2004 (11) TMI 539 - HC - VAT and Sales Tax

Issues Involved:
1. Challenge to the insertion of entry No. 46 "pan masala and gutka" in the First Schedule to the Delhi Sales Tax Act, 1975.
2. Interpretation of "tobacco" as defined in the Central Excise Act, 1944 and its applicability to "gutka".
3. Legislative competence of the State to levy sales tax on "gutka" by including it in the First Schedule.
4. Conflict between general and specific entries in tax legislation.
5. Precedential value of conflicting judgments from the Supreme Court.

Issue-wise Detailed Analysis:

1. Challenge to the Insertion of Entry No. 46:
The petitioner challenged the notification dated March 31, 2000, which inserted entry No. 46 "pan masala and gutka" in the First Schedule to the Delhi Sales Tax Act, 1975. The Act specifies that goods listed in the First Schedule are subject to sales tax, while those in the Third Schedule are tax-free. The Lieutenant Governor has the authority to amend these schedules either retrospectively or prospectively, provided that no retrospective amendment adversely affects any dealer.

2. Interpretation of "Tobacco":
The petitioner argued that "gutka" falls under the definition of "tobacco" as per the Central Excise Act, 1944, and should be tax-free under the Third Schedule of the Delhi Sales Tax Act. The definition of "tobacco" in the Central Excise Act includes any form of tobacco, whether cured or uncured, and manufactured or not, but excludes parts of the tobacco plant still attached to the earth. "Pan masala containing tobacco" is defined separately, indicating that it includes betel nuts, tobacco, and other ingredients such as lime and kattha.

3. Legislative Competence to Levy Sales Tax:
The petitioner relied on the Supreme Court's decision in Kothari Products Ltd. v. Government of Andhra Pradesh, which held that "gutka" is a form of tobacco and thus exempt from sales tax under the relevant state legislation. However, the Revenue argued that the State has the legislative competence to levy tax on specific items even if they fall under a general exempt category. The court noted that the power to levy tax and grant exemptions both rest with the State Government, and it is within their competence to issue notifications for specific items.

4. Conflict Between General and Specific Entries:
The Revenue contended that the general entry for "tobacco" in the Third Schedule should give way to the specific entry for "pan masala and gutka" in the First Schedule. The court referred to the principle that a specific entry prevails over a general entry, as established in various judgments, including Commissioner, Sales Tax v. Agra Belting Works and Sales Tax Officer v. Darling Dairy Products. These cases held that a notification prescribing a tax rate for goods previously exempted implies the withdrawal of the exemption.

5. Precedential Value of Conflicting Judgments:
The petitioner urged the court to follow the later Supreme Court decision in Kothari Products Ltd., which exempted "gutka" from sales tax. However, the court emphasized the need to reconcile conflicting judgments and noted that the earlier decisions in Agra Belting Works and Darling Dairy Products provided a comprehensive framework for interpreting tax exemptions and levies. The court found that the specific inclusion of "pan masala and gutka" in the First Schedule was consistent with legislative intent and upheld the notification.

Conclusion:
The court dismissed the petition, upholding the legislative competence of the State to levy sales tax on "pan masala and gutka" by including them in the First Schedule. The court found no merit in the petitioner's arguments and reaffirmed the principle that specific entries in tax legislation prevail over general entries. The writ petition was dismissed.

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