What this judgment does NOT decide: it does not decide the cess liability of the powerloom and handloom manufacturers who supply the fabric, nor of units that themselves produce fabric from yarn or fibre. It decides only that an independent processor which merely bleaches, dyes and processes others' fabric does not manufacture textiles for Section 5A purposes.
- Case
- Assessing Officer, Textiles Committee v. M/s Premium Suiting Pvt. Ltd. & Anr.
- Court
- Supreme Court of India
- Decision
- Citation
- 2026 INSC 1158
- Bench
- S. V. N. Bhatti; N. V. Anjaria
- Judgment by
- N. V. Anjaria
- Case numbers
- Civil Appeal No. 785 of 2016
- Outcome
- Final judgment dismissing the Textiles Committee's appeal; the Allahabad High Court's order quashing the cess demand stands.
What the Court decided
On 26 October 2026, a Bench of Justices S. V. N. Bhatti and N. V. Anjaria dismissed the Textiles Committee's appeal and upheld the Allahabad High Court's order quashing a textile cess demand of Rs 2,68,293 against Premium Suiting Pvt. Ltd.
The Court held that an independent unit which only bleaches, dyes and processes fabrics supplied by powerloom and handloom units does not manufacture textiles: at best, the textile is upgraded, not manufactured, so no cess is payable by such a processor under Section 5A of the Textiles Committee Act, 1963.
The cess demand and the challenge
The Textiles Committee is a statutory body under Section 3 of the Textiles Committee Act, 1963, functioning under the Ministry of Textiles with the object of ensuring the quality of textiles and textile machinery. Premium Suiting is a company engaged in bleaching, dyeing and processing of 100 per cent man-made fabrics supplied by powerloom and handloom units.
The demand began with a letter dated 28 June 2001 from the Comptroller General of India to the Ministry of Textiles, recording that in an audit of 30 independent textile processors, only one had paid cess during 2000–2001 in five Central Excise Commissionerates of Uttar Pradesh, and the remaining 29 had not paid cess of Rs 39.64 lakh for 1997 to 2000. Following that communication, the assessing officer served a show-cause notice dated 20 August 2001 on Premium Suiting, raising a demand of Rs 2,68,293 towards textile cess.
The Textiles Committee Cess Appellate Tribunal, by its order dated 20 October 2005 in T.C.A. No. 223 of 2002, dismissed the company's appeal and upheld the assessing authority's demand. The company challenged that order before the Allahabad High Court.
What the High Court had held
The Allahabad High Court, by its order dated 6 March 2013 in Writ Tax No. 354 of 2006, allowed the company's writ petition and quashed the textile cess demand. The Textiles Committee's appeal before the Supreme Court was directed against that order.
The issue before the Supreme Court
The issue was whether an independent processor that receives fabric from powerloom and handloom units, bleaches, dyes and processes it, and returns it, can be said to manufacture textiles within the meaning of the Textiles Committee Act, so as to be liable to pay textile cess under Section 5A.
The Court's reasoning
The Court held that the processor's activity operates only to the benefit of the textile manufacturers in the powerloom industry, and that the processor works as an extended arm of those manufacturers. The fabric or textile which becomes bleached and dyed is not textile manufactured: at best, it is the textile upgraded, not manufactured in the sense applicable in the context of Section 5A in particular and the Act in general.
It follows, the Court held, that the respondent cannot be subjected to or made liable to pay the textile cess, as there is no textile manufactured in its units. The challenge to the High Court's order therefore had necessarily to fail, and the appeal was meritless.
The operative outcome
The appeal was dismissed. The Allahabad High Court's order quashing the Rs 2,68,293 textile cess demand against Premium Suiting stands. Any pending interlocutory application ceased to survive in view of the disposal of the appeal.
BANTHRY ANALYSISFor law students
This is a clean example of a court reading a charging provision strictly and purposively at once. Cess under Section 5A attaches to manufacture, so the question is never whether the processor adds value — bleaching and dyeing plainly do — but whether the processor brings a new textile into existence. The Court's answer turns on whose textile it is: fabric supplied by powerloom and handloom units, processed and returned, remains the manufacturers' textile, upgraded rather than manufactured.
The contrast to remember: a unit that itself produces fabric from yarn or fibre would be manufacturing; a job-work processor that only treats someone else's fabric is not. That distinction decides cess liability for an entire class of independent processors, which is why a Rs 2.68 lakh demand produced a Supreme Court ruling.
READING PROMPTSQuestions for a closer reading
- Why did the Court hold that bleaching and dyeing do not amount to manufacture of textiles?
- What role did the source of the fabric play in the Court's reasoning?
- Does this judgment decide anything about the cess liability of the powerloom and handloom manufacturers themselves?
