Holding

The Supreme Court held that the processing operations constitute manufacture within the meaning of Section 2(f) (both before and after amendment), the amendment is constitutionally valid, and the assessable value is the wholesale cash price at the factory gate (value of the grey cloth plus processing charges, excluding post‑manufacture profit).

Summary

The petitioners, processors of grey cotton and man‑made fabrics, challenged the levy of excise duty on operations such as bleaching, dyeing and printing, arguing that these were merely processing and not "manufacture" under Section 2(f) of the Central Excises and Salt Act, 1944. The Gujarat High Court held the opposite, while the Bombay High Court upheld the levy; the Union of India subsequently amended the definition of "manufacture" by the 1980 Amendment Act with retrospective effect. The Supreme Court examined whether the processing amounted to manufacture, the constitutional validity of the amendment, its retrospective operation, and the proper method of computing assessable value. It held that the processing does constitute manufacture both before and after the amendment, that the amendment is intra‑vires of Entry 84 (and, if necessary, supported by Entry 97), and that the assessable value is the wholesale cash price at the factory gate (value of the grey cloth plus processing charges, excluding the trader’s post‑manufacture profit). Consequently, the Union’s appeals were allowed, the Gujarat judgment set aside, and the processors’ appeals and writ petitions dismissed.

Issues considered

Whether bleaching, dyeing, printing, sizing and similar operations on grey fabric amount to "manufacture" within the meaning of Section 2(f) of the Central Excises and Salt Act, 1944 as it stood prior to amendment.
Whether the decision in Empire Industries Ltd. v. Union of India, which held such processes to be manufacture, should be reconsidered.
Whether the amendment of Section 2(f) and the related schedule items 19 and 22 by the Central Excises and Salt Additional Duties Excise (Amendment) Act, 1980 is ultra‑vires Entry 84 of List I of the Seventh Schedule.
Whether, if the amendment is beyond Entry 84, the levy can be sustained under the residuary Entry 97 of List I.
Whether the levy of additional duties under the Additional Duties of Excise Act, 1957 is unsupported because that Act does not incorporate the expanded definition of "manufacture".
Whether the retrospective operation of the amendment violates the fundamental right to carry on any trade, business or profession under Article 19(1)(g) of the Constitution.
Whether the assessable value of the processed fabric should be based on the wholesale cash selling price under Rule 173(b) or be limited to the processing charges alone.

Legislation cited

Additional Duties of Excise Act, 1957s. 3(1), s. 3(3)
Central Excises and Salt Act, 1944s. 2(f), s. 4
Central Excises and Salt Additional Duties Excise (Amendment) Act, 1980s. 2, s. 4, s. 5(2)(b)
Central Excise (Valuation) Rules, 1975s. Rule 173(b), s. Rule 174A
Constitution of Indias. Article 19(1)(g), s. Article 245, s. Article 246, s. Schedule VII List I Entry 84, s. Schedule VII List I Entry 97

Subjects

excise dutymanufactureprocessingjob‑workretrospective legislationconstitutional competencevaluationassessable valueCentral Excise ActAdditional Duties Actstatutory interpretation

Judgment

UJAGAR PRINTS ETC.
A
v.
UNION OF INDIA & ORS. ETC.

NOVEMBER 4, 1988

B [R.S. PATHAK, CJ., SABYASACHI MUKHARJI,
S. NATARAJAN, M.N. VENKATACHALIAH AND
S. RANGANATHAN, JJ.]

Central Excises and Salt Act, 1944-Sections 2(f), 4 and Schedule
Items 19 and 22-'Manufacture' meaning of-Processors carry out
C operations on 'grey fabrics' on job work basis-Whether 'manufac-
ture'-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-
D Imposed 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 II and III-"With respect to"-Inter-
pretation of-'Manufacture'-Concept of Entries in legislative lists-
£ Not sources of legislative power-Merely topics or fields of legislation- ,
Legislation co•ild 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-
F Effect of-Legislation could be composite legislation-'Rag-bag'
legislation-What is-Competent legislature can always validate a law.

Words and phrases-'Manufacture'-'In respect of-Meaning
of.
'
O Section 2(0 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)
H Ordinance 1979, which was later replaced by Central Act VI of 1980,
'
770
UJAGAR PRINTS v. U.0.1. 771

called the Central Excises and Salt and Additional Duties of Excise
A
(Amendment) Act, 1980. The Amending Act became effective from 24th
February, 1979. By section 2 of the Amending Act, Section 2(0 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 B
Schedule with retrospective effect. Section 5(2)(b) of the Amending Act
provided that no suit or other proceedings shall be maintained or con-
tinued 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 direct-
ing 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 c
Act.

Prior to the Amending Act, !980, the levy on the processors was
challenged before the Gujarat High Court in the case of Vijay Textiles
Mills v. Union of India and Real Honest Textile v. Union of India, D
[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 Schednle 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 the processor. Follow-
ing this judgment a large number of similar claims of processing-houses E
were allowed by the High Court by its judgment dated 13.3.1979. How-
ever, the Bombay High Court, took a different view and held that even
under the concept of 'manufacture' envisaged in section 2(0 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 Amending Act of 1980. F

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. l SCR 292 and it was held not to have been decided ·
correctly. The view taken by the Bombay High Court in New Shakti G
Dye Works Pvt. Ltd. v. Union of India & Anr., [I98J) ELT 1736, was
approved.

The present appeals, by special leave, preferred against the judg-
ments 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, H
772 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

A involve common 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, rub-
B berising, shrink-proofing, organdie processing etc. done by the proces-
sors 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 identical.

The petitioners/appellants carry out the operations of bleaching
dyeing, printing sizing, finishing etc. of grey fabric on job-work
c against payment of processing charges to it by the customers who are
the ownerii of the grey-fabric. The machinery and equipment installed
in the petitioners' factories are suited for and appropriate to the proces-
sing of grey-fabric and are not capable to manufacturing grey-fabric.
The man-made grey-fabric, such as, Art Silk Grey-fabric is
D 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 traden
E 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. Io some cases, the manufacturers of the
grey-fabric subject it to captive consumption and process them In their
F own composite establishments.

At the 11me 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
G processing of grey-fabric amounted to 'manufacture' within the mean-
ing of Section 2(1) 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.

H In the petitions and appeals, the following points arise for
determination.
1
UJAGAR PRINTS v. U.0.1. 773

A(i) Whether the process of bleaching, dyeing, printing, sizing,
A
shrink-proormg etc. carried on in respect or 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.
B
A(ii) Whether the decision in Empire Industries Limited & Ors.
v. Union of India, (198~] Supp. 1SCR292holding that these operations
amount to 'manufacture' is wrongly decided and requires reconsi-
deration.

(B) Whether the amendment brought about by the Amending Act of C
19110 of Section 2(1') and to tariff-items 19 and 22 of the Central Excise
4.ct is ultra-vires Entry 84 List I and, therefore, beyond the competence
of the Union Parliament.

