Law:

Section:

Central Excises and Salt Act (I of 1944), S. 2(f) and First Sched, item 15(c)-Word "manufacture" Includes any process incidental or ancillary to CA a con of manufactured product "Calendaring" of woollen fabrics on power driven machines-Mere fact drat fabrics woven with yarn on hand looms-Would not exempt goods from payment of excise duty under item 15(c) of First Schedule. ORDER MUHAMMAD YAQUB ALI, J.-The subject is the levy of excise duty under the Central Excises and Salt Act I of 1944, hereinafter called the Act, on the manufacture of woollen fabrics by the petitioner Messrs Chenab Woollen and Textile Mills Limited, Lyallpur. . Woollen yarn is manufactured by the petitioner on power driven spindles which under the Act is exempt from excise duty. They, however, manufacture fabrics with the yarn on hand looms and calender and finish them by power driven machines. Woollen fabrics manufactured on hand looms being exempt from excise duty under the Act this intermediary process of spinning cloth on a large number of hand looms by the petitioner was visibly adopted to avoid taxation. For sometime this device worked, but on 17-2-1966 the Superintendent, Central Excise, Circle III, Lyallpur on notice to the petitioner raised a demand of Rs. 1,95,692.50 against them for the period 26-10-1960 to 25-10-1964 at the prescribed rate of 10 % as per item 15(c) of the First Schedule to the Act. Aggrieved by the levy the petitioner filed an appeal before the Collector, Central Excise, Lahore, contending that as woollen fabrics were manufactured by them on hand looms they were , under Article 15(c) not liable to pay duty on them. The construction placed by the petitioner on the definition of "manufacture" in section 2 (f) and the exemption clause in Article 15(c) of the first Schedule to the Act was ruled out by the Collector and the appeal dismissed. The petitioner then filed a revision petition before the Central Government which too was rejected with the modification that the demand in respect of goods before 13-2-1963 was set aside as barred by time. Finally the petitioner moved the High Court in writ jurisdic­tion for quashment of the assessment reiterating the plea that…

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