Background
Textiles Committee Act, 1963 provides for the establishment of the Textiles Committee as a statutory body responsible for ensuring and promoting the quality and standards of textiles and textile machinery produced and exported from India. The Act empowers the Committee to prescribe and recognise standards, conduct tests to verify conformity, advise the Central Government on quality matters, and levy cess on specified textiles and textile machinery manufactured in India. The Textiles Committee (Cess) Rules, 1975 prescribe the procedural requirements relating to production records, filing of returns, payment and assessment of cess, refund of excess cess, and recovery of short-levied cess.
Applicability
The Act and Cess Rules apply primarily to manufacturers of textiles and textile machinery in India. Such manufacturers are required to maintain monthly production records, file prescribed returns in Form A or Form B, and pay the applicable cess within the prescribed timelines. The framework also provides for revision of returns, refund of excess cess, recovery of short-levied cess and appeals against cess assessments. In addition, manufacturers, exporters and traders dealing in textiles or textile machinery are required to comply with prohibition orders issued by the Central Government restricting the export or domestic sale of products that do not conform to prescribed standards
Compliance Requirement Under the act in Accordance with the Rules & Regulations:
Every manufacturer of textiles or textile machinery is required to pay to the Textiles Committee the amount of duty of excise (cess) levied under Section 5A(1) of the Act within one month from the date on which the manufacturer receives a notice of demand from the Committee. The cess is levied on textiles and textile machinery manufactured in India and is computed on the basis of the assessable value and the applicable rate of cess as notified from time to time. Rules 6 and 7 of the Textiles Committee (Cess) Rules, 1975 govern the manner of payment and the authority to whom such payment is to be made. Where an appeal has been preferred against an order of assessment under Section 5A(7), the cess determined to be payable must be paid within one month from the date of disposal of such appeal.
Every manufacturer of textiles or textile machinery must maintain a monthly production register indicating the following particulars for each month: the total quantity of textiles or textile machinery manufactured; the quantity (if any) used by the manufacturer in the manufacture of another commodity; the quantity removed on payment of duty under the Central Excise and Salt Act, 1944; the quantity removed for export without payment of such duty; the total assessable value (ad valorem); and the cess payable on such value at the rate applicable for the time being in force. This register must be maintained at the place of manufacture and must be available for inspection by the officers of the Textiles Committee.
Every manufacturer of textiles or textile machinery must submit a monthly return in the prescribed form — Form A for textiles and Form B for textile machinery — duly signed, to the Textiles Committee within fifteen days of the end of each month. The return must be accompanied by a certified copy of the relevant return filed with the Central Excise authorities for the corresponding period. The return must be sent to the Textiles Committee by registered post with acknowledgement due. The return must accurately reflect the quantity manufactured, the assessable value, and the cess payable as recorded in the production register maintained under Rule 3.
If a manufacturer, after having furnished the monthly return, discovers any omission or wrong statement therein, the manufacturer may revise the return at any time before receiving the notice of demand from the Textiles Committee. The revised return must correct the error or omission identified and must be submitted to the Committee in the same prescribed form and manner as the original return. Once a notice of demand is received, the return can no longer be revised and the assessment proceeds on the basis of the return as filed.
A manufacturer who wishes to appeal against a cess assessment order issued by the Textiles Committee under Section 5A(7) must file the appeal before the Tribunal in the prescribed form, verified in the prescribed manner, and accompanied by the prescribed fees. The appeal must be filed within one month from the date on which the notice of demand in respect of the assessment is served on the manufacturer. Failure to comply with the procedural requirements — including the prescribed form, manner of verification, and fees — will render the appeal defective. If no appeal is filed within the prescribed period, the assessment order becomes final and binding on the manufacturer and recovery proceedings may be initiated accordingly.
No person — including manufacturers, exporters, and traders — shall export or sell for internal consumption any textiles or textile machinery in contravention of any prohibition order issued by the Central Government under Section 17(1) of the Act. Prohibition orders are issued by the Central Government when textiles or textile machinery do not conform to the standard specifications established, adopted, or recognised by the Textiles Committee under the Act. Such orders are notified by the Central Government and remain in force until revoked or modified. Every regulated entity must monitor and ensure full compliance with all such prohibition orders that are in force at the relevant time.