Whether, at all events, even if the expended concept of manufac-
;ure introduced by the Amendment is beyond the scope of Entry 84 List D
I, 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 unsup-
portable and without the authority of law as there is no corresponding E
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. · · F

(E) Whether, even if the levy is justified, at all events, the compu-
tation 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 l 73(b) is unjustifie.d and illegal in respect oft.he assessable value ot
the processed grey-fabric done on job-work-basi,, G

Allowing the appeals preferred by the Union of India,

HELD: (Per Majority)

The \appeals preferred by the Union of India are allowed and the H
774 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

A 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 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 enforce-
ment of the bank guarantees, if any, for the rerovery of the arrears. [810C-D]

Per Sltbyasachi Mukharji, J. (Concurring with Venkatacbaliab,
J.)

(1) A statutory charge should be measured by the method of its
own computation as laid down in the statute and not by any other
method of computation. The circumstances that thereby the benefit of
c 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. l811C-Df

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
the wholesale dealer who purchases the goods from the manufacturer
E 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 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.
F The value of the trade-marks is not to be taken into account in comput-
ing the assessable value as the affixation of the trade-marks of a particu-
lar brand was extraneous to manufacture. The values of such extrane-
ous 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
thJ.> wholesale market would be independent of the value of the trade-
G marks. [812G-H; 813A-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
H assessable
'
value must. be the value
. of the fabric at the factory gate, that
UJAGAR PRINTS v. U.0.1. 775

is to say, the value at which the manufactured goods leave the factory A
and enter the main stream. [813E] ·

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 goo,!Js. 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 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) c
Atic Industries Ltd. v. H.H. Dave, Asstt. Collector of Central
Excise and Ors., [1975) 3 S.C.R. 563; U;;ion of India & Ors. etc. etc. v.
. Bombay Tyre International Ltd. etc. etc., [1984) I 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., D
[1985) Suppl. 3 S.C.R. 165, followed.

Per Venkatachaliah, J. (for himself and on behalf of R.S. Pathak,
CJ and S. Natarajan, J.)

I (i) The prevalent abd generally accepted test to ascertain that E
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)

l(li) 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·'ll commercially different com-
modity with its own price:-structure, Custom and other conimerCial inci·
dents and that there.was in that sense a 'manufacture' within the mean-
ing of Section 2(1), even as unamended, is an eminently plausible view G
and is not shown to suffer from any fallacy. [798A-B]

Union of India v. Delhi Cloth & General Mills, [1963) Supp. I
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 .l-i
Food Packers, [1980) 3 S.C.R. 1271at1275; Steriing Foods v. State of
776 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

A
Karnataka, (1986] 3 S.C.C 469 at 475 & 476; Kai/ash Nath v. State of
U.P., 8 S.T.C. 358; Deputy Commissioner sales Tax v. Sadasivan, 42
S.T.C. 2 fKerala); Swastic Products Baroda v. Superintendent of Cent-
ral Excise, (1980] E.L.T .. 164 (Gujarat); Swan Bangle Stores v. As~
sistant Sales Tax Officer, 25 S.T.C. 122 (Allahabad); State of Andhra
B Pradesh v. Sri Durga Hardware Stores, 32 S.T.C. 322 (Andhra
Pradesh); Extrusion Process Pvt. Ltd. v. N.R. ladnav, Superintendent
of Cen:ral Excise, (1979] E.L. T. 380 (Gujarat); In Health & Milligan
Man.ufacturing Company, The Sherwin-Williams Company, etc. v.
J.H. Worst Director ·of the North Dakota Government Agricultural
Experiment Station; Kai/ash Nath v. State of U.P., 8 S.T.C. 358;
q 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 ofJhelegislative
0 power but are·merely topics ·Or tields of legislation and must receive a
liberal costruction 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 qnestion of
E 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
legfslatfonon the topic. (799B,D]

F 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 snstenance could be drawn and had from a number of
entries. The legislation could be a composite legislation drawing upon
G several entries. Such a "rag-bag" legislation is particularly familiar in
taxation. [800F-G] ·

Diamond Sugar Mills v. State of U.P., [1961] 3 S.C.R. 242 at 248;
Statutory Interpretation, at page 644 and Hari Krishna Bhargav v.
l;I Union of India & Anr., [1966] 2 S.C.R. 22, referred to.
UJAGAR PRINTS v. U.0.1. 777

2(iii) So far as, 'the exclusive competence of the Union Parliament
A
to legislate is concerned, all that is necessary is to find out whether th•
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 fie.Id in List 1.
Union Parliament has· exclusive power to legislate upon that topic or
field. Of course, it itas eoiicurrent power also in respect of the sub-
jects in List III • .[801E-F] B

2(iv) Even if the impost on prqcess is not one under Entry 84, List
I, but is an impost on 'processing' distinct from 'manufacture' the levy
could yet be supported by Entry 97, List I, even without the aid of the
wider principle recognised a11d· adopted in Dhillon's case AIR 1972 SC
1061. [799FJ . .

3. Section 4 of the Amending Act VI of 1980 has amended the
relevant items in the schedule to the Additional Duties Act, the expres-
sions' 'produce' or 'manufacture' in Section 3(1) of the Additional
Duties Act must be read alongwith the entries in the Schedules. What
appears; tl!erefore, dear is th>1t what applies to the main levy, applies to D
the additional duties as well. [803FJ

Pandit Ram Narain v. The State of Uttar Pradesh and Ors., [1956]
S.C.R. 664 at 673; Macbath & Com. v. Chislett, [1910] AC 220 at 224;
Commissioner of Sales Tax, Madhya Pradesh v. Jaswant Singh Charan
Singh, [1967] 2 S.C.R. 720 at 725-26; Assistant Collector of Central B
Excise, Calcutta Division v. National Tobacco Co. of India Ltd., [1973]
l S.C.R. 822 at 835; Att.-Gen. v. Lamplough, '[1878] 3 Ex. D. 214, 299;
Interpretation of Statutes, 11th ed. p. 156 and Bennion"s Statutory
Interpretation, p. 568-569, referred to.

4(i) A Competent legislature can always validate a law which has F
been declared by courts to be invalid, provided the infirmities and
vitiating factors 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 be called an impermissible G
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 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 H
778 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

vested right from a defect in a statute and seek a wind-fall from the
A
legislature's mistakes. [804G-H; SOSA-CJ

Sri Prithvi. Cotton Mills Ltd. & Anr. v. Broach Borough Munici-
pality & Ors., [1970] l S.C.R. 388, referred to.

