason to read into the language of the amended provision  a meaning much wider that had been attributed to the provision before its amendment. The amendment gave no indication that, contrary  to  what  had been decided  earlier,  it  was  the intention  of the legislature to bring into  the  assessable value even an element of post manufacturing cost/profit.                                                   PG NO 816     But  here  the  position  is  entirely  different.   The

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 33 of 39  

amendment has specifically enlarged the meaning and  concept of  the  word  "manufacture". If such  extended  concept  is within  the  range of duties of excise  as  envisaged  under Entry  84-and  I agree that with my  learned  brothers  that is-,  there is no difficulty. But, if,  as contended for  by Sri Sri Soli Sorabjee, that legislative entry permits a duty levied with on the process of ’manufacture", stricto  sensu, and  the  processing in this case cannot be  brought  within that  definition  then this expended  definition  cannot  be fitted into that entry. Nevertheless the specific  statutory definition cannot be ignored and it it cannot be held  valid by reference to Entry 84, its validity has to be  considered with reference to the residuary Entry 97. The definition  of manufacture  in a limited sense. It explictly  enlarges  the scope  of  the  levy  of  excise duty  and,  if  it  is  not permissible  to  bring it within the scope of  Entry  84,  a resort  to  Entry  97  cannot be  ruled  out.  In  my  view, therefore, there is nothing in the decision in the HMM  case that  supports the contention  of the petitioners have  that the  amendment of the definition of "manufacture" cannot  be                                                   PG NO 817 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.     The second point, on which I feel inclined to add a  few words  is  in  regard to the contention  on  behalf  of  the petitioners  that the definition of the  term  "manufacture" enacted in the Central Excises & Salt Act, 1944 as  enlarged by Amendment Act 6/80, cannot be read into the provisions of the  Additional  Duties of Excise Act (No.  58),  1957.  The argument is in three phases and runs thus:     (i) S. 3 of the 1957 Act, which is the charging section, fastens the charge of duty at the state of ’manufacture out this e expression is deliberately left undefined, though the statute  takes  special  care  in s. 2  to  adopt,  for  its purposes, the definition of the specified goods as contained in   the   1944  Act.  This  excludes  the   definition   of ’manufacture’  enacted in s. 2(f) of the 1944  and  enlarged from time to time .     (ii) S. 3(3) cannot help the Revenue in this regard,  as its  only  purpose and effect is to avoid a  repetition.  in this  Act of the procedural provisions of the 1944 Act.  The charge or imposition of the tax having been said under S.  3 [1], the purpose of .S. 3(3) is only to say that this charge shall  be  qualified, demanded of the 1944  Act.  This  sub- section cannot be read as having the effect of incorporating the substantive definition of "manufacture" in the 1944  Act particularly  when  s.  2  chose  to  incorporate  only  the definition  of the specified goods as contained in the  1944 Act.     [iii]  Even  if the language of S. 3( 3 )  is  construed more liberaly, it will be effective with only to incorporate the definitions contained in the  1944 Act as on the date of commencement  of  the  1957  Act  but  not  its   subsequent legislative expansions.     In my opinion. there is no warrant or justification  for giving such a narrow interpretation to the wide language  of s. 3[3] of the 1957 Act. Learned counsel for the petitioner, in  advancing  this  argument, apparently has  in  mind  the famous  dictum of Lord Dunedin in Whitney v. Inland  Revenue Commissioners, [1927] A.C. .7 echoed in several decisions of this Court and of the various High Courts in India:                                                   PG NO 818     "Now, there are three stages in the imposition of a tax: there  is the declaration of liability, that is the part  of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 34 of 39  

