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TMI Blog2009 (4) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... . Narendra Sharma, for the Petitioners. S/Shri P.S. Raman, Additional Advocate General for K. Radhakrishnan, Govt. Advocate (Taxes), for the Respondent. [Order per : Prabha Sridevan, J.]. - The petitioners are engaged in the manufacture and marketing of 'Pan Masala' containing tobacco under the brand name 'Pan Parag', 'Pan Zarda', 'Pan Parag Gutkha' and also 'Pan Masala' which does not contain tobacco. The first respondent passed provisional assessment orders for the months of October, November and December, 2000, levying tax under Entry-II, Part-J of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959 ('TNGST Act' in short). The petitioners filed a revision before the Deputy Commissioner (C.T.). The revisional authority confirmed the provisional assessment orders. Aggrieved by that, the petitioners approached the Tamil Nadu Taxation Special Tribunal. The Tribunal dismissed all the original petitions filed by the petitioners. The petitioners also filed original petitions seeking the substantial relief of declaration that the word or tobacco in Sl. No. 2, Part-J of the First Schedule to the TNGST Act is ultra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace reliance on 2008 (227) E.L.T. 497 (S.C.) = (2008) 15 V.S.T. 256 (S.C.) [Ponds India Limited v. Commissioner of Trade Tax, Lucknow] and AIR 1972 SC 168 [The Commissioner of Income-Tax, Andhra Pradesh v. Taj Mahal Hotel, Secunderabad]. It was submitted that the words 'that is to say' in Sl. No. 1(iv) have been used so that no other kind of manufactured tobacco can be brought under Sl. No. 1(iv), but that does not mean that the said words have any effect on the word 'including' in Sl. No. 1(iv)(d) of the Third Schedule. That is, while the words 'that is to say' are restrictive, that cannot take away the effect of the inclusive definition in Sl. No. 1(iv)(d). 5. Alternatively, it was submitted on behalf of the petitioners that by virtue of Article 286(3) of the constitution the State of Tamil Nadu is subjected to restrictions and conditions as specified by Parliamentary Legislation with regard to inter alia tax on sale or purchase of goods declared to be of special in interstate law and commerce. Section 14(ix) of the CST Act which deals with such goods of special importance refers, inter alia, to items of manufactured tobacco. Section 15 spells out the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not attracted, then Rule 3(b) will be attracted as the essential character of Gutkha is that of chewing tobacco. Besides, since Rule 3(c) provides that the Heading which occurs last in numerical order should be preferred, Chapter Heading 2404 is to be preferred, since it occurs after Heading 21.06. The petitioners were originally paying excise duty on these goods as per the Central Excise Tariff Act, 1985 ('CET Act' in short) under Heading 21.06 upto 9-10-2000 and thereafter, they are paying central excise duty and additional excise duty under Sub-Heading 24.40, in accordance with the decision in (2000) 119 STC 553 (supra). 7. Therefore, according to the petitioners, the judgment in 119 STC 553 (supra) prohibits classification of the goods in question under Chapter 21 of the CET Act and therefore, one has to look only to Chapter 24 and the interpretative rules also point out only to sub-heading 2404.04. The word 'inclusive' would show that chewing tobacco by whatever name they are called, including khara masala, kimam, dokta, zarda, sukha and surti, would be classified under sub-heading 2404.41/2404.40 and therefore, the goods would be covered by the words 'c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts mentioned under Note-6. Therefore, the learned Additional Advocate General submitted that it is only in the year 2001, with effect from 1-3-2001, that 'Pan Masala' containing tobacco came to be classified under Chapter 24. Significantly, it may be noted that 'Pan Masala' containing tobacco has been assigned separate sub-Heading and not the same sub-headings chewing tobacco and preparations containing chewing tobacco assigned a distinct sub-Heading. Thus, the legislature has consciously not treated 'Pan Masala' containing tobacco termed as Gutkha by the petitioners, as a product of chewing tobacco. Therefore, it was submitted that if this construction is accepted, the other grounds of challenge become redundant. 9. With regard to the specific submission made by the petitioners that 119 S.T.C. 553 (supra) decides the issue, the learned Additional Advocate General submitted that in that case, what was dealt with was Gudaku, a tobacco product falling under sub-heading 2404.11 of the Central Excise Tariff Act as well as the ADE Act and that is not the case of the petitioners herein and that it was a decision rendered on an issue of fact and may not bind us. