9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (5) TMI 326 - SC - VAT and Sales TaxTaxability - gutka/gutkha/guhtka - appellants argued that state legislatures were not empowered to levy sales tax on those articles, in view of the provision in the Constitution enabling the Union to levy additional duties of excise, and further that in any case, the rate of state tax cannot exceed the limit prescribed by the Central Sales Tax Act, 1956. HELD THAT - Entry No. 2 of Part-J in the First Schedule to the ADE Act is similar to sub-heading 2404.49 - as amended from 01.03.2001. As a result, additional excise duty could be imposed on ''Pan Masala containing tobacco . As far as Kothari Products Limited v. Government of Andhra Pradesh, 1997 (7) TMI 601 - ANDHRA PRADESH HIGH COURT is concerned, a Full Bench of the (undivided) Andhra Pradesh High Court had examined the interface between the APGST Act, and the provisions of the CET Act, in the context of whether gudaku was subjected to sales tax levy, as the dealers had contended that it was tobacco, and therefore, exempt under the local law - The Full Bench ruling considered the local enactments, and sub-headings in Chapters 21 and 24 of the CET Act, and held that although gutkha falls within the term pan masala , since no additional duty of excise is levied on it, yet it could not be held that gutkha was exempt from state sales tax. It was held by the Full Bench of the Andhra Pradesh High Court 1997 (7) TMI 601 - ANDHRA PRADESH HIGH COURT that provisions of explanation of the Fourth Schedule to the APGST Act, with reference to the heads and sub-heads in the CET Act, what was relevant in ascertaining the real import of the expression chewing tobacco and preparations containing chewing tobacco was the breadth of the terms used in the entry, sub-heading or a notification, or statute. From that aspect, the court concluded that gutkha fell within the wide language of the said expression. However sub-heading 2404.40 Chewing tobacco and preparations containing chewing tobacco was a general sub-head. The court concluded that it is a settled rule of interpretation that a specific reference prevails over a general entry. Since the court held that gutkha fell within the meaning of pan masala in the sub-heading 21.06, there could be no doubt that pan masala was a specific sub-head even assuming that it falls within the meaning of chewing tobacco . Therefore, the court concluded that in view of the specific head pan masala in Chapter 21, that item was excluded from the general sub-head 2404.40 Chewing tobacco and preparations containing chewing tobacco . The court also concluded that though gutkha fell within the term pan masala in Chapter 21 under sub-head 21.06 yet as it is not subjected to additional duty, an essential condition envisaged by the explanation for claiming exemption, is lacking. Whether pan masala was an exempted item, being tobacco ? - HELD THAT - It is noticeable that pan masala was expressly mentioned in Chapter 21 for the first time, in 1995 in the CET Act. Note 3 defined 'Pan Masala' as any preparation containing betel nuts and any one or more of the following ingredients, namely lime, katha (catechu) and tobacco, whether or not containing any other ingredients . However, at the same time, Chapter 24 contained a specific entry tobacco which enumerated tobacco, manufactured tobacco, substitutes etc. The relevant sub-heading at that time was 2404.41 which enumerated chewing tobacco, including preparations commonly known as khara masala, kimam, dokta, zarda, sukha and surti. Thus, the CET Act itself made a distinction between pan masala - whether it contained tobacco, or not, and all forms of tobacco. Right from 1995, the distinction in the CET Act between pan masala (Chapter 21) and tobacco (Chapter 24), had been made. The definition of pan masala also clarified that despite one of its ingredients being tobacco, it would nevertheless be a separate article. On a plain application of the interpretive rules, especially Rule 3(a) it is clear that the heading which provides the most accurate description has to be followed. In the present case, there is no doubt, that before 2001, pan masala and gutkha fell within Chapter 21, as pan masala, regardless of whether they contained tobacco. Goods classifiable under Chapter 24, i.e. tobacco items were more general; also they did not include pan masala. Rate of tax - HELD THAT - In view of the restrictions under Section 15 CST Act, neither gutkha nor pan masala were declared goods under Section 14 of the CST Act. The amendment to the CET Act did not become part of Section 14(ix). The goods under the relevant sub-headings of the CET Act were absent in the list of declared goods of the CST Act; they were not part of the provisions introduced to the Finance Act, 1988. Therefore, the subsequent changes made introducing 2404.40 in the CET Act do not affect or change the CST Act. Consequently gutkha and pan masala are not covered under sub-heading 2404.40 so far as CST Act is concerned. Resultantly the arguments of the assessees that the rate of local tax, cannot exceed the limit under the CST Act, are rejected as unmerited. The appeals by the assessees have to fail. The revenue s appeals are consequently allowed.
Issues Involved:
1. Taxability of Pan Masala or Gutkha under state enactments. 2. Competence of state legislatures to levy sales tax on Gutkha in view of central excise laws. 3. Validity of state notifications imposing tax on items exempt under other state provisions. 4. Interpretation of "tobacco" and "Pan Masala containing tobacco" under various central and state laws. Summary: Issue 1: Taxability of Pan Masala or Gutkha under state enactments The Supreme Court examined whether state legislatures were empowered to levy sales tax on Gutkha, given the central laws governing excise duties. The court noted that the appellants argued against the state's authority to impose such taxes, citing the Central Sales Tax Act (CST Act), Central Excise Tariff Act (CET Act), and Additional Duties of Excise Act (ADE Act). The court analyzed various state enactments including the Delhi Sales Tax Act (DST Act), Tamil Nadu General Sales Tax Act (TNGST Act), and Uttar Pradesh Trade Tax Act (UPTT Act). Issue 2: Competence of state legislatures to levy sales tax on Gutkha in view of central excise laws The court held that state legislatures were competent to levy taxes on the sale or purchase of commodities subjected to additional excise duty. The levy of such sales taxes only meant that additional excise duty levied on such commodities by the Central Government would not be distributed among the states which had chosen to levy a tax on the sale of such articles. This was supported by the precedent set in Mahalakshmi Oil Mills v. State of Andhra Pradesh. Issue 3: Validity of state notifications imposing tax on items exempt under other state provisions The court addressed the conflict between two lines of judgments: one suggesting that exempt items could not be taxed without amending the exemption notification, and another allowing for such taxation through new notifications. The court concluded that there was no conflict between these lines of cases, as the Agra Belting Works line of cases dealt with the interplay between general exemption and specific taxation notifications. Thus, the court upheld the validity of state notifications imposing tax on Gutkha, even if it was previously exempt under another provision. Issue 4: Interpretation of "tobacco" and "Pan Masala containing tobacco" under various central and state laws The court examined the definitions and classifications under the CET Act and other central laws. It noted that "Pan Masala" was defined separately from "tobacco" and included preparations containing betel nuts and other ingredients, including tobacco. The court held that the CET Act made a clear distinction between Pan Masala and tobacco, and this distinction was maintained in subsequent amendments. The court also applied the General Rules of Interpretation to conclude that Pan Masala and Gutkha were correctly classified under Chapter 21 before 2001 and under Chapter 24 thereafter. Conclusion: The Supreme Court dismissed the appeals by the assessees, holding that state legislatures were competent to levy sales tax on Gutkha and that the state notifications imposing such taxes were valid. The court also clarified the interpretation of "tobacco" and "Pan Masala containing tobacco" under various central and state laws, concluding that these items were not interchangeable and were subject to different tax treatments. The revenue's appeals were consequently allowed.
|
