P L D 1959 Supreme Court (Pak (PLP)

SHAHABUDDIN, J.‑This is an appeal by special leave pre ferred against the judgment of a Lahore Bench of the High Court of West Pakistan, whereby the appellant the Superintendent of Central Excise, Lyallpur was prohibited from demanding that the respondent Ch. Faqir Muhammad, Proprietor of Aftab Calendar ing and Finishing Mills, should take out a licence for his business of calendaring cloth. On a survey of Dyeing, Bleaching, Embroidering, Printing, Calendaring and Finishing Mills conducted by the staff of the appellant it was found that the respondent was carrying on in his factory the work of Calendaring and therefore a notice was issued to him by the appellant requiring him to take out a licence. It was explained in the notice that as Calendaring was one of the processes ancillary to the completion of an excisable manufactured product a licence had to be taken under rule 174 (1) (c) of the Central Excise Rules. This rule which is to the effect that no manufacturer shall conduct his business otherwise than by the authority and subject to the terms and conditions of a licence was framed under the Central Excise and Salt Act, 1944. Section 6 (a) of this Act is as follows:‑ "The Central Government may, by notification in the official Gazette, provide that, from such date as may be specified in the notification, no person shall, except under the authority and in accordance with the terms and conditions of a licence granted under this Act, engage in‑ (a) the production or manufacture or any process of the production or manufacture of any specified excisable goods or of saltpetre or of any specified component parts or ingredients of such goods or of specified containers of such goods, or . . . On receiving this notice the respondent filed in the High Court an application for the issue to the appellant of a writ of mandamus or any other appropriate writ or direction to withdraw the said notice. In the alternative he prayed for the quashing of the notice and for a declaration that the provisions of the above mentioned Act and rule did not apply to the business of the respondent. His case was that his mills did not manufacture cloth but lifted it from the open market and calendared it, that once cloth came into the market the presumption was that the excise duty due on it had been paid and that any process done to it thereafter neither amounted to manufacture nor made the cloth excisable again. The position of the appellant on the other hand was that the manufactured object was not merely cloth but calendared cloth and as Calendaring was an ancillary process in its manufacture the respondent was a manufacturer, and that no question of duty being levies twice arose. The learned Judges of the High Court upheld the contention of the respondent relying on the definition of excisable goods in the Act, viz., goods specified in the first Schedule as subject to duty and item 15 of that Schedule which is "cloth produced in a factory ordinarily using power in the course of production of cloth." They observed "Now when the cloth is given to the petitioner for Calendaring, it is either cloth or cotton cloth as envisaged by entry 15 of the Central Excise and Salt Act, 1944 and there is no doubt that it remains the same article even after the petitioner has calendared it because, though the cloth may get a finer look and may fetch more price, its relevant contents remain precisely the same. If the contents of the cloth do not change by the process of Calendaring to which the petitioner subjects it I fail to see how that process can be deemed to be a process in the manufacture or production of the cloth. If the First Schedule of the Central Excise and Salt Act had made calendared cloth, as distinguished from cloth dealt with in entry 15 of the Schedule, an excisable article it is obvious that the process of Calendaring would have altered the goods for the purposes of the schedule but as the only entry which can be invoked by the respondent is entry 15 of the Schedule which concerns itself only with cloth. I cannot see how the respondent can claim, as was claimed by his learned counsel, that because the price of the cloth after Calendaring would be more than it was before it was calendared the process of Calendaring was manufacture of cloth within the meaning of the definition of that term contained in section 2 (f) of the Act. It is well settled that taxing Statutes and it is hardly open to question that the Central Excise and Salt Act, 1944, is a taxing statute should be very strictly construed so that the Government does not get money for a thing which the Legislature did not intend to be liable to tax. But even if that strict interpre tation is not applied to the case of the petitioner, the business of Calendaring cannot be brought within section 6 of the Central Excise and Salt Act, 1944, or Rule 174 (1) (c) of Central Excise Rules, 1944. As contended for the appellant this conclusion of the learned Judges is not correct. "Manufacture" is defined in the Ac' [S. 2 (f)] as including any process incidental or ancillary to the B completion of the manufactured product. We are unable to agree with the view of the learned Judges that unless the content of the article is changed it remains the same in spite of its being given a finish. It might have been so if without the finish the goods were not marketable, but un-calendared cloth is also sold in the market. The fact that its price is higher after it is calendared shows that the purchasing public regards calendared cloth as a different article having a positive and specific use in its new state. There is no force in the argument of the learned Advocate for the respondent that Calendaring is nothing more than ironing the cloth already manufactured. That Calendaring like dyeing, bleaching and printing is a distinct process which transforms the article is clear from the following extract from Encyclopaedia Britannica (1953 Edition, Vol. 5, page 846) "In its modern significance, finishing comprises a large and diverse range of processes intended to produce in the fabric a desired appearance or feel; and the machines required for this purpose are correspondingly numerous and varied; finishing operations require plant for, to name some of the important processes, shearing, stretching, drying, damping pressing embossing, impregnating, covering and raising cotton cloths. Classification of finishes in relation to the many different kinds of cotton fabrics is difficult, because many of the processes are applicable to a wide range of cloths. They may be con sidered under the following headings:‑Grey goods, i.e., cloth direct from the loom; white goods, i.e., cloth which has under gone a bleaching process; plain dyed goods‑colours and black printed goods ; raised goods Grey Goods: These may be finished pure i.e., without any additional size or stiffening. After passing through a shearing machine or a combined moting and shearing machine, the cloth may be conditioned in a damping machine of the brush type or the spray type (fig. 1) and afterwards calendared in a suitable calendar such as the three bowl swissing calendar (fig. 2) or a five or seven bowl calendar arranged to give a bright finish on both sides of the cloth, or a friction calendar giving a glazed surface on one side only. Grey goods which are stiffened before being calendared are passed through a range comprising a mangle and cylinder drying machine (fig. 3). The mangle may have two or three bowls, and the drying set may be horizontal or vertical. There can thus be no doubt that Calendaring is a process ancillary to the completion of the manufactured product which is the calendared cloth. It is true that under section 6 a licence is" necessary only if the manufactured goods are excisable; but there: is nothing in Article 15 of the 1st Schedule to show that it ex cludes calendared cloth. If the respondent's mills had manufac tured cloth and calendared it before issuing it out he could not have pleaded that as calendared cloth is not specifically mentioned in the Article 15 of the first Schedule lie seed not pay duty at all As for the liability to pay duty a second time, which has been pressed before us on behalf of the respondent, there is the fact that notification No. 6 dated 29‑4‑1955 issued under S. 37 of the Act exempts cloth undergoing any process incidental or ancillary to the completion of its, manufacture from so much of the duty liable under the Act as may have already been levied on it prier to that process In the present case duty was admittedly levied when the cloths vas manufactured by the concerned mill and before it came into the market, and to that extent further duty is not leviable on it after it is calendared. But that does not mean that calendared cloth is not excisable. It was then argued for the respondent that according to S. 6 (a) Government should have issued a notification to the effect that licences should be taken out by the manufacturer or producer; but there is the rule cited already namely Rule 174 (1) (c) which has been notified. The appeal is therefore allowed, but the appellant shall pay the respondent's posts, as delay in filing the appeal which was out of time was condoned on that condition. A. H. Appeal allowed.