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the words 'that is to say' found in Entry 114 should be understood to mean that no form of tobacco can be brought under Sl. No. 1(iv) and if 'Gutkha' is 'Gudaku' following the judgment in 119 S.T.C. 553 (supra), then it will not be covered by any of the goods enumerated in Entry 1(iv), Part-A of the First schedule. For all these reasons, the learned Additional Advocate General submitted that the writ petitions should be dismissed. 13. The questions that we have to answer are:- (a) whether 'Pan Masala' containing tobacco commonly known as 'Gutkha' would fall under chapter 21 of the CET Act, 1985 and more particularly under sub-Heading 2106.00 contained thereunder? or (b) Whether 'Pan Masala' containing tobacco (Gutkha) answers the description contained in Chapter 24 more particularly in sub-heading 2404.41/2404.40 namely chewing tobacco and preparations including khara masala, kimam, dokta, zarda, sukha and surti, chewing tobacco and preparations containing chewing tobacco? If we hold that 'Pan Masala' containing tobacco commonly known as 'Gutkha' falls under Chapter 21 of the CET Act, then the writ pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escription contained in Entry 1(iv)(d) Part-A of the Third Schedule? The case of the petitioners is that Gutkha is not commercially considered as 'Pan Masala' and therefore, as per 119 S.T.C. 553 (supra), these goods will not fall under sub-heading 2106.00 and on the other hand, they would have to be classified under Chapter 24. 14. To understand the questions posed before us, we have to see the historical developments of the relevant entries in the relevant Acts, which have a bearing on the levy of sales tax/excise duty on 'Pan Masala' containing tobacco. The relevant Acts are the TNGST Act, the CST Act, the CET Act and the ADE Act. Section 14 of the CST Act declares certain goods to be of special importance. And Section 15 restricts the power of taxation on the said goods. Originally Section 14(ix) of the CST Act read thus:- (ix) tobacco, as defined in Item No. 4 of the First Schedule to the Central Excises and Sale Act, 1944 (1 of 1944) [*] If we go to item no. 4, 'Tobacco' reads as follows: 4. Tobacco Tobacco means any form of Tobacco, whether cured or uncured and whether manufactured or not and includes the leaf, stalks and stems ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es operated with or without the aid of power 2404.39 - - - Other - - - Chewing tobacco, including preparations commonly known as Khara masala , Kimam , Dokta , Zarda , Sukha and Surti . 2404.41 - - - Bearing a brand name 2404.49 - - - Other - - - Snuff; 2404.50 - - - Snuff of tobacco 2404.90 - - - Other The entry relating to chewing tobacco as on 1-3-1993 under the CET of India 1993-94 reads as follows : Heading No. Sub-Heading No. Description of goods Rate of duty Basic Additional Chewing tobacco i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2404.40 Chewing tobacco and preparations containing chewing tobacco 40% The relevant extracts from the Finance Act, 2001 read as follows: THE FOURTH SCHEDULE [See section 134 (a)] PART - I In the First Schedule to the Central Excise Tariff Act, - (1) In Chapter 21, for NOTE 3, the following NOTE shall be substituted, namely :- '3. In this Chapter, 'Pan Masala' means any preparation containing betel-nuts and any one or more of the following ingredients, namely :- (i) lime; and (ii) kattha (catechu), but not tobacco, whether or not containing any other ingredients,such as cardamom, copra and menthol ; (2) in Chapter 24, after NOTE 5, the following NOTE shall be inserted, namely :- '6. in this Chapter, 'Pan Masala' containing tobacco , commonly known as 'Gutkha' or by any other name, means any preparation containing betel-nuts and tobacco and any one or more of the following ingredients, namely :- (i) lime; and (ii) kattha (catechu), whether or not containing any other ingredients such as cardamom, copra and menthol. On the above products, a special excise duty o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (1), of the First Schedule to the said Act; (iii) Cigarettes and cigarillos of tobacco (produced or manufactured in India) as described in column (3), against the heading '24.03' in column (1) of the First Schedule to the said Act; (iv) Other manufactured tobacco (produced or manufactured in India) as described in column (3), against the heading '24.04' in column (1), of the First Schedule to the said Act, that is to say, - (a) Smoking mixtures of tobacco for pipes and cigarettes; cut-tobacco; (b) Hookah tobacco; (c) Biris of tobacco; (d) chewing tobacco including preparations commonly known as khara masala, kimam, dokta, zarda, sukha and surti; (e) Snuff of tobacco (f) Preparations containing snuff of tobacco in any proportion. But Entry-2 in Part-J of the First Schedule to the Act which came into effect from 17-3-1999 pertaining to levy of 40% sales tax on 'Pan Masala' reads as follows : 2. Entry From 17-3-1999 'Pan Masala' by whatever name called containing betel nuts, that is to say, nut of areca, catachu broken and perfumed and lime or menthol or sandal oils or cardamom or tobacco or any one or more of these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material or component which gives them their essential character, insofar as this criterion is applicable. (c) when goods cannot be classified by reference (a) or (b), they shall be classified under the Heading which occurs last in numerical order among those which equally merit consideration. 