the statute which determines what persons in respect of what property   are  liable.  Next,  there  is  the   assessment. Liability does not depend on assessment. That, ex hypothesi, has  already been fixed. But assessment  particularizes  the exact sum which a person liable has to pay. Lastly come  the methods   of  recovery,  if  the  person  taxed   does   not voluntarily pay." The  argument,  founded on the  above  figurative  analysis, seeks  to equate the expressions "levy and collection"  used in  s.  3(3) with the stages of  assessment  and  collection concerned with the procedure for quantification and recovery of a duty that has already been imposed. The first stage  of "charge", according to counsel, has already been dealt  with in  the  first  sub-section of s. 3, which  has  fastened  a charge on the production of manufacture of specified  goods. The  third  sub-section,  it is said, only  relates  to  the quantification  or recovery of the charge imposed  under  s. 3(1) . I do not see any force in this argument.     In the first place, even s. 3(1) which, according to the counsel,  is  the  charging section,  uses  the  same  words "levied and collected. These are the same as the words  used in  Article  265  of  the  Constitution,  which  have   been interpreted as comprehending the entire process of  taxation commencing  from  the imposition of the tax  by  enacting  a statute  to the actual taking away of money from the  pocket of a citizen. They take in every stage in the entire process of  taxation.  The  words "levied" is  a  wide  and  generic expression.  One can say with as much  appropriateness  that the  Income tax Act levies a tax on income as that  the  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  a restricted  meaning. In the context of sub-section  (1)  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 (1). S. 3(3),  therefore, also  covers  the  entire gomut of s. 3 (1)  and  cannot  be construed  as becoming operative at a somewhat later  stage. Its operation cannot be excluded in determining the scope of the charge.                                                   PG NO 819     In this context, reference has to be made to a  decision of  this  Court which had to consider  a  provision,  almost identical  with  S. 3(3) of the 1957 Act, appearing  in  the Finance  Act  1965, in a somewhat indirect  manner,  as  the decision contains some observations, which, at first  sight, appear  to  support the line of argument of  the  petitioner herein.  Such a provision has been annually repeated in  all Finance  Acts--vide, the Finance Act from 1963 to  1983--and imposes  what has been described as "special", "regular"  or "auxiliary" duties of excise and customs. The decision I  am referring to is that of this Court in Associated Cement  Co. Ltd.  v.  Director of Inspection, [1985] 2 SCC  7  19.  This decision  was really concerned with s. 280 ZD of the  Income Tax Act, 1961, which in turn called for a reference to s. 80 of the Finance Act, 1965 which is in the following terms:     "(I)  When  goods of the description mentioned  in  this section  chargeable with a duty of excise under the  Central Excises Act ....        are assessed to duty, there shall be levied and collected--     (a) as respects (certain) goods ............        ,  a special  duty  of excise equal to 10 per cent of  the  total amount so chargeable on such goods;

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 35 of 39  

   (b) as respects (certain other) goods ......        ..., a special duty of excise equal to 20 per cent . . .: and     (c) as respects (certain other) goods ......        ..., a special duty of excise equal to 33- 1/3 per cent . . .     (2) xxx xxx     (3) The duties of excise referred to in sub-section ( l) chargeable on such goods under the Central Excise Act or any other law for the time being in force . ..     (4)  The provisions of the Central Excises Act  and  the rules  thereunder. including those relating to  refunds  and exemptions  from  duty, shall. so far as may  be.  apply  in relation  to the levy and collection of the duty  of  excise leviable under this section in respect of any goods as  they apply  in relation to the levy and collection of the  duties of excise on such goods under that Act or rules."                                                   PG NO 820 Section  280  ZD  of the Income Tax  Act,  1961  enabled  an assessee, in certain circumstances, to obtain a "tax credit" certificate  in  respect of a percentage of  the  amount  of "duty  of  excise  payable by him."  "Duty  of  excise"  was defined by the section to mean "the duty of excise  leviable under  the  Central Excises & Salt Act".  The  question  was whether the tax credit could also be given in respect of the amount  of the special duty of excise levied  and  collected under the Finance Act.  This Court held that, obviously, the special  duty  levied under s. 80 could not be  regarded  as having been levied under the Central Excise Act. It said:     "It  is  true  that  the  expression  ’leviable’  is  an expression   of   wide  import  and   includes   stages   of quantification  and recovery of the duty but in the  context in which that expression has been used in clause (b) of sub- section (6) of s. 280 ZD, it is clear that it has been  used in  the sense of chargeability to duty. In other words,  the duty  of excise in respect whereof tax credit  is  available would be in respect of such duty of excise as is  chargeable under the Excise Act and clearly the Special excise duty  in respect  whereof  additional  tax credit is  sought  by  the appellant company is not chargeable under the Excise Act but chargeable under the Excise Act."     Having said this, the Court added:     "’Sub-clauses  [3] and (4) of s. 8() of the Finance  Act on  which  reliance  has  been placed  by  counsel  for  the appellant  company in terms refers to the procedural  aspect such as the qualification and collection of the special duty and  simply because the qualification and collection of  the special  duty  under  the  Finance Act  is  to  he  done  in accordance  with the provisions of the Excise Act such  duty does  not become leviable that is to say  chargeable,  under the Excise Act." The  above  observations no doubt lend some support  to  the contention of the petitioner, as the wording of s. 80(4)  of the  1965 Finance Act is identical with that of s. 3(3)  and has  been  interpreted  as attracting  only  the  procedural aspect  of the Central Excise Act. But in my opinion,  while that  may  have been true of s. 80(4) of  the  Finance  Act, 1965,  it  will not be correct to draw the  same  conclusion about  the 1957 Act. For, s. 80(1) of the Finance Act,  1965 fully exhausted the aspect of charge of the special duty. It                                                   PG NO 821 specified the goods to be taxed and also laid down that  the special  duty  was to be a percentage of the  normal  excise duty chargeable on those goods. Nothing else remained except the quantification and the collection. But here the position is  different. There are three ingredients of  the  charging provision  viz. s. 3(1). The additional duties  are  charged

