1987 (8) TMI 405 - SC - Central Excise

Whether 'gudakhu' is covered by the expression, 'tobacco' as defined in section 2(c) of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 which was substituted with effect from July 1, 1967, by Notification No. 21278-F dated June 6, 1967 and is exempted from tax under the Orissa Sales Tax Act, 1947? Whether 'gudakhu' is not taxable under the Central Sales Tax Act, 1956 during the period 1967-68 as per the provision contained in section 8(2A) of the Central Sales Tax Act, 1956? Held that - Appeal dismissed. gudakhu is a product which falls within the exemption covered by serial No. 35 of the Schedule to the Orissa Sales Tax Act and that the High Court is right in holding that the assessees in these appeals are entitled to that exemption.

Summary

Issues:
1. Interpretation of whether "gudakhu" falls under the definition of "tobacco" for tax exemption under the Orissa Sales Tax Act.
2. Determination of whether "gudakhu" is taxable under the Central Sales Tax Act during a specific period.

Detailed Analysis:
1. The case involved an appeal against the Orissa High Court's judgment, which favored the assessees and ruled against the Revenue regarding the tax exemption of "gudakhu" under the Orissa Sales Tax Act. The assessees contended that "gudakhu" should be exempt from tax under the Orissa Sales Tax Act, relying on the definition of "tobacco" under the Additional Duties of Excise Act. The Sales Tax Officer initially levied sales tax on "gudakhu" turnover, but the assessments were later annulled on appeal by the Assistant Commissioner of Sales Tax. The Tribunal upheld the appellate order, leading to the reference of legal questions to the High Court.

2. The High Court was tasked with determining whether "gudakhu" fell within the definition of "tobacco" for tax exemption under the Orissa Sales Tax Act and whether it was taxable under the Central Sales Tax Act during a specific period. The High Court ruled in favor of the assessees, stating that "gudakhu" is a product of tobacco, even though it may contain molasses and other constituents. The court considered "gudakhu" to be a form of smoking tobacco, commonly used for cleansing teeth, and held that it fell within the exemption covered by the Schedule to the Orissa Sales Tax Act.

3. The Supreme Court, after hearing arguments from both parties, affirmed the High Court's decision, agreeing that "gudakhu" is a product that qualifies for exemption under the Orissa Sales Tax Act. The court noted that "gudakhu" is primarily made of tobacco, making it a tobacco product in common parlance. Additionally, the court referenced a previous judgment by the Calcutta High Court, which also classified "gudakhu" as a tobacco product. Consequently, the Supreme Court dismissed the appeals, upholding the exemption for the assessees under the Orissa Sales Tax Act, with no order as to costs.