Any amount of cess paid in excess of the cess actually payable may be refunded to the manufacturer upon application made to the Textiles Committee within one year from the date of such excess payment. The application for refund must be made within this one-year limitation period; claims made after expiry of one year from the date of payment shall not be entertainable and the excess amount shall not be recoverable. Manufacturers are accordingly required to monitor their cess payments and initiate refund applications promptly where any overpayment is identified.
Where the cess has been short levied through inadvertence or otherwise, or where an amount has been erroneously refunded to a manufacturer, the Textiles Committee may issue a notice of demand to the manufacturer within one year from the date on which the cess was originally paid. On receipt of such a notice, the manufacturer must pay the deficiency — being the amount short levied — or refund the amount erroneously paid to them, as the case may be, within one month from the date of receipt of the notice of demand. This obligation arises on receipt of the notice and does not require further proceedings by the Committee before the amount becomes due and payable.
Penalty & Consequences
The following penalty provisions and procedural consequences apply across the compliance obligations covered in this blog.
Section 5D — Recovery of Unpaid Cess as Arrears of Land Revenue
If any manufacturer fails to pay the duty of excise (cess) levied under Section 5A within the period specified in Section 5A(4) — being one month from the date of receipt of the notice of demand — the duty payable shall be recoverable as an arrear of land revenue. Where an appeal has been preferred by the manufacturer against an order of assessment under Section 5A(7), and the manufacturer fails to pay the cess determined to be due within one month from the date of disposal of such appeal, the amount due shall similarly be recoverable as an arrear of land revenue. Recovery as arrears of land revenue enables the Committee to utilise statutory revenue recovery mechanisms without recourse to civil court proceedings.
Section 5A(6) — Best Judgment Assessment for Failure to File or Defective Return
If any manufacturer fails to furnish the return referred to in Section 5A(5) within the time specified, or furnishes a return which the Committee has reason to believe is incorrect or defective, the Committee may assess the amount of the duty of excise (cess) in such manner as may be prescribed. Under Rule 8 of the Textiles Committee (Cess) Rules, 1975, where such a situation arises, the Assessing Officer may — after giving the manufacturer an opportunity of being heard — assess the amount of cess on the basis of figures obtained from the Central Excise Department, or on the basis of the average of the cess levied during the previous two quarters immediately preceding the quarter for which the assessment is being made. This best-judgment assessment becomes the basis for the notice of demand and subsequent recovery.
Section 17(2) — Criminal Penalty for Contravention of Prohibition Orders
Any person who contravenes any order issued by the Central Government under Section 17(1) prohibiting the export of any textiles or textile machinery, or the sale of any textiles or textile machinery for internal consumption, shall on conviction be punishable as follows: for the first offence — with imprisonment for a term which may extend to one year, or with a fine, or with both; and for the second or a subsequent offence — with imprisonment for a term which may extend to one year and also with a fine, and in the absence of special and adequate reasons to be mentioned in the judgment of the court, such imprisonment shall not be less than three months. Contravention of prohibition orders is accordingly both a statutory offence and a criminal liability attracting mandatory minimum imprisonment for repeat offenders.
Consequence — Assessment Order Becomes Final on Failure to File Timely Appeal
Where a manufacturer does not file an appeal against a cess assessment order within one month from the date of service of the notice of demand, the assessment order becomes final and binding on the manufacturer. Recovery proceedings for the cess as determined in the assessment order may be initiated by the Textiles Committee without further process. This is a procedural consequence of inaction rather than a penalty, but it has the practical effect of making the assessed amount immediately recoverable as arrears of land revenue under Section 5D.
Consequence — Refund of Excess Cess Barred after One Year
If a manufacturer fails to apply for refund of excess cess paid within one year from the date of such payment, the right to claim refund is extinguished. The excess amount cannot thereafter be recovered by the manufacturer. This is a limitation-based consequence that applies regardless of the reason for the delay; manufacturers must monitor their cess payments and initiate refund applications promptly.
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