Dyeing and bleaching powerloom cloth is not manufacture, Supreme Court holds in textile cess appeal
Justice S.V.N. Bhatti and Justice N.V. Anjaria dismiss the Textiles Committee appeal, holding a job-work processor of powerloom fabric owes no cess under Section 5A because no textile is manufactured in its units.
A textile cess demand of Rs 2,68,293 raised in 2001 has ended, twenty-five years later, in a Supreme Court ruling on a single undefined word. On 26 October 2026 the Court dismissed the Textiles Committee’s appeal against an Allahabad High Court order that had freed M/s Premium Suiting Pvt. Ltd., a processor that bleaches and dyes fabric for powerloom and handloom weavers on job work, from cess under Section 5A of the Textiles Committee Act, 1963. Justice N.V. Anjaria, writing for himself and Justice S.V.N. Bhatti, held that the Act does not define “manufacture”, that the wider definition in the Central Excise Act, 1944 cannot be borrowed to fill the gap, and that in ordinary language a job-work processor that receives cloth and returns it dyed and bleached manufactures nothing. The proviso to Section 5A exempts textiles made by the handloom and powerloom industry, and the processor, the Court said, is only an extended arm of those exempt manufacturers.
An audit letter, a show cause notice and a two-line exemption
The Textiles Committee is a statutory body under Section 3 of the 1963 Act, functioning under the Ministry of Textiles with the object of ensuring the quality of textiles and textile machinery. Premium Suiting is engaged in bleaching, dyeing and processing 100 per cent man-made fabrics supplied to it by powerloom and handloom units.
The case began with a letter of 28 June 2001 from the office of the Comptroller General of India to the Ministry of Textiles. An audit across five Central Excise Commissionerates in Uttar Pradesh had found that of 30 independent textile processors, only one had been paying textile cess during 2000-2001. The remaining 29 had not, and the audit put the unpaid cess for 1997 to 2000 at Rs 39.64 lakh.
On 20 August 2001 the Assessing Officer served Premium Suiting with a show cause notice demanding Rs 2,68,293. The company replied on 28 August 2001 that it was an independent processor working on job work for textiles received from the powerloom industry; that the fabric was woven by small weavers in household units which in every case had fewer than 50 powerlooms and no spinning plant; and that the Act exempted such products from cess. The explanation was not accepted. The inspecting officer wrote on 16 October 2001 that powerloom and handloom fabrics were exempt only at the loom stage and not afterwards, when further processed. An assessment order of 21 November 2001 fixed the liability at Rs 2,68,293.
Premium Suiting appealed to the Textiles Committee Cess Appellate Tribunal in Appeal No. 223 of 2002. The Tribunal dismissed the appeal on the strength of its own earlier decision in Chandok Textile Exporters Pvt. Ltd. v. Assessing Officer, Textiles Committee, T.C.A. No. 222 of 2002, decided on 30 April 2004, where it had held that processing amounted to manufacturing under the Act, that job workers and merchant dealers were jointly and severally liable, and that processing powerloom and handloom fabric for further manufacturing was not exempt under the proviso to Section 5A. The company was required to deposit the adjudicated amount. A separate notice of 6 January 2006 demanded a further Rs 1,43,176 for April 2001 to December 2003, which the Court treated as a distinct cause of action.
The company then filed Writ Tax No. 354 of 2006 in the Allahabad High Court. On 6 March 2013 the High Court allowed it. It reasoned that bleaching, dyeing and other processing by job workers did not obliterate the status of the cloth as a product of the powerloom industry, which Section 5A exempts, and that the job workers were performing an extended activity for the exempt manufacturers. Since no inspection was required of textiles the handloom and powerloom industry produced, the High Court concluded, the activity of their extended hand could not attract the cess either. The Textiles Committee filed Civil Appeal No. 785 of 2016. Chirag M. Shroff appeared for the Committee and Tanmaya Agarwal for Premium Suiting.
What Section 5A taxes and what it spares
Section 5A was inserted by Act 51 of 1973 with effect from 1 January 1975. It levies, as a cess for the purposes of the Act, a duty of excise on all textiles and all textile machinery manufactured in India, at a rate the Central Government fixes by notification not exceeding one per cent ad valorem. The proviso states that no such cess shall be levied on textiles manufactured from out of the handloom or powerloom industry. The cess is in addition to any other duty, is collected by the Committee from every manufacturer, must be paid within one month of a demand notice, and is assessed on returns the manufacturer files within fifteen days of the end of each assessment period. A manufacturer aggrieved by an assessment may appeal to the Tribunal constituted under Section 5B.