B 4(ii) Validity of legislations retroactively curing defects in tax-
ing 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
(
I9(J)(g), the factors considered relevant include the context in which
retroactivity was contemplated such as whether the law is one of valida·
tion of taxing statute struck-down by courts for certain defects; the
period of such retroactivity, and the decree and extent of any unfore-
seen or unforeseenable financial burden imposed for the j>ast jleriod etc.
0 Having regard to all the circumstances of the present case, this Court in
Empire Industries' case rightly held that the retroactivity of the Amend-
ing provisions was not such as to incure any infirmity under Article
19(l)(g). [SOSE-GJ

S(i) Section 4 of the 'Central Excise Act' envisages that the value
B of au article for the purposes of duty shall he deemed to be; (a) the
wholesale cash price fgr 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 froin 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
F capable of being sold at the time of removal of the article chargeable
with duty. [808F-G]

S(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
G 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]
UJAGAR PRINTS v. U.0.1. 779

S(iii) The question whether the producer or the manufacturer is A
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 B
to Impose as long as a rational relationship with the nature of the tax
is maintained. [806B-D]

S(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 c
nature of the levy but is not determinative of it. When a statutory
measure for assess~ent 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 lletermining
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 D
basis for assessing the measure of the tax. [808G-H; 809A-B]

Atic Industries Ltd. v. H.H. Dave, Asstt. 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] l S.C.~. p. 347 at
375, referred to. E

Per Ranganathan, J. (Concurring with Venkatachaliah, J.)

l(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 of the amendment F
actually effected. It was considered not ne.cessary or possible to stretch
the language of the definition in S. 4 beyond the ambit ofthe provision
as delineated in the earlier decisions. The question decided was not that
the legislature could not, but that i.t did not make any redical change in
the nature of the levy. [815F-G]
G
l(ii) There is nothing in the decision HMM case thafimpports the
contention of the petitioners here that the amendment of the definition
of 'manufacture' cannot be 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. lliiiiH; 817AJ
H
780 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

2(i) The words 'levied' is a wide and generic expression. One can
A 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 " restdded meaning. ·in the
B context of sub-section (l) 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 (I). Section 3(3), therefore, also covers the entire
gomut of s. 3(1) and cannot be construed as becoming operative at
somewhat later stage. ~ts operation cannot be excluded in determining
the scope of the charge. [818F -Hl
c
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
-0 -consider section 3(1) of.the 1957 Act-in contrasno the Finance Act of
1965-as covering the entire ambit of the charge linposed. 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 ihe Finance
Act, 1965_ is also found in other Finance Acts. On perusal of these provi-
sions, it will be found that a like position exists there also. These provi-
-E sions are all self-contained and completely specify ihe 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 a 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
F 1957 Act.1821E-HJ

Mis Mahendra Pratap Rama Chandra v. Commercial Tax Officer
& Othet:s, A.I.R. 1965 Cal. 203, referred to.

3(i) Legislatures sometimes take a short cut and try to reduce the
G · length of statutes by omitting elaborate provisions where such provi·
sions 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 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
H_ the expense of lucidity. However this legislative device is quite well
UJAGAR PRINTS v. U.0.1. 781

known and the principies applicable to it fairly well settled. [823C-D]
A
3(ii) Referential legis.lation 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 incorpora-
tion, will be read into the later Act. Subsequent changes in the earlier B
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 irrele-
vant 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 gener- C
ally 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 tbe eadier 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] D

3(iii) Whether a particular statute falls into the first or second.
category is always a question of construction. [824B I

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 E
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; F
Mahindra and Mahindra Ltd. v. Union, A.I.R. 1979 S.C. 798; Bhajiva
v. Gopikabai, (1978] 3 S.C.R. 561; Collector of Custom' v. Nathe/la
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.C.R. 569 and Madhya
Pradesh v. Narasimhan, (1976] I S.C.R. 6, referred to. G

3(ivJ 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 supple-
ment the levy by an additional duty of the same nature on certain goods. H
. ..
,;·

782 SUPREME COURT REPORTS [19881 Supp. 3 s:c.R.

A The duration of the applicability is undefined but the ·statute is clearly enforce-
able as long as it is in the statute book side by side with. the normal
excise duties. The clear intention is that the sanie provisions shall
govern both the levies except that the duty under the later Act is con-
fined to certain goods only and its distribntability among the States may
perhaps follow a different pattern from the principal duty. [8258-C]
B
3(v) The Finance Acts which levied special or regular or addi-
tional excise dnties contained in themselves all the elements of charge or
duty. The 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 t~e
c 1944 Act. All that was further needed was the applicability of the pro;
cedural provisions oftbe 1944 Act. However, the 1957 Act'ls 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.· [8250-J?]
D
ORIGINAL JURISDICTION: Writ Petition No. 12183 of 1985
etc. eic.

(Under Article 3~ of the Constitution of India).

E K. Parasaran, Attorney General, Soli J. 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, Subash
Parekh, Dushyant Dave, P.H. Parekh, E.K. Jose, Ms1 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.
F
H. Wahi, Mrs. V.D. Khanna, Aruneshwar Gupta, Mrs. AnilKatiyar,
R.K. 'Kapur, B.R. Kapur, Anis Ahmed Khan, Ms. Abha Jain,
R. Karanjawala, Mrs. M. Karanjawala, Ms. Meenakshi, Vishnu
Mat)ll!r, Kail,ish V:asudev,, P.O. Shah, Shri Narain, Sandeep Narain,
M.N. Shroff, Mrs. P.S. Shroff, R. Sasprabbu, S.A. Shroff, S.S.
Shroff, Praveen Kumar, M.N. Chowdhary, M.D. Chowdhary,
G N. Das Oupta, Rajesh Chibber, K.K. Bhaduri, Rajiv Dutta,
E.C. Agaiwala, Harjinder Singh, R.K. Nambiar, P. Paremeswaran,
Ms. Bina Gupta, K. Swami and V.N. Ganpule for the appearing
parties.

H The following Judgments of the Court were delivered:
UJAGAR PRINTS v. U.O.I. [VENKATACHALIAH, J.I 783

VENKATACHALIAH J, These appeals, by Special Leave, pre-
ferred against the Judgments of the High Court of Gujarat and the
High Co.urt 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-
conceming the validity of the levy of duties of excise under tariff-items
19 and 22 of the Schedule to the Central Excises and Sali Act 1944 B
("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' belooging to their customers.
c
the Amending Act which became effective from 24.2. 1979
i' 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 D
Judgment of the High Court of Gujarat which had declared the levy on
such 'processing' as illegal as, according to the.High Court, the proces-
sing 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. E

The processors who carry-out these operations on cotton fabrics
01 "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 Art) F
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 the main impost, the levy
of additional duties also fails and, that at all events, even after the
amendment the concept of 'manufacture' under the said Additional
Duties Act had not been correspondingly widened by an appropriate G
amendment.

2. The present batch of appeals and writ-petitions comprises of a
large number of cases. It is not, having regard to the questions requir-
ing to be decided in these matters, necessary to go into, in any parti-
cular detail, the fact-situation of each individual case. The processors H
784 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

·in th~se cases, who may convenie~tly be referred .to as the "proces-
A sors" 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
-8, 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 . 1218,3 of 1985 '.Mis. Ujagar Prints v. Union
of !ndia·and Ors.), in which the petitioner has challenged the levy by a
petition' under Article 32 of the Consiitution are typical and rep-
resentative of all oiher similar cases. The petitioner is a firm of
partners with its Head bffice 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
D averred-and that is not disputed either-are suited for and
appropriate to the processing of Grey-fabric and are ~ot capable of
manufacturing Grey-fabric. The man-made grey-fabric such as Art
Silk Greifabric, it is stated, is manufactured in mills and on power
looms and that latter is exempt from excise d\Jty on iis manufacture.
Petitioners further aver that the Art Silk Grey-fabrics which are pro-
E cessed in the petitioner' faetory 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 make is that the proces-
sing of the grey-fabric is not a part, or continuation, of the process of
F 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. lt-is also averred that the firm Mis. 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
a 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.
It is contended that these job work processing operations do· not
H amount to "manufacture" as the petitioners do not carry out any spin-
ning or weaving operations; that what they receive from their custo-
UJAGAR PRINTS v. U.0.1. [VENKATACHALIAH, J.] 785

mers for processing is othel'Wise fully manufactured man-made fabr;c
A
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,
fpr, in conceivable cases the duty itself might far exceed the pro- B
cessing-charges that the processors stipulate and geL ·

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. ln some cases the manufacturers of the grey-fabric subject
it to captive consumption and. process them in their own composite- C
establishments.

