Sizing, bleaching, and dyeing of raw cloth amounts to "manufacture" of textiles within the meaning of the Central Sales Tax Act, 1956.

Ranjit Singh Sarkaria, J.

1. Appellant is a company registered under the Companies Act, 1956 , having its registered office at Calcutta and a factory at Faridabad (Haryana State) for the manufacture and processing of textiles. It is a registered dealer under the Punjab General Sales Tax Act, 1948 . It also obtained on 1st July, 1957, a certificate of registration (annexure A) under Section 7 of the Central Sales Tax Act, 1956 (hereinafter referred to as "the Act"). Its business, as mentioned in this certificate, is: "textile manufacturing, sale, purchase, wholesale distribution, sale and purchase of yarn and waste and textile machinery". The certificate also specifies the class of goods for the purposes of Sub-section (1) of Section 8 of the Act. Among other things, such goods include cotton textile yarn, dyeing colours and other chemicals for use in the manufacture.

2. The company purchases these goods on the basis of the aforesaid certificate and issues C forms to the selling dealers who claim the deductions and pay tax at the rate of 3 per cent, in the State from which the movement of goods has originated.

3. A notice was issued to the company on 17th September, 1966, by the Excise and Taxation Officer, Gurgaon, in these terms:

It has come to notice that you have been misusing the registration certificate under the Central Sales Tax Act, 1956 . You are, therefore, directed to appear before me on 29th September, 1966, at 10-00 A.M. at Canal Rest House, Faridabad, and show cause why action under Section 10 of the Central Sales Tax Act should not be taken against you for this gross negligence. You should produce your account books from the date when you started doing sizing, bleaching and dyeing for the third party on job basis.

4. A similar notice was issued by the said officer on 13th July, 1967, pertaining to the years 1962-63 to 1966-67. In reply, the company, vide their letter dated 21st July, 1967, asked for the details and the circumstances in which the alleged misuse had occurred. In consequence, the allegations against the company were summed up as follows :

The company purchased goods from outside the State of Punjab (from Haryana) on submission of C forms for the purpose of use in manufacture of goods for sale. But instead of doing so, the company used those purchases partly in manufacturing its own goods for sale and partly for doing job-work for other parties. The company could not use the material concessionally purchased for the job-work as that does not constitute sale.

5. In reply, the companys contention was that the job-work of "sizing, dyeing and bleaching" done by them for third parties amounted to "manufacture or processing of textile goods for sale", and as such, was fully covered by Section 8(3)(b) of the Act. It was maintained that neither the terms and conditions of the certificate nor the aforesaid provisions of the statute required that the goods purchased on the basis of the certificate should necessarily be sold by the certificate-holder himself. This contention was not accepted by the assessing authority. In consequence, another notice was issued to the company, which said:

It is proposed to impose upon you penalty under Section 10-A of the Central Sales Tax Act, 1956, as you have contravened the provisions of Section 10 of the Act ibid by purchasing goods for the purposes specified in Clause (b) of Sub-section (3) of Section 8 but have failed, without reasonable excuse, to make use of the goods for any such purpose.

6. Aggrieved by these notices, the company moved the High Court by a writ petition under articles 226 and 227 of the Constitution praying for the issuance of a writ of certiorari, prohibition or any other appropriate writ, order or direction, quashing the notices E to E-4 and restraining the assessing authority from proceeding in pursuance of those notices.

7. The same contentions, which were raised in reply to the notices, were reiterated, with elaboration, before the learne