19. We will now look at the pleadings in this regard. In W.P. No. 4001 of 2002, the product in question is described as the present petition relates only to 'Pan Masala' containing tobacco also known as Gutkha which is sold under the brand name Tulsi Mix . In W.P. Nos. 4604 to 4609 of 2002, it is stated that the petitioners market various products under the brand names 'Pan Parag' being sadha Parag Masala, Parag zarda and Pan Parag Gutkha and that besides the above products, the petitioners are also marketing 'Pan Masala' which do not contain tobacco and other allied products. Therefore, we may safely understand from this that the goods in question are 'Pan Masala' which contain tobacco. According to the petitioners in W.P. No. 4001 of 2002, though tobacco is mixed in small quantity in 'Pan Masala' contents, but since it is used by the custom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only 'Pan Masala'. The change came with effect from 1-3-2001, where Note-3 read as follows: 3. In this Chapter, 'Pan Masala' means any preparation containing betel nuts and any one or more of the following ingredients, namely:- (i) lime; and (ii) kattha (catechu) but not tobacco, whether or not containing any other ingredients, such as cardamom, copra and menthol. Note-6 in Chapter 24 read as follows : 6. In this Chapter, ''Pan Masala' containing tobacco', commonly known as 'Gutkha' or by any other name, means any preparation containing betel nuts and tobacco and any one or more of the following ingredients, namely :- (i) lime; and (ii) kattha (catechu), whether or not containing any other ingredients, such as cardamom, copra and menthol. In chapter 24, for sub-heading 2404.40 and the entries relating thereto, the following was substituted, namely:- Chewing tobacco and preparations containing chewing tobacco; 'Pan Masala' containing tobacco. 2404.41 - Chewing tobacco and preparations containing chewing tobacco 2404.49 - 'Pan Masala' containing tobacco 22. Entry no. 2 of Part-J in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation - The goods mentioned in entries 5, 6 and 7 of this Schedule shall be goods included in the relevant heads and sub-heads of the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957, but does not include goods where no additional duties of excise are levied under that Schedule. 23. In (1997) 107 STC 618 (supra), the Full Bench of the Andhra Pradesh High Court had to consider the question whether the State Legislature could impose sales tax upon 'Pan Masala' and Gutkha and at a rate exceeding 4%. After perusing all the heads and sub-heads in Chapters XXI and XXIV of the CAT Act, the Andhra Pradesh Court concluded that though Gutkha falls within the meaning of 'Pan Masala', since no additional duty of excise is levied on Gutkha, it cannot be held that Gutkha is exempt from tax. Against this, the manufacturer went before the supreme Court. The Supreme Court reversed this decision in 119 STC 553 (supra), by a fairly short-judgment. This is extracted hereunder: 1. The appeal is filed against the judgment and order of a Full Bench of the High Court at Andhra Pradesh. The appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellants will be entitled to all consequential benefits. 5. The appeal is allowed and the judgment and order under appeal is set aside. No order as to costs. 24. The Delhi High Court, in (2006) 144 STC 529 (supra) and 145 STC 211 (supra), rejected the case of the manufacturers of gutkha who contended that their product is gutkha and is a tax free item by virtue of the inclusion of the said goods in the Third Schedule of the Delhi Sales Tax Act. The Delhi High Court chose to follow Agra Belting Works' case and distinguished 119 STC 553 (supra) on the ground that it was decided on the facts of that case and the terminology used in the Andhra Pradesh Sales Tax Act was different. The Delhi High Court has also examined the writ petitions filed by guktha manufacturers on the basis of the language of each Act and also on following Agra Belting Works' case. 25. It is not the case of the petitioners herein that their product is covered by Entry 2404.11 or 2404.12. Their specific case is that their product comes under sub-heading 2404.40 and arguments were also advanced only on that understanding. In fact, even in the written submissions, it is specifