TMI Blog1966 (10) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... computation of taxable turnover of a dealer in respect of any goods included in clause (vii) the dealer is entitled to the rebate to the extent of sales tax paid by him on the raw tobacco used in the manufacture of those goods. - Civil Appeal No. 1071, 1072, 1073, 1074, 1075, 1076, 1077 of 1965, - - - Dated:- 4-10-1966 - SHAH J.C., RAMASWAMI V. AND BHARGAVA V. JJ. A.V. Rangam, for the appellant. S. Shaukat Hussain, for the respondents. -------------------------------------------------- The judgment of the Court was delivered by SHAH, J.- Messrs Bell Mark Tobacco Company-respondents in this appeal-are dealers in tobacco and tobacco products. They were assessed to sales tax by the Deputy Commercial Tax Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale of chewing tobacco manufactured out of that raw tobacco was recently considered by this Court in The State of Madras v. Swasthik Tobacco Factory [1966] 17 S.T.C. 316. It was held by this Court that the expression "in respect of the goods" in rule 5 (1)(i) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, means "on the goods", and therefore only the excise duty paid on the goods sold by the dealer is deductible. In Swasthik Tobacco Factory's case [1966] 17 S.T.C. 316., the dealer purchased raw tobacco and converted it by a manufacturing process into chewing tobacco and sold it in small packets. His claim in computing the taxable turnover for rebate in respect of excise duty paid on raw tobacco used in manufacturing " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ckets are known as "chewing tobacco" packets. A large number of workmen are employed to carry out these several processes. In the view of the High Court the cumulative effect of the various processes, such as soaking in jaggery water, "shredding of tobacco" and addition of "flavouring essences" to which tobacco was subjected before it was sold, amounted to a manufacturing process and the product sold was a manufactured product from raw tobacco purchased by the respondents. We are in complete agreement with the view of the High Court on this part of the case. Rule 5(1)(i) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, in so far as it is material provides: "The tax or taxes under section 3 or 5 or the notificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to get rebate in respect of excise duty paid by them on raw tobacco. He submitted that the provisions of section 5 of the Act were not brought to the notice of this Court when Swasthik Tobacco Factory's case [1966] 17 S.T.C. 316., was decided and therefore the judgment in that case cannot be regarded as decisive of the right of the respondents in this case to claim deduction in respect of excise duty paid by them on raw tobacco. In our judgment this argument proceeds upon a misconception of the true meaning of section 5 of the Act. The material part of section 5 on which reliance is placed is as follows: "Subject to such restrictions and conditions as may be prescribed, including conditions as to licences and licence fees- * * * * ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales tax and section 5 provides for the rates of sales tax and the point at which tax is to be levied. The proviso could obviously not refer to tax other than the sales tax with which the whole Act, and especially the provisions of section 5, deals. It is intended to provide by the proviso that in the computation of taxable turnover of a dealer in respect of any goods included in clause (vii) the dealer is entitled to the rebate to the extent of sales tax paid by him on the raw tobacco used in the manufacture of those goods. The contentions raised by counsel must be rejected, and following the judgment of this Court in Swasthik Tobacco Factory's case [1966] 17 S.T.C. 316., the appeals filed by the State must be allowed. There will be no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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