The Act defines “textiles” in Section 2(g) as any fabric, cloth, yarn, garment or other article made wholly or in part of cotton, wool, silk, artificial silk or other fibre, and includes fibre. Section 2(da) defines a powerloom as a loom worked by power, as that term is defined in the Factories Act, used or capable of being used for weaving cloth from cotton, woollen or mixed yarn or fibre. Section 2(db) defines the powerloom industry as one in which a manufacturer of textiles has not more than 50 powerlooms in the factory. The word that does all the work in Section 5A, “manufactured”, appears several times in the section and is defined nowhere in the Act.
Why the Central Excise definition stayed where it was
The Committee’s whole case rested on borrowing. Section 2(f) of the Central Excise Act, 1944 defines manufacture to include any process incidental or ancillary to the completion of a manufactured product. If that definition applied, bleaching and dyeing would be processes incidental to completing the cloth, Premium Suiting would be a manufacturer, and the levy would stand.
The Court endorsed the High Court’s refusal to take that step. Unless a statute incorporates or refers to a definition in another enactment, a word left undefined cannot readily be read as carrying the meaning assigned to it elsewhere. The High Court had correctly relied on Union of India v. R.C. Jain, where the Supreme Court held that if an expression is not defined in an Act, its definition in another Act cannot be imported. Every statute, the Court said, has its own subject matter and context, and a word must be construed with regard to the scheme, purpose and operational ambit of the statute in which it sits. The same word in a different Act cannot be bodily lifted across unless the legislature has applied the doctrine of reference or the doctrine of incorporation.
Two further decisions were pressed into service. In Jagatram Ahuja v. Commissioner of Gift Tax, Hyderabad, (2000) 8 SCC 249, the Court had said that words defined in one statute, as judicially interpreted, do not guide the construction of the same words in another unless the two are in pari materia or one statute expressly adopts the other’s meaning; the Gift Tax Act and the Estate Duty Act were not similar in aim. In Maheshwari Fish Seed Farm v. T.N. Electricity Board, (2004) 4 SCC 705, the appellant had wanted “agriculture” in the electricity statute to carry the meaning given in Tamil Nadu agricultural marketing, university and debt relief legislation, where it included pisciculture. The Court declined, for two reasons it spelled out: none of those statutes was in pari materia, and definitions coined for a particular enactment are often extended or artificial meanings designed to serve that enactment’s object, which cannot be freely used to fix the common-parlance meaning of a term in an altogether different setting. The Court in Maheshwari had also quoted Justice G.P. Singh’s Principles of Statutory Interpretation for the proposition that it is hazardous to read a statute according to a definition in another, more so when the two deal with no cognate subject.
Applying that line of authority, the Court held it “neither safe nor permissible in law” to adopt the Central Excise connotation of manufacture and, on the basis of what it called an alien definition, treat Premium Suiting’s activity as manufacturing. The word “manufactured” in Section 5A had to be understood in common parlance, not in a special sense borrowed from another statute.
An extended arm of an exempt industry
With the definition settled, the facts decided the appeal. Premium Suiting’s processing units are independent units that receive textile from handloom and powerloom manufacturers, who are the ones that manufacture it. Those manufacturers do undertake bleaching and dyeing themselves; here they engaged Premium Suiting to do it on job work. The company takes the cloth, applies dyeing, bleaching and whatever processing is needed, and returns it to the powerloom manufacturers. No manufacturing takes place at its end, and what leaves its unit cannot be termed textile manufactured.
The Court then read the proviso in that light. Section 5A imposes the cess, but the proviso says no cess shall be levied on textiles manufactured out of the handloom or powerloom industry, an express exemption. Premium Suiting does not manufacture; it processes fabric that the exempt industry has already manufactured and sends it back. Its work refines the textile and could be viewed as supplementary and ancillary to manufacturing performed by the powerloom industry, which is itself outside the cess. The company operates only for the benefit of those manufacturers and works as an extended arm for them. Fabric that has been bleached and dyed does not thereby become textile manufactured. “At the best, it is the textile upgraded”, the Court said, not manufacture in the sense Section 5A or the Act as a whole uses the word. Since no textile is manufactured in Premium Suiting’s units, it cannot be made liable to pay the cess.
Order
The Court held that the challenge to the High Court’s order of 6 March 2013 in Writ Tax No. 354 of 2006 had to fail. Civil Appeal No. 785 of 2016 was found meritless and dismissed. Any pending interlocutory application ceased to survive. The judgment is reported as 2026 INSC 1158.