2022 (5) TMI 1191 - HC - VAT and Sales Tax

Levy of Sales Tax - sale of Gudakhu - Gudakhu being tobacco covered under Additional Duties of excise (Goods of Special importance) Act (ADE Act) is exempted from sales tax under Entry 38 of the exempted list or not - Orissa Sales Tax Act, 1947 (OST Act) - HELD THAT - Entry-38 of the Exempted List A of the OST Act clearly includes Tobacco as described in column 3 of the first schedule to the ADE Act. If one turns to the ADE Act in the first schedule under Chapter Heading 2404.99 the Entry is Tobacco used for smoking through hookah or chillum commonly known as hookah tobacco or Gudakhu . It is therefore, plain that for the purpose of ADE Act Gudakhu is also recognized as a tobacco product - It may be noted here that even in subsequent amendments to the OST Act, there is an express recognition of Gudakhu being a tobacco product. Likewise, even in the ADE Act by an amendment in 2005 Gudakhu is treated as other manufactured tobacco. Gudakhu is also another form of manufactured tobacco, this Court answers the two questions framed for consideration in favour of the Assessee against the Department. In other words, it is held that the Tribunal was not justified in holding that the sale of Gudakhu by the Petitioner was amenable to sales tax under the OST Act. The conclusion is that Gudakhu is tobacco covered by the ADE Act and is exempt from sales tax under Entry 38 of the exemption list i.e. List-A of the OST Act. The impugned orders of the Tribunal and the corresponding orders of the ACST and the Assessing Officer are accordingly set aside. The revision petitions are disposed of.

Summary

Issues:
1. Taxability of Gudakhu under the Orissa Sales Tax Act, 1947 (OST Act).
2. Exemption of Gudakhu from sales tax under Entry 38 of the exempted list.

Analysis:
1. The petitioner, engaged in the manufacturing and sale of Gudakhu, sought exemption from sales tax under Entry 38 of the exemption list of the OST Act, citing that Gudakhu falls under tobacco as described in the ADE Act. The assessing authority imposed sales tax on Gudakhu, stating it might be covered under "other manufactures of Tobacco" in the ADE Act but not under Entry-38 of the OST Act. The Tribunal upheld this decision, denying the exemption claim as Gudakhu was not specifically mentioned in the ADE Act's first schedule.

2. The High Court analyzed the definition of tobacco under the ADE Act, noting that Gudakhu falls under Chapter Heading 2404.99 as "Tobacco used for smoking through hookah or chillum commonly known as hookah tobacco or Gudakhu." The court highlighted subsequent amendments recognizing Gudakhu as a tobacco product under both the OST Act and the ADE Act. Referring to precedent cases, the court emphasized that Gudakhu is considered a tobacco product in common parlance, exempt from sales tax under the OST Act. Citing the Supreme Court's rulings on similar products, the court concluded that Gudakhu is covered by Entry 38 of the exemption list and exempt from sales tax.

3. The court ruled in favor of the assessee, holding that Gudakhu is indeed a form of tobacco covered by the ADE Act and exempt from sales tax under the OST Act. The Tribunal's decision, along with the orders of the ACST and the Assessing Officer, was set aside. The judgment clarified the legal position and factual understanding that Gudakhu qualifies as tobacco, thereby resolving the issues raised in the revision petitions in favor of the petitioner.