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 D
corollary -if the contention of the processing~houses which do not pro-
cessing work fot 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 E
the kind concerned in these cases ambunts 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 I; whether, at all events, the imposition ·of a tax on such
'processing' is referable to Entry 97'List I; and if the impost ·on .the
processors is justified under tariff-items 19 and 22,· according as F
whether the Grey-fabric is cotton ·or 'man-made', what shmild 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-
faoric did not amount to 'manufacture' and did not attract ad-valo'"m
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 H
processing.
786 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

Following this judgment a large number of similar claims of
A 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,
B dated 16th June, 1983 in writ petition 1623 of 1979 New Shakti Dye
Works Pvt. Ltd. v. Union of India and Anr. too.k 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
C: Amending 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
..
I} 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 refe-
R rence to an artificial and statutorily expanded import.

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

F
and

(i) J -
(ii) ] Omitted as unnecessary"

The reasoning of the Gujarat High Court was on these lines .

G . "In the instant case, the excise duty cl.aimed on the basis of
the market value of the processed cotton fabrics ·or man-
. made fabrics cannot be levied because, assuming that pro- ,,
cess amounts to manufacture, all that they have done is to
manufacture processed cloth, processed fabric, either cot-
ton or man-made a,nd that not being a taxable event in the
.H light of Secti~n 3 read with s~ction,2( d) of tl!_e_ A~t and
UJAGAR PRINTS v. U.0.1. (VENKA'rACHALIAH, J.] 787

Items 19 and 22 levy of excise duty on this basis was ultra
A
vires and contrary to law ..... "

This view, acc<'>rding 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 (Amend- B
ment) 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). Tlie relevant
entries in the Schedule to the 'Additional Duties Act' were also
amended.· So far as amendment to Section 2(f) was concerned, Section C
2 of the Amending Act introduced three sub-items in the definition of
'manufacture'. Two of them are material for the present purpose:

-· "(v) fa relation to_goods comprised in Item No. 19(I) of the
Firsi Schedule, includes bleaching, mercerising, dyeing,
printing, water-proofing, rubberising, shrink-proofing, , D
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-settin_g, crea_se resistant E
processing or any other process or any one or more of these
processes."

Similarly, amendments were affected by Section 3 of the Amend-
ment Act which amended the original tariff-items 19 and 22 by sub-
stituting the following provisions in their respective places: F

"1. Cotton fabrics other than (i) embroidery in the piece,
in strips or in motifs, and (ii) fabrics impregnated, coated
or laminated with preparations of cellulose derivatives or
of other artificial plastic materials
G
(a) cotton fabrics, not subjected to any process: Twepty
per cent ad-valorem

(b) cotton fabrics, subjected to the process of bleaching,
mercerising, dyeing, printing, water-proofing, rubberising,
shrink-proofing, organdie processing or any other process H
788 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

or any two· or more of these processes. Twenty per cent
A ad-valorem

xxx xxx XXX"
"'
· "l2(1) Man-made fabrics other than (i) embroidery
B in the piece, ,in strips or in motifs, (ii) fabrics impregnated,
coated or 'laminated with preparations of cellulose deriva-
tives 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.
c
(b) man-made fabrics, subjected to the process of bleach-
itig, dyeing, printing, shrink-proofing, teritering, heat-set-
ting, creaseTesistant processing or any otlier 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 ir
· the :Schedule to the Additional Duties Act. Section-5(2) of the Amend-
ing Act provided:

!E "5. Special provisions as to duties of excise on eotton
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
silb'section ( 1) before the date of co.mmencement of this
Act, with respect to or in relation to the levy of duties of
. excise on-
:G
(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
' 1may ,be, "man-made _fabrics",
UJAGAR PRINTS v. U.O.L [VENKATACHALIAH, J.] 789

shall for all purposes be deemed to be and to have always
A
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 judg-
ment, decree or _order of any court, tribunal or other
authority-
B
. (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" sub-
jected to any process,
c
(ii} "woollenfabrics" 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
D

_shall be deemed always to have been, as validly levied,
a_ssessed 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 E
or continued in any court for the refund of, and no enforce-
. ment 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; · F

(c) • .. • • ........... ,'" ..... ..
,,
(d) ••••••••••••• i •••••••••••

8. Indeed, the correctness of the judgment of the Gujarat High G
Court in the cases of Vijaya Textiles and Real Honest Textiles were
considered by a Bench consisting of three judges of this court in
Empire Industries v. Union of India, [1985] Supp. 1 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. Vi jay a Textiles Mills v.
_Union of India, I 1979 I 4 ELTJ 181, was held not to have been decided H
'790 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

correctly. The view taken by the Bombay High Court in New Shakti
A 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
a 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 (Mis.
c 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
11> its amendment. The second question was whether, even if such proces-
sing did amount to 'manufacture' what should be 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 reconsi'
1£ dered. 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:
F
" .. : .. 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 asses-
sed to excise duty in the hands of what may be called 'job-
bers'. Since this was a decision given by a Bench of three
Judges, the petitioners and appellants who are carrying on
I{ busfoess of processing on job:work basis could not conte'!d
UJAGAR PRINTS v. U.0.1. [VENKATACHALIAH, J.] 791

that these processes do not amount to manufacture and
A
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 B
some doubts. Nevertheless, in para 6 of -the order, the Referring
Bench made a further observation to this effect:

" .... Of course, wher. ;ii .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, c
whether processing of grey fabric by a processor on job-
work basis constitutes manufacture, because the judgment
in Empire Industries case which has decided this question
in favour of the revenue and against the processor is a
judgment of a Bench of only three Judges and now the D
present writ petitions and appeals will be·beard by a Be9eh
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 E
vigorously argued this aspect at great length and we thought 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- F
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 pro-
cedure followed by the Excise authorities was that the
trader, who entrusted cotton or marl made fabrics to the 0
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 H
792 SUPREME COURT REPORTS . (1988J Supp. 3 S..C.R.

may be illustrated by giving the following example:
A
" ' .. ~
(1) Value of grey cloth in the hands. of. the processor:
Rs.20.00

(2) Value of job-work done: Rs.5.00
B Value of finished cloth returned to the..trader (1+2):
Rs.25.00

(~) Trader's selling price inclusive of his selling profits,
etc.: Rs.30.00 · ·

The assessable value in the case given in this example
c would. be taken by the Excise authorities at Rs.30 which
was the sale price of the trader .... "

The view of. the. Referring
,.-. . I .
Bench
.
on the point was this:.
.

