TMI Blog1997 (7) TMI 601X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 194 was inserted in the First Schedule to the Andhra Pradesh General Sales Tax Act, 1957 (for short the APGST Act ) and they were taxed at the point of first sale in the State at the rate of 10 paise in a rupee with effect from February 8, 1996. By Andhra Pradesh Ordinance No. 3 of 1997 that entry was amended by increasing the rate of tax to 50 paise in a rupee. It is this amendment which gave rise to the present writ petition which is filed by the C F agent of the petitioner-company. 3. The petitioner has given the ingredients of pan masala and the rates at which they are taxed as follows: Description of goods Sl. No. in APGST Act in the First Schedule under which tax is levied Rate of tax (a) Betel nut powder 158 10 paise in a rupee (b) Catechu 184 9 paise in a rupee (c) Lime 10 paise in a rupee (d) Permitted spices 182 9 paise in a rupee (e) Flavours 36 20 paise in a rupee Total tax paid 58 paise in a rupee The total tax paid on the ingredients in pan masala is 58 paise. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enumerated under the Additional Duties of Excise Act and that by long line of judgments, the honourable Supreme Court has categorically held that no person has fundamental right for carrying on trade in harmful or noxious product which harms the health of the citizens of India and that the products pan masala and gutka are injurious to the health of the people consuming them. The levy of tax does not in any way interfere with the carrying on of the trade by the petitioner. The petitioner is paying excise duty on those two products, therefore it cannot deny that two independent commercial products have been manufactured. It is stated that the provisions of the Fourth Schedule have been interpreted by a Division Bench of this Court in State of Andhra Pradesh v. Feno Plast Private Limited [1995] 97 STC 316; (1995) 20 APGST 226 and in view of the observation of the court the explanation has been enacted. Tobacco had been exempted from the payment of the sales tax in view of the share being available to the State Government from tax collected under the Additional Duties of Central Excise Act. Pursuant to the arrangement between the States and the Central Government, the States will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 184 9 paise in a rupee (c) Lime 182 10 paise in a rupee (d) Permitted spices 9 paise in a rupee (e) Flavours 36 20 paise in a rupee Total tax paid 58 paise in a rupee The total tax paid on the ingredients in pan masala is 58 paise. The total tax paid on the ingredients in pan masala is 58 paise. 8.These ingredients are taxable under the entries mentioned against them. Incidentally we may point out that in the entry in the last column, viz., rate of tax payable is shown as 58 paise in a rupee but in fact 58 paise are taxed in five rupees but not in one rupee. It is not seriously disputed that mixing together of the aforementioned ingredients, would not automatically result into "pan masala". The ingredients have to be mixed according to the know how which involves manufacturing process. The product is called "pan masala" and accordingly it is subjected to duty under the Central Excise Act. It is also well-settled that once a new commercial product comes into existence from a combination of one or more taxable goods, the same is taxable under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of certain goods.-Subject to such restrictions and conditions as may be prescribed including conditions as to licences and licence fees, a dealer who deals in the goods specified in the Fourth Schedule shall be exempt from tax under this Act in respect of such goods." From a plain reading of section 8 it is manifest that a dealer who deals in goods specified in the Fourth Schedule shall be exempt under the APGST Act in respect of such goods. Item 7 of the Fourth Schedule and the explanation appended to the Schedule may be noticed here: Sl. No. Description of goods 7. Tobacco Explanation. The goods mentioned in entries 5, 6 and 7 of this Schedule shall be goods included in the relevant heads and sub-heads of the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957, but does not include goods where no additional duties of excise are levied under that Schedule." 12.. The explanation says: (1) goods mentioned in the entries 5, 6 and 7 shall be goods included in the relevant heads and sub-heads of the First Schedule to the Additional Duties of Excise Act; and (2) such goods do not include goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bacco substitutes, etc. . There is no reference to gutka as such in any one of the headings and sub-headings of that chapter. 16. Mr. Parasaran has argued that gutka is nothing but chewing tobacco so it falls within the meaning of chewing tobacco and preparations containing chewing tobacco in sub-heading 2404.40, as such no sales tax can be levied on it. The learned Advocate-General has contested this proposition firstly on the ground that "gutka" is covered by the specific sub-head 21.06-"pan masala" in chapter 21 and as such it will not be covered by the general sub-head-2404.40 "chewing tobacco and preparations containing chewing tobacco" in chapter 24; and secondly on the ground that goods falling under that sub-heading and "gutka" are two independent commercial commodities. 17. We shall now examine whether "gutka" can be brought within the ambit of "chewing tobacco and preparations containing chewing tobacco" in subheading 2404.40 of heading 24.04 of the Central Excise Tariff Act. The said sub-heading reads as follows: Heading No. Sub-heading No. Description of goods Rate of duty Basic Add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing tobacco embraces gutka . Having regard to the wide amplitude of the sub-heading, we have no doubt that gutka falls within the meaning of chewing tobacco and preparations containing chewing tobacco and consequently in the sub-heading. 19.. Here it would be pertinent to point out that the clarification issued by the Government in CCT s Ref. Al(1) 3202/92 dated October 26, 1994 to the effect that gutka is covered under entry No. 7A of the Fourth Schedule under section 8 of the APGST Act and is exempt from tax, was subsequently withdrawn by the Government in CCT s Ref. A1(3)1547/95 dated January 31, 1996. 20.. In Jagabandhu Roul v. State of Orissa [1970] 26 STC 234, a Division Bench of the Orissa High Court held that in the absence of the definition of the expression tobacco product in the Orissa Sales Tax Act, it was difficult to hold that preparations of tobacco could not be said to be tobacco products . There the question was whether mitha gundi containing small percentage of tobacco, was a tobacco product . The Government of Orissa had issued notification exempting tobacco and tobacco products from the exigibility to sales tax. The court held that the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing tobacco within the meaning of the notifications issued by the Orissa Government. The Bench held that the manufacturing process of zarda was quite different and complicated and so zarda was a distinct item of goods from chewing tobacco and that whereas zarda was meant for affluent class of citizens, chewing tobacco was meant for poor and lower middle class people. Having considered various notifications issued by the Government from time to time, the Division Bench held that subsequent changes deleting the entries in the notification resulted in making gudakhu , pan masala , gundi , zarda and snuff with mixture of tobacco taxable at the rate of 4 per cent, so the law laid down by the Division Bench of the Orissa High Court in State of Orissa v. Samsuddin Akbar Khan Co. [1975] 35 STC 179 (Orissa) and confirmed by the Supreme Court in State of Orissa v. Radheshyam Gudakhu Factory [1988] 68 STC 92 would not apply. Adverting to the judgment of the Division Bench of this Court in Shamdas v. State of Andhra Pradesh [1967] 19 STC 412 it was observed that the provisions of the Orissa Act were quite different from the provisions of the Andhra Pradesh Act and that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these reasons it cannot be held that gutka is exempt from tax. 25.. The other submission which is more seriously pursued, is that in view of sections 14 and 15 of the Central Sales Tax Act, 1956, levying of sales tax at the rate of 50 paise in a rupee being in contravention of the said provisions, is illegal and arbitrary and the impugned Ordinance has to be quashed. Section 15 of the CST Act in so far as it is relevant for our purpose, reads as follows: 15. Restrictions and conditions in regard to tax on sale or purchase of declared goods within a State. Every sales tax law of a State shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely: (a) the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed four per cent of the sale or purchase price thereof and such tax shall not be levied at more than one stage ; ............................. This section imposes restrictions and conditions in regard to levy of tax on sale or purchase of the declared goods within a State. There are two restrictions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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