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2016 (10) TMI 561 - BOMBAY HIGH COURTConstitutional validity of levy of VAT on pan masala containing tobacco - claim of exemption from VAT since tobacco products liable to ADE (GSI) under section 3 of the ADE Act, 1957 - The Parliament omitted Chapter headings 2401, 2402 and 2403 and sub-heading and tariff item thereunder from the First Schedule to ADE Act 1957 vide section 10, Taxation Laws (Amendment) Act, 2007 (Act No.16 of 2007) effective from 1st April, 2007, without losing share of central taxes. This enabled States to levy VAT on tobacco with effect from 1st April, 2007. Held that:- We need not refer to Articles 270 to 281 of the Constitution prior to 2000 and Article 270 to 281 of the Constitution post 2000 for the simple reason that we are considering the question about the State Legislature's power to tax pan masala with tobacco. Prior to that we must refer to Schedule A. The petitioners rely upon Chapter 24 of the Central Excise Tariff Act, 1985, in which after the Finance Act 2001, it classified pan masala containing tobacco as 2404.09. Mrs. Jeejeebhoy is right in submitting that pan masala on the face of it is different from tobacco and constitutes a separate class by itself. We have perused Chapters 21 and 24 of the Central Excise Tariff Act and as appearing in the compilation tendered by the petitioners from pages 88 to 90, 93, 96 and 101. The corresponding Note, namely, Note No.3 in Chapter No.21 was amended to clarify that pan masala covered by Chapter 21 would not have tobacco as an ingredient. Corresponding to that was the change brought about in column (3) to the First Schedule of the ADE Act to include Tariff Entry 2404.49, namely, pan masala containing tobacco (page 111 of the petitioners compilation). Thus until 2001, pan masala was not included in either page 24 of the Central Excise Tariff Act nor in the the First Schedule to the ADE Act. Pan masala containing tobacco is known to the commercial world as different from tobacco. Pan masala is said to be a preparation containing betel-nuts and one or more of the ingredients referred above. Unlike the other entries in Chapter 24 of the 1985 Act, essentially dealing with tobacco, pan masala may or may not contain tobacco. The State's power to legislate is not curtailed by the ADE Act. If that is not curtailed, then, any reliance on the constitutional scheme of distribution of revenues and taxes cannot be of assistance. That would probably deprive a State of its share in the revenue even if a tax is levied and collected in that State, but would not denude it of its power which is otherwise traceable to the constitutional provisions referred above. The principle that sub-ordinate legislation cannot be given retrospective effect equally is of no assistance in the facts and circumstances of the present case. We are not concerned here with tobacco but a product (pan masala) containing tobacco. Hence, the effect of the explanation as above need not be considered at all. Decided against the petitioner.
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