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 36 of 39  

(a)  on  manufacture, storage of production (b)  of  certain named  goods  (c)  at  the  rates  specified  in  the  first schedule.  Of  these, only aspect (b) finds mention  in  the t957 Act but in relation to the definitions contained in the 1944  Act.  Aspect (c), clearly is not  complete  without  a reference  to  the  main  Act. For,  turning  to  the  First Schedule  of the Act, originally it specified rates  on  the basis  of  length,  weight or number  on  all  items  except "cigarettes"  where  the  duty was to  be  ad  valorem.  The Amendment Act, No. 6 of 1980, substituted the rate per metre specified  under  the original schedule in  respect  of  the items  with which we are concerned to ad valorem rates.  Now the  assessable  value is to be determined on the  basis  of which the special duty will have to be worked out cannot  be found out from the 1957 Act which contains no definition  or indication  in  this regard. The statute  cannot  be  worked atleast  in  respect of goods where an ad  valorem  rate  is prescribed  unless  s. 3(l) is read with s. 3(3  )  and  the definition  of "assessable value" in s. 14 of the  1944  Act is  read with the Finance Act. In like manner, I think.  the content of aspect (a) cannot be understood differently from, or independently of, the  definition in the main enanctment. 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  consider section  3(1) of the 1(1957 Act--in contrast to the  Finance Act  of  1965---As covering the entire ambit of  the  charge imposed. In short, the language of s. (3) has to he given  a wider  meaning  than  under the Finance Act,  1985.  I  have referred to the fact that a provision similar to that in  s. 80  of the 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 provisions are  all self-contained  and  completely  specify the  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, in my view, is  a  very  important reason  why the observations in the Associated Cement  Co.’s case (supra) cannot be of application in the context of  the 1957 Act.     A  question  has been raised as to why, if it  were  the intention  of the Legislature to take in all the  provisions                                                   PG NO 822 including  definitions from the 1944 Act, it was  considered necessary to make a specific reference to the definitions of the various goods on which additional duty was being imposed as  contained in the schedule to the 1944 Act. Counsel  says that  this enactment of specific definitions drawn from  the 1944  Act  should  lead  to  an  inference  that  no   other definitions  from that Act were intended to be  incorporated in  the 1957 Act. A careful examination will, however.  show that this is not the effect. Actually, s. 2 is not much of a ’definition’ section. Cl. (a) is not strictly necessary  and cl. (b) is only intended to clarify that the proceeds of the duties  are not be distributed to Union Territories. So  far as  clause  (c)  is concerned, it is  necessary  to  make  a reference to s. 7 of the Act, which reads thus:     "7.  It  is hereby declared that  the  following  goods, namely,   subject,   tobacco,  cotton  fabrics,   rayon   or artificial  fabrics  and  woolen  fabrics,  are  of  special importance in inter-state trade of commerce and every  sales tax  law  of  a  State shall, in so far  as  it  imposes  or

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 37 of 39  

authorises  the imposition of a tax on the sale or  purchase of  the declared goods, he subject, as from the 1st  day  of April, 1958, to the restrictions and conditions specified in s. 15 of the Central Sales Tax Act, 1956."     The  effect of this provision, as held in  M/s  Mahendra Pratap Rama Chandra v. Commercial Tax Officer & Others,  AIR 1965  Cal. 203 is that "the contents of s. 15 became a  part of section 7 from the moment when s. ’, was enacted.’’ S. 15 of  the  Central Sales Act applies to  "declared"  goods  as defined  in s. 2(c) and enumerated in s. 14 of that  Act  as being  of  special  importance  in  inter-state  trade   and commerce.   S.  14  of  the Central  Sales  Tax  Act,  1956. enumerates  various items of goods among which arc  the  six items  specified  in s. 3(1) of the 1957 Act and  this  list further  specifies that they shall have the same meaning  as is attached to the respective items in the First Schedule to the  Central Excises & Salt Act,  1944  vide  items  (ii-a), (vii), (viii), (ix). (x) and (xi). Thus, it was always clear that  the specified goods have to be understood in  the  way they  were defined in the Central Excises & Salt Act,  1944. The idea in 1956 was to restrict the powers of the States to levy sales tax in respect of such goods and other goods.  In 1958,  the  idea  was conceived of  the  Centre  levying  an additional  excise duty on these goods and distributing  the same  to  the States subject to the condition  specified  in Schedule  II  that such States did not impose  any  sale  or purchase tax on these commodities. Subsequently, perhaps. it was realised that s. 7 served no specific purpose under  the Act  except  that  of the definitions which  was  an  aspect                                                   PG NO 823 already covered by s. 2(c). In these circumstances, not much significance need be attached to s. 2(c) much less can it be construed as negativing the import of other definitions from the 1944 Act.     The  next  question  that  arises  for  considerion  is, whether,  even  assuming  that  the terms  of  s.  3(3)  are applicable, its terms are wide enough to take in not  merely the  provisions of the Central Excises and & Salt Act,  1944 and, in particular its definition clauses, as they stood  in 1957 on the date when the 1957 Act came into force but  also the  amendments  effected  therein from time  to  time.  The answer to this question depends upon the general  principles applicable to what is described as ’referential legislation’ of which this is an instance. Legislatures sometimes take  a short  cut  and  try to reduce the  length  of  statutes  by omitting  elaborate  provisions where such  provisions  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  legislation then  one on the same or allied topics render such a  course useful and desirable, the attempt to legislate by  reference is sometimes everdone and previty is achieved at the expense of lucidity. However, this legislative device is  quite well known  and  the  principles applicable  to  it  fairly  well settled.     Referential legislation 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 thc earlier 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 38 of 39  

