1989 (5) TMI 310 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Taxability of Amrit Surti zarda.
2. Legality of Notifications dated 5th February 1968 and 1976.
3. Classification of zarda as a separate commodity from chewing tobacco.
4. Reasonableness of the classification made by the State Government.

Issue-Wise Detailed Analysis:

1. Taxability of Amrit Surti zarda:
The petitioner, a registered dealer under the Orissa Sales Tax Act, 1947, contended that Amrit Surti zarda should be treated as tax-free chewing tobacco. However, the sales tax authority assessed Amrit Surti zarda to sales tax for the assessment years 1974-75 to 1977-78. The Sales Tax Tribunal upheld this assessment. The Court examined whether Amrit Surti zarda is chewing tobacco and concluded that it is not, based on the notifications and definitions provided in the relevant statutes.

2. Legality of Notifications dated 5th February 1968 and 1976:
The petitioner argued that the notifications treating zarda as a separate commodity from chewing tobacco were illegal. The Court reviewed the notifications and found that the amendments made by Notification No. 3604-CTA-38/67-F dated 5th February 1968, and Notification No. SRO 1206/76 dated 3rd December 1976, were within the legal framework. These notifications specified that tobacco and all its products, except for items like zarda, were tax-free, thereby making zarda taxable.

3. Classification of zarda as a separate commodity from chewing tobacco:
The Court referred to various precedents, including the decisions in [1975] 35 STC 179 (State of Orissa v. Samsuddin Akbar Khan & Co.) and [1988] 68 STC 92 (SC) (State of Orissa v. Radheshyam Gudakhu Factory), which discussed the broad definition of "tobacco" under the Central Excises and Salt Act, 1944. However, the Orissa Sales Tax Act adopted a more restricted definition, treating items like zarda separately from tobacco. The Court emphasized that the definitions and classifications under the Orissa Act were distinct and valid.

4. Reasonableness of the classification made by the State Government:
The Court considered whether the classification of zarda as a separate commodity from tobacco was reasonable. It noted the significant price difference between zarda and tobacco, the distinct manufacturing processes, and the different consumer bases. The Court concluded that the classification was rational and not arbitrary. The decision in [1989] 1 SVLR(T) 158 (Arya Vaidya Pharmacy v. State of Tamil Nadu) was distinguished on the grounds that the circumstances and statutory provisions in that case were different.

Conclusion:
The writ petition was dismissed, and the Court upheld the taxability of Amrit Surti zarda as a separate commodity from chewing tobacco. The notifications treating zarda as taxable were found to be legal, and the classification made by the State Government was deemed reasonable. The Court found no grounds to strike off zarda from the relevant entry and treat it as tax-free tobacco.