1961 (9) TMI 48 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the goods sold by the assessee, described as tundu tobacco, constitute "chewing tobacco" produced as a result of any manufacturing operations.
2. Whether the process employed by the assessee qualifies as a manufacturing process under section 5(vii) of the Madras General Sales Tax Act.
3. Whether the taxability of tundu tobacco falls under clause (vii) or clause (viii) of section 5 of the Madras General Sales Tax Act.

Detailed Analysis:

1. Whether the goods sold by the assessee, described as tundu tobacco, constitute "chewing tobacco" produced as a result of any manufacturing operations:
The Tribunal was tasked with determining whether the tundu tobacco sold by the assessees could be classified as chewing tobacco manufactured from raw tobacco. The Tribunal concluded that the term "chewing tobacco" has come to be associated with a particular manufactured product different from raw tobacco. This conclusion was based on the fact that the product sold as "scented tobacco" involved additional processes such as mixing jaggery, cardamom, and other spices, which clearly constituted manufacturing. However, in the present case, the Tribunal found that the process employed by the assessee did not bring about any significant change in the tobacco purchased, and merely cutting the tobacco into pieces was not sufficient to qualify as a manufacturing process.

2. Whether the process employed by the assessee qualifies as a manufacturing process under section 5(vii) of the Madras General Sales Tax Act:
The Tribunal examined the report from the Commercial Tax Officer, which detailed the process employed by the assessee. The process involved unbundling the tobacco, sprinkling it with palm jaggery water to keep it pliable, and cutting it into pieces of two sizes. The Tribunal noted that this process did not involve adding any new ingredients other than jaggery water and did not result in a significant transformation of the raw tobacco. The Tribunal referred to previous cases, including Bell Mark Tobacco Co. v. Government of Madras, where it was held that processes like soaking in jaggery water and bulking did not convert raw tobacco into a manufactured product. Therefore, the Tribunal concluded that the process employed by the assessee did not qualify as manufacturing under section 5(vii).

3. Whether the taxability of tundu tobacco falls under clause (vii) or clause (viii) of section 5 of the Madras General Sales Tax Act:
The Tribunal referred to the relevant sections of the Madras General Sales Tax Act. Under section 5(viii), tax is levied on sales of raw tobacco at the point of first purchase in the State of Madras. Under section 5(vii), the sale of manufactured tobacco products, including chewing tobacco, is taxed at the point of first sale in the State of Madras. The Tribunal found that the processes employed by the assessee did not constitute manufacturing and, therefore, the tundu tobacco could not be classified as a manufactured product under section 5(vii). Consequently, the taxability of tundu tobacco fell under section 5(viii), which pertains to raw tobacco.

Conclusion:
The Tribunal concluded that the process employed by the assessee did not qualify as a manufacturing process and, therefore, the tundu tobacco sold by the assessee could not be classified as chewing tobacco produced as a result of manufacturing operations. The taxability of tundu tobacco fell under section 5(viii) of the Madras General Sales Tax Act, which pertains to raw tobacco. The petitions were allowed with costs, and the product was not subject to tax under section 5(vii).

Judgment:
The petitions are allowed with costs, counsel's fee of Rs. 100 one set in T.C. Nos. 161 and 170 of 1959, and another in T.C. Nos. 171 and 172 of 1959. Petitions allowed.