the earlier statute thereafter. Examples of this can be seen in  Secretary  of State v. Hindustan  Cooperative  Insurance Society, AIR 1931 P.C. 149; Solani Ores Ltd. v.  State,  AIR 1975  S.C. 17 and Mahindra and Mahindra Ltd. v.  Union,  AIR 1979  S.C.798. 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 thc law  on  a  subject generally, as in Bhajiyu v. Gopikabai. [1978] 3 SCR 561;  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 the earlier  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 latter Act also. Examples  of                                                   PG NO 824 this  type  of legislation are to be seen  in  Collector  of Customs  v. Nathella Sampathu Chetty, [1962] 3 SCR 786;  New Central Jute Mills Co. Ltd. v. Assistant Collector, [1971] 2 SCR  92  and  Special  Land  Acquisition  Officer  v.   City Improvement  Trust, [1977] 1 SCR 569. Whether  a  particular statute falls into the first or second category is always  a question  of construction. In the present case, in my  view, the  legislation falls into the second category. S. 3(3)  of the  l957  Act does not incorporate into the  1957  Act  any 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.     That  apart,  it  has been held, even  when  a  specific provision  is incorporated and the case apparently falls  in the  first  of  the above categories,  that  the  rule  that repeals, modifications or amendments of the earlier Act will have  to be ignored is not adhered to incertain  situations. These  have  been  set out in State  of  Madhya  Pradesh  v. Narasimhan. [ 1976] 1 SCR 6. In that case. the Supreme Court was     considering the question whether the amendment of s. 21  of  the Penal Code by the Criminal  Law  Amendment  Act. 195X, was also applicable for purposes of the Prevention  of Corruption  Act, 1947, which by section 2 incorporates,  for the purposes of that Act, the definition of ‘public servant’ in  s 2l of the Penal Code. Answering thc (question  in  the affirmative, the Court outlined the following proposition:     "Where  a  subsequent Act incorporates provisions  of  a previous  Act.  then  the  borrowed  provisions  become   an integral and independent part of the subsequent Act and  are totally  uneffected  by  any  repeal  or  amendment  in  the previous  Act This principle. however will not apply in  the following, cases:     (a)  where the subsequent Act and the previous  Act  are supplemental to each other;     (b) where the two Acts are in pari materia:     (c)  where  the amendment in the previous  Act,  if  not imported  into  the subsequent Act also,  would  render  the subsequent Act wholly unworkable and uneffectual; and     (d)  where  the amendment of the  previous  Act,  either                                                   PG NO 825 expressly  or  by  necessary intendment,  applies  the  said provisions to the subsequent Act. "     The  present  case  falls  within  the  scope  of  these exceptions,  even if s. 3(3) is construed  as  incorporating certain  specific provisions of  the 1944 into  itself.  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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 39 of 39  

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.  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   same provisions shall govern both the levies except that the duty under  the later Act is confined to certain goods  only  and its  distributability among the States may perhaps follow  a different  pattern  from  the principal duty.  There  is  no reason  or logic why all the incidents attaching  under  the earlier  legislation,  in  so &r as  they  are  not  clearly inconsistent  with the later one should not be  extended  to the  later  legislation  as well. As has  been  pointed  out earlier, the Finance Acts which levied special or regular or additional  excise  duties contained in themselves  all  the elements of charge of duty. The goods were mentioned and the duty  as 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  the 1944 Act. All that was further needed was the  applicability of the procedural provisions of the 1944 Act Here,  however, the 1957 Act is 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.     In  the circumstances, I agree that we should give  full and literal effect to the language of s. 3(3) and hold  that it  has  the effect not only of  attracting  the  procedural provisions   of  the  1944  Act  but  also  all  its   other provisions, including those Containing the definition. M.L.A.