1961 (4) TMI 1 - SC - Central Excise

Whether tobacco means any form of tobacco, whether cured or uncured and whether manufactured or not the tobacco plant but does not include any part of a tobacco plant while still attached to the earth? Held that - The distinction between tobacco falling under Clause (5) and Clause (6) according to the report of the Committee, is so clear and unambiguous and its relation to the object intended by the imposition of tariff is so clearly reasonable that the attack against its validity on the ground of unconstitutional discrimination cannot be upheld. In the counter-affidavit, the allegations made in regard to the exclusive user of Nicotiana Rustica are generally denied what is more the report of the Committee specifically points out that though not known to be used for biris, when they are cured in broken leaf grades they can be used with admixture with biri tobacco like Pandharpuri tobacco for imparting strength to biri mixtures, and so according to the Committee no generalisation in this matter is possible and it cannot be asserted that all the forms of this variety are incapable of use of biris. Besides, it would be quite possible for dealers in the said varieties of tobacco to send them to other parts of the country where they are used for the purpose of manufacturing biris. Therefore, the grievance made by the petitioners that the tobacco in which they deal can never be used for biris is obviously not well founded. Appeal dismissed.

Summary

Issues:
Challenge to excise tariff under Central Excises and Salt Act, 1944 based on excessive rates and discrimination.

Analysis:
1. The petition challenged the validity of the excise tariff imposed by Clause (6) in Entry (4)(1) of the Central Excises and Salt Act, 1944, on the grounds of excessive rates and discrimination. The petitioners, tobacco cultivators and warehouse licensees, sought relief from the imposition of excise duty on hooka and chewing tobacco. The challenge primarily focused on the argument of discrimination in the tariff rates imposed under the impugned item.

2. The disputed tariff entry, Entry 4 in the First Schedule, pertained to tobacco and included various categories of tobacco with different prescribed tariff rates per kilogram. The petitioners contended that the double tariff imposed under Clause (6) for tobacco other than flue cured and not otherwise specified was discriminatory as it lacked a rational basis for classification. The argument was based on the assumption that the tariff was determined by the intended use of tobacco, specifically for cigarettes, smoking mixtures, or biris.

3. The judgment referred to the report of the Tobacco Expert Committee, which formed the basis for the revised tariff on tobacco. The report highlighted the complexities in classifying tobacco based on its physical form and capability of use in biri manufacturing. The Committee's recommendations emphasized the need for a standardized classification method to ensure equitable taxation across different types of tobacco consumption habits in the country.

4. The Court analyzed the distinction between tobacco falling under Clause (5) and Clause (6) based on the Committee's report, which clearly differentiated the two categories of tobacco. The report justified the imposition of different tariff rates for tobacco used for biri manufacturing, emphasizing the reasonable basis for classification and the objective of the tariff imposition.

5. Additionally, the argument regarding the exclusive use of Nicotiana Rustica for hooka and chewing in Uttar Pradesh was addressed. The Court noted that the petitioners' claim that this type of tobacco could not be legitimately taxed under the impugned clause was refuted by the counter-affidavit and the Committee's report. The report indicated that the tobacco in question could potentially be used for biri manufacturing with suitable processing and admixture.

6. Ultimately, the Court dismissed the petition, ruling against the petitioners and upholding the validity of the excise tariff under Clause (6) of Entry 4 in the First Schedule. The judgment concluded that the petition failed on the grounds of discrimination and excessive rates, and costs were awarded against the petitioners.