D "We cannot accept the contention of the learned couns.eI
. 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 assess~ble value of the pro-
cessedfabric since the grey cloth is \)~e of the raw materials
. which goes into the manufacture· of the processed fabric
E . and the value of the processed fabric cannot be computed
. w.ithout including the ~al\le of the raw material that goe~
into its manufacture. The assessable value of the processed
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 at the
F 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
G value of the processed fabric must be taken to be Rs.20 + 5
that is Rs.25 and the profit of RS.S which the trader may
make by selling the processed fabric cann<;>t .be. included,in
the assessable value. The element of selling profit of the
trader would be entirely an extraneous element . and.it
' . can·-
not be taken into account for the purpose of determining
H the assessable value of the processee fabric which would
UJAGAR PRINTS v. U.0.1. (VENKATACHALIAH, l.] 793

comprise the value of the grey cloth and the job-work A
charges but exclude the profit at which the trader may sub-
sequently sell the processed fabric."

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-
B
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. c~rried on in respect of cotton or C
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.
D
(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
E
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 I, whether the impost is, at all events, referable F
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~ G
under the Additional Duties Act.

(d) Whether the retrospective operation of the Amending Act is
an unreasonable restriction on the fundamental right of the 'pro-
cessors' under Article 19(1)(g) of the Constitution.
H
794 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

(e) Whether, even if the levy is justified, at all events, the com-
A putation of the assessable-value of the processed Grey-fabric on
the basis of the whole-sale cash selling-price declared under clas-
sification list under Rule l73(b) is unjustified and illegal ifl
·respect of the assessable-value of the processed Grey-fabric done ·•
on job-work-basis.
B
12. Re: Conterition (a)

The essential condition to be satisfied to justify the levies, con-
tend 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 charac-
c ter 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
D cited. Particular reference was made to Union of India v. Delhi Cloth
& General Mills, [1963] Supp. (1) SCR 586 at 597; Tungabhadra
Industries Ltd. v. Commercial Officer Kurnool, [1961] 2 SCR 14;
Deputy ,Commissioner of Sales Tax v. Pio Food Packers, [1980] 3 SCR
1271at1275; Sterling Foods v. State of Karnataka, [1986] 3 SCC 469 at
475 & 476; Kai/ash Nath v. State of U.P., 8 STC 358; Deputy Commis-
E sioner Sales Tax v. Sadasivan, .42. STC 201 (Kerala);'Swastic Products
Baroda v. Superintendent of Central Excise, [1980] ELT 164 (Gujarat);
Swan Bangle Stores v. Assistant Sales Tax Officer, 25 STC 122
(Allahabad); State 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, [1979] ELT 380 (Gujarat).
F
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 comp-
a lete 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
1 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."
UJAGAR PRINTS v. U.0.I. [VENKATACHALIAH, J.] 795

These observations in Health & Milligan Manufacturing Company, the
A
Sherwin-Williams Company, etc. v. J.H. Worst, Director of the North
Dakota 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. B
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 C
case were cited:

" ..... manufacture is the end result of one or more pro-

- cesses 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 D
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 hs
still retaining its original identity."
(Emphasis Supplied)
E
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
some 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 F
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 changed by ·
printing and processing. In· view which we take the cloth
exported is the same as the cloth sold by the petitioners, G
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' H
796 SUPREME COURT REPORTS [1988) Supp. 3 S.C.R.

AIR 1963 SC p. 791 at 795 case was referre.d to:
A
"Manufacture implies a change, but every change is not
manufacture and yet every change of an article is the result

B
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."

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
c 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

D
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 custc:ner while not shedding its
E 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 comer-
cially different commodity.

14. We have carefully considered these submissions. In the
F 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, 21STC17 in which the view expressed by the Division
Bench of the Madhya Pradesh High Court in Hiralal Jitmalv. Commis-
sioner of Income-tax, 8 STC 325 at 326 was held supportable on the
G 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."
UJAGAR PRINTS v. U.0.1. [VENKATACHALIAH, J.] 797

The Division Bench also referred to, with approval, the decision A
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:
'r
"Fabric itself means woven materials. It was contended
that processing the manufactured fabric does not bring into
B
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:
c
"It appears in the light of the several decisions and on the
construction of the expression that the process of bleach-
ing, dyeing and printing etymologically also means
manufacturing processes ..... "

15. It is strenuously urged for the processors that the view taken D
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 E
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 F
reached. Insistence on any sharp or intrinsic distinction between 'pro-
cessing' and 'manufacture', we are afraid, results in an over simplifica-
tion 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 G
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.
H
798 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.
,
16. On a consideration of the matter, we are persuaded to think
A ·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
B 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 Re-
ferring 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. ,
I

We think, we should reject Contention (a).
c
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 recog-
D nised 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
E salutary rule that words conferring the right of legislation
should be interpreted liberally and the powers conferred
should be given the widest ampHtude; 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."
f (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
G 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, con-
H tended that the amendment which seeks to equate "processing" with
.,_
UJAGAR PRINTS v. U.0.1. [VENKATACHALIAH, J.] 799

"manufacture" is beyond the scope of Entry 84 List I.
A
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
i come within that concept. B

Entries to the legislative lists, it must be recalled, 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 gene-
rous spirit and not in a narrow pedantic sense. The expression "with
respect to" in Article 246 brings-in the doctrine of "Pith and Sub-
stance" in the unerstanding of the exertion of the legislative power and
c
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. D

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 E
not come within that concept."

19. At all events, even if the impost on process is not one under
Entry 84, List I, but is an impost on "processing" distinct from "man-
ufacture" the levy could yet be supported by Entry 97, List I, even
without the aid of the wider principle recognised and adopted in Dhil- F
Ion's case AIR 1972 SC 1061. 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 Parlia-
ment, it is urged, has not chosen to enact any such law in this case. The
charging section does not, it is urged, bring such a taxable-event to G
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 &ctivity like
processing and would be covered by the powers enumera-
ted under Entry 97 of List I of the Seventh Schedule then it H
800 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

was submitted that there was no charging section for such
A
an activity and as such the charge must fail, and there can-
not be any levy ..... "

The contention was rejected holding:

B " ..... This argument proceeds on an entire misconcep-
tion. 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 pro-
duced or manufactured. "Manufactured" under the A·
after the amendment would be the 'manufacture'. as
amended in section 2(f) and Tariff item 19-I and 22 and the
c 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
D 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.

E 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 liiw, consciously applied its mind to
the source ·Of its own competence. Competence to legislate flows from
F 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 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
G composite legislation drawing upon several entries. Such a "rag-bag" legis-
lation is particularly familiar in taxation.

Bennion in his "Statutory Interp~etation" (at page 644) .r_efers
such a composite legislation, though the observations must be under-
s.tood in the context of the supremacy of the British Parliament and
fl!: . one of unlimited powers and which is, under no inhibitions unlike a

1
<
UJAGAR PRINTS v. U.O.I. [VENKATACHALIAH, J.] 801

federal polity, of distribution of legislative powers. Learned author
A
refers to:

" 'Ragbag' Acts: Some Acts are 'rag bag' Acts, co-
vering 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, capi- B
tal gains tax, stamp duty, capital transfer tax and so on.
Even within a Part of a Finance Act the various provisions
hav~·nuite different aims ...... "

In Hari Krishna Hhargav v. Union of India and Anr., [1966] 2 SCR 22,
this Court said: ·
c
" There is no prohibition against the Parliament
enacting in a single statute, matters which call for the exer-
cise 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 D
entries is the residuary entry does not also attract any disa-
bility ..... "

21. So fat 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 E
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, th10refore, insubstantial. F

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' Section3(1) of the Additional Duties G
Aet. If it does, as has been held on point (a), this argument does riot
survive at all.

rhe point, however, sought to be ·put across is that, even if the
concept of 'manufacture' for purposes of levy of excise duty u~der the
'Central Excise Act' is validly expanded or that a tax on processing is, H
')
802 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

otherwise, supportable under Entry 97(1), the position under the
A
'Additional Duties Act' is quite different. The 'Addiiional 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
B urged, that the ordinary legal connotation of 'manufacture', contained
in the charging Sectioin 3(1) of the 'Additional Duties Act' can alone
support the levy. It is not, it is urged, permissible to import the artifi-
cial and expanded definition of 'manufacture' containing in Section
2(f), as amended, into Section 3(1) of the Additional Duties Act.

The following observations of this court in Pandit Ram Narain v.
c The State of Uttar Pradesh and Ors., [1956] SCR 664 at 673 are pressed
in to service: ·

" ..... It was rightly pointed out that it is no sound princi-
ple of construction to'interpret expressions used in one Act
D, with reference to their use in another Act ..... "

Again, the observations in Macbeth & Co. v. Chislett, [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 incor-
porated or referred to such an interpreta~ion is given to .. it,
for the purposes of that Act alone' ..... "
F
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
G 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'.

H 23. The· contention was neatly and attractively presented and
'·~'

'
UJAGAR PRINTS v. U.0.1. [VENKATACHALIAH, J.) 803

appeared, at .first blush, to merit a serious cosideration of the validity A
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 B
provides:

... , .... levy 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 (1)."

It is plain that the statute expressly makes the provision in the "Cent-
c
ral Excise Act" apply in relation to 'levy and collection' of the addi-
tional duties. The question is. whether this provision is sufficient! to
attract Section 2(f) ot the main Act as amended. This, in tum, 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 D
imposition of a tax as well as its quantification and assessment. In
Assistant Collector of Central Excise, Calcutta Division v. National
Toba~co Co. of India Ltd., [1973) l 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 E
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 be taxed ..... "

24, That apart, Section 4 of Amending Act VI of 1980 has F-
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.

In Att.-Gen v. Lamplough, [1878) 3 r3i... D. 214, 229 it is G.
observed:

"A schedule in an Act is a mere question of drafting, a
mere question of words. The sl:hedule is as much a part of
the statute, and is as much an enactment, as any other
part" H
\
'
804 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

Maxwell says (in Interpretation of Statutes 11th ed. p. 156):
A

... " ..... if an enactment in a schedule contradicts an earlier
·~ I
clause it pevails against it."

Bennion (in Bennion's Statutory Interpretation, p. 568-569) referring
B 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, .. ·... "
c "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
D 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
E like effect, Flower Freight Co. Ltd. v. Hammond, [1963] 1
QB 275; R v. Legal Aid Committee No. 1 (London) Legal
Aid Area, exp. Ronde!, I 1967] 2 QB 482 and Metropolitan
Police·Commr. v. Curran,, [1976] l WLR 87.)"

What appears, therefore, clear is that what applies to the main
p 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 retroacti-.
G vity 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-
H granting legislative competence-the earlier judgment becomes
UJAGAR PRINTS v. U.0.1. [VENKATACHALIAH, J.] '805

irrelevant and unenforceable, that cannot be called an impermissible
A
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 Pritkvi Cotton
Mills Ltd. & Anr. v. Broach Borough Municipality & Ors., [1970] 1
SCR, 388)
B
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 re-
cognised·and courts, except under extraordinary circumstances, would c
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., [1985] 1 Supp. 292 at 327
this court observed:
D
" ..... not only because of the paramount governmental
interest in obtaining adequate revenues, hut a]so 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".
E.
In testing whether a retrospective imposition of a tax operates so
harshly as to violate fundamental rights under Article 19(1)(g), ihe
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 unforse- F
able 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(1)(g). We are in
respectful agreement with that view.
G
There is no merit in contention (d) either.

26. Re: Contention (e)

This concerns the question of the correctness of the determina-
tic>n of t~e asse~able-vallle. The processors say_ that th_ey have _f~ed H
806 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

A classification lists under rule 173 B 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 con-
' sequences 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. ~
B
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 determina-
tive 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
! c 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
~ould 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.
D
27. The processors contend that,:the assessable-value could only
be the job-work charges received hy them for the processing of 'Grey-
fahric' and cannot be the selling-price at which the customer who
entrusts the Grey fabric for processing-ul.timately sells it in the market.
Such a sale-price, it is said, would; quite painly, include the value of
E the Grey fabric, the processing-charges and also the selling-profits 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-
fi price of goods of like nature and quality in ~he wholesale market would
include the post-manufacturing profits of the trader which cannot
legitimately be regarded as part of the assessable-value.

28. Thi~ contention was considered in detail in Empire Industries
case [1985] 1 Supp. SCR 293 at 327 whereinit was held:
G
"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 of the purposes of assessment under section
4 of the Central Excise Act will not be the processing
charges alone but the intrinsic va!ue ?! ,!lie_ p_i:o~~~j _fab-_
UJAGAR PRINTS v. U.0.1. [vENKATACHALJAH, J.] 807

rics which is the price at which such fabrics are sold for the
first time in the wholesale market.. That is the effect of A
section 4 of the Act. The value would naturally include the
value of grey fabrics supplied to the independent proces-
sors for the processing. However, excise duty, if any, paid
on the grey fabrics will be given pro forma credit to the
indeperident processors to be utilised for the payment on B
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 inclu-
sion in the assessable-value the cost of the Grey-fabric and the proces-
sing charges. The Referring Bench held:
c
"We cannot accept the contention of the learned counsel
on behalf of the petitioners and the appellan.ts that the
value of the grey cloth which is processed by the processor
should not be included in the assessable value of the pro-
cessed fabric ...... " D
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: E
"The value of the goods for the purpose of excise must take
into account only the manufacturing cost and the manufac-
turing profit and it must not be loaded with post-manufac-
turing cost or profit arising from post-manufacturing opera-
tion ...... '' F

" .... 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 G
...! wholesale transactions ..... "

" ..... If excise were levied on the basis of second or sub-
sequent wholesale price, it would load the price with a post
manufacuturing element, namely, selling cost and selling
profit of the wholesale dealer. That would be plainly con- · H
808 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

trary to the true nature of excise as explained in the Vo/las'
A
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
B 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 wh0lesale dealer .Jess trade discount would
represent the value of the goods for the purpose of assess-
ment of excise .... "
c Explaining what really is the idea of "post-manufacturing profit"
referred to in Alic's case this court in Union of India & Ors. etc. etc. v.
Bombay Tyre International Ltd. etc. etc., [1984] 1 SCR, p. 347 at 375
said:

D " .... 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 pertainillg to the sale transactions effected by
the manufacturer but to those pertaining to the subsequent
sale transactions effected by the wholesale buyers in favour
E -0f 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' envis-
ages that the value of an article for the purposes of duty shall be
p 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
o chargeable with duty.

The nature of the excise duty i~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
H measure for assessment of the tax is contem£lated, it "need not con-
UJAGAR PRINTS v. U.0.1. [VENKATACHALIAH, J.I 809

tour along the lines which spell out the levy itself.", and "a broader
based standard of reference may be adopted for the purposes of A
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 B
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(l)(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 prov1S1ons of Section 4 and the Central c
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 D
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 woul_d have to be deter-
mined differently dependent upon the consideration that the process- E
ing-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 proces-
sing operations on its own.
F
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 manufac- G
tured 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 and Salt Act, 1944 ( 1 of 1944) and the rules
made thereunder, in respect of the goods manuactur.ed on H
810 SUPREME COURT REPORTS [ 1938] Supp. 3 S.C.R.

behalf of the said manufacturer and, in order to enable the
A.
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."
B
31. On a consideration of the matter, the view taken in the mat-
ter 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
c set-aside. The appeals preferred by the processors against the judg-
ment 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.

D 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 guaran-
tees, if any, for the recovery of the arrears.

SABYASACHI MUKHARJI, J. I have had the advantage of
E 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
F 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 deter-
mination of the assessable-value do not legally justify the conse-
quences 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
G 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
H in the course of wholesale trade for delivery at the time and place of
UJAGAR PRINTS v. U.O.I. [MUKHARJI, J.] 811

removal, where the buyer is not a reiated person and the price is the
A
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 &
Others etc., [1985] Suppl. S.C.R. 292, it was held that where for the B
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 o\her 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 c
method of computation. The circumstances that thereby the benefit of
any exemption granted by the legislation may be Jost 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 D
taxation under the Ad 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 pro-
cesses, whether on their own account or on job charges basis, the value
for the purposes of assessment under section 4 of the Central Excise E
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 F
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 r.
of grey cotton fabrics and manmade fabrics belonging to the customer
and entrusted by him for processing amount to 'manufacture' within ·
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 ihe
Amendment Act, these processes amount to manufacture· and-·excise
duty is leviable on the processed fabrics. The learned Chief Justice also H
812 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

dealt with the other question, namely, what is the value of the proces-
A sed 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 be
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 sub-
sequently sells the processed fabrics. The learned Chief Justice
c reiterated that it is ~t 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 postcmanufacturing
profits or post-manufacturing costs could be included in the assessable-
D 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 tlie 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
E that basis. 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 the wholesale dealer who purchases the goods from the
F 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 /nterna-
G tional Ltd. etc. etc., [1984] 1 S.C.R. 347 at 375. It has to be 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 & Ors. v.
Cibatul Ltd., [1985] Suppl 3 SCR 95 and the Joint Secy. to the Govt. of
India & Ors. v. Food Specialities Ltd., [1985] Suppl 3 SCR 165. It was
H emphasised in Union of India & Ors. v. Cibatul, (supra) that the value
UJAGAR PRINTS v. U.0.1. [MUKHARJI, J.l 813

of the trade-marks was not be taken into account in computing the
A
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 B
assessable value. Similarly, in the case of Joint Secretary to the Govt. of
Jndia 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
c
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 manufac-
ture. The charges for the same are not part of the assessable value and D
cannot enter into computation of the whole-sail cash price on the basis
of which excise duties are to be levied.

In the aforesaid view of the law and for the reasons mentioned by
my learned brother, I agree with his answer to this contention. The
assessable value would, therefore, include the value of the grey cloth E
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
rnain stream. F

One more aspect will have to be reiterated. 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 rule>. This is quite indepen- G
dent of the ownership of goods. It is, therefore, necessary to reiterate
that the value for the assessment under Section 4 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 H
814 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

A Empire Industries (supra) and as clarified by my learned brother in this
judgment no difficulty should arise.

RANGANATHAN, J. I agree but I should like to add a few
words on two of the points argued befote us.

B First, I should like to clarify the nat.ure 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 UniQn cannot seek to uphold the amendment
presently in question by reference to Entry 97 of List I in the Seventh-·
c 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
D 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
E 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
F 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 India, with a view to overcome these decisions, had contended that
since Entry 97 of List I in the Seventh Schedule to the Constitution
G enabled Parliament to enact a legislation even beyond the purview of
an excise duty covered by Entry 84of 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,
H however, be clear from the discussion in the paragraphs referred to
UJAGAR PRINTS v. U.0.I. [RANGANATHAN, J.] 815

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 A
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~ 1 where I said:

"Mr. Chandrasekharan's contention .......... that the B
language of the new section should be given an enlarged
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 C
also .including in the dutiable value the whole or some part,
of 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, tl!_at in view of Entry 97 in the Union D
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 E
statement of objects and reasons for the amendment, that there was
nothing to show that the legislature had intended to make any 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 9] in List l but on the
language and scope of the amendment actually effected. It was con- p
sidered not necessary or possible to stretch the language of the defini-
tion in s. 4 beyond the ambit of the provision as delineated in the
earlier decisions. The question decided was not that the legislatur£
could not, but that it did not, make any radical.change in the nature of
the levy. -
G
• The position considered in the HMM case may be illustrated by
an analogy. Entry 82 in List I of the Seventh Schedule to the Constitu-
tion 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. Bet- if
816 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

A ween 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.J. T. v. Elphinstone Spinning & Weaving Mills Co. Ltd., [1960] 3
SCR 953, this Court held that the language of the relevant provision in
B the Finance Acts was so framed that it could not be read as an indepen-
dent charging section. It will be appreciated that the Finance Acts
were also enactments of the Union Legislature and a taxation of pro-
fits,. 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
c 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
D earlier section. The Court saw no reason to read into the language of
the amended provision a meaning much wider than 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/profits.
E
But. here the position is entirely different. The 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 with my learned
brothers that it is-, there is no difficulty. But, if, as contended for by
F Sri Soli Sorabjee, that legislative entry permits a duty being levied only
on the process of '·'manufacture", stricto sensu, and the processing in
this case cannot be brought within that definition then this expanded
definition cannot be fitted into that entry. Nevertheless the specific
statutory definition cannot be ignored and if it cannot be held valid by
reference to Entry 84, its validity has to be considered with reference to
G the residuary Entry 97. The definition being what it is it cannot be read
down or restricted only to the process of manufacture in a limited
sense. It explicitly enlarges the scope of the levy of excise duty and, if
it is not permissiole to bring it within the scope of Entry 84, a resort to
Bntry 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
H petitioners here that the amendment of the definition of "manufac-
UJAGAR PRINTS v. U.0.1. [RANGANATHAN, J.] 817

ture" cannot be sustained by reference to Entry 97 of List I in the
Seventh Schedule to the Constitution of India, if it cannot be upheld as A
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 defini-
tion of the term "manufacture" enacted in the Central Excises & Salt B
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' but
this expression is deliberately left undefined, though the c
statute takes special care in s. 2 to adopt, for its purposes,
the definition of the specified goods as con.tained in the
1944 Act. This excludes the definition of 'manufacture'
enacted in s. 2(f) of the 1944 and enlarged from time to
time. D

(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 laid under S. 3(1), the
purpose of S. 3(3) is only to say that this charge shall be E
quantified, demanded and recovered by resort to the
machinery provisions of the 1944 Act. This sub-section can-
not be read as having the effect of incorporating the sub-
stantive definition of "manufacture" in the 1944 Act
particularly when s. 2 chose to incorporate only the defini-
tion of the specified goods as contained in the 1944 Act. F

(iii) Even if the language of S. 3(3) is construed more
liberaly, it will be effective only to incorporate the defini-
tions contained in the 1944 Act as on the date of com-
mencement of the 1957 Act but not its subsequent legisla-
tive expansions. G

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, appa-
rently has in mind the famous dictum of Lord Dunedin in Whitney v.
Inland Revenue Commissioners, [ 1927] A.C. 37 echoed in several deci- H
818 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

A sions of this Court and of the various High Courts in India:

"Now, there are three stages in the imposition of a tax:
there is the declaration of liability, that is the part of the
statute which determines what persons in respect of what
property are liable. Next, there is the assessment. Liability
B 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 volunta-
rily pay." ·

The argument, founded on the above figurative analysis, seeks to
c 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
D 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, evens. 3(1) which, according to the counsel, is
the charging section, uses the same words "levied and collected".
E 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
F 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 con-
texts it may have a restricted meaning. In the context of sub-section (1)
the word "levied" admittedly means "charged "as well as "assessed".
G The words "levy and collection" in sub-section (3) cannot be con-
strued differently from the words 'levied and collected' used in sub-
section (1). S. 3(3), therefore, also covers the entire gamut 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.
H
UJA.GAR PRINTS v. U.0.1. [RANGANA1HAN. J.] 819

In this context, reference has to be made to a decision of this A
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 B
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
719. This decision was really concerned withs. 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:
c
"( 1) When goods of the description mentioned in this sec-
tion chargeable with a duty of excise under the Central
Excises Act ..... are assessed to duty, there shall be levied
and collected-
D
(a) as respects (certain) goods .... ., a special duty of ex-
cise equal to 10 per cent of the total amount so chargeable
on such goods;

(b} as respects (certain other) goods .... ., a special duty
of excise equal to 20 per cent ... : and E

(c) as respects (certain other) goods .... ., a special duty
of excise equal to 33-1/3 per cent ...

(2) xxxxxx
F
(3) The duties of excise referred to in sub-section (1)
. . . . . . . . . . shall be in addition of the duties of excise
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 G
thereunder, including those relating to refunds and exemp-
tions 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." H
820 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

A Section 280 ZD of the Income Tax Act, ·196Lenabled 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
B 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 quantificalion and re-
c covery of the duty but in the context in which that expres-
sion 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 chargea-
. l bility to duty. In other words, the duty of excise in respeci
whereof tax credit is available would be in respect of s.uch
D duty of ex(tse. 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 charge-
able under the Excise Act but chargeable under the Excise
Act."

E Having said this, the Court added:

"Sub-clauses (3) and (4) of s. 80 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 sim-
F ply because the qualification and collection of the special
duty under the Finance Act is to be done in accordance
with the provisions of the Excise Act such duty does not
become Ieviable, that is to say chargeable, under the Excise
Act.''

G 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 Exicse 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.
H For, s. 80(1) of the Finance Act, 1965 fully exhausted the aspect of
UJAGAR PRINTS v. U.0.1. [RANGANATHAN, !.] 821

charge of the special duty. It specified the goods to be taxed and also
A
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 (a) on manufacture, storage of produc-
tion (b) of certain named goods (c) at the rates specified in the first B
schedule. Of these, only aspect (b) finds mention in the 1957 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 c
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 D
where an ad valorem rate is prescribed unless s. 3(1) is read withs. 3(3)
and the definition of "assessable value" ins. 4 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 ins. 3(1), it is obvious thats. 3(3) has to E
have the effect of at!racting 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, 1985. I have refer- F
red 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 charge-
able under the Central Excises & Salt Act, 1944 or as a percentage of G
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 H
822 SUPREME COURT REPORTS (1988] Supp. 3 S.C.R.

A the Legislature to lake in all the provisions 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
B were intended to be incorporated in the 1957 Act. A careful examina-
tion 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:
c "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 authorises the imposition of a tax
D on the sale or purchase of the declared goods, he subject,
as from the Isl 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 Mis Mahendra Pratap Rama
E 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. 7 was enacted." S. 15 of the Central Sales Act applies to
"declared" goo~s as defined ins. 2(c) and enumerated ins. 14 of that
Act as being of special importance in i11ter-state trade and commerce.
S. 14 of the Central Sales Tax Act, 1956, enumerates various items of
F goods among which are the six items specified ins. 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
G 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
H was realised that s. 7 served no specific purpose under the Act except
UJAGAR PRINTS v. U.0.1. !RANGANATHAN, J.] 823

that of the definitions which was an aspect already covered bys. 2(c).
A
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 B
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. Legis-
latures sometimes take a short cut and try to reduce the length of c
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 modem 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 D
reference is sometimes everdone and p;evity 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 E
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 incorpora-
tion, 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 irrele- F
vant what happens to the earlier statute thereafter. Examples of this
can be seen in Secretary of State v. Hindustan Cooperative Insurance
Society, AIR 1931 P.C. 149; Soltini 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 provi-
sions. It may only make a re.ference of a broad nature as to the law on a G
subject generally, as in Bhajiya 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 late.r, 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 H
824 SUPREME COURT REPORTS [1988) Supp. 3 S.C.R.

A the purpose of the latter Act also. Examples of 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 Col-
lector, [ 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 construc-
B tion.' In the present case, in my view, 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.
c 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.
D 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, 1958, 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. 21 of the Penal Code. Answering the question in
E the affirmative, the Court outlined the following proposition:

"Where a subsequent Act incorporates provisions of a pre-
vious Act, then the borrowed provisions become an integ-
ral and independent part of the subsequent Act and are
totally uneffected by any repeal or amendment in the pre-
F vious 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;

·G (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

H (d) where the amendment of the previous Act, either
• "'f ·~
. ,- •~

UJAGAR PRINTS v. U.0.1. [RANGANATHAN, J.] 825

expressly or by necessary intendment, applies the said pro- A
visions to the subsequent Act."

The present case falls within the scope of these exceptions, even
ifs. 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
B
1944 Act imposes a general levy of excise duty on all goods
manufactured and produced, and aim of the present Act is to supple-
ment \he 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 provi- c
sions shall govern both the levies except that the duty under the later
Act is confined to certain ·goods only anci its distributability among the
State's inay 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 far as they are not clearly inconsistent with the
·1ater one sh1:mld not be extended to the later legislation as well. As has D
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 thatwas further needed E
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 con-
cepts of "manufacture" and "assessable value" as determined under
the 1944 Act are carried into it. · ·
.F
In the circumstances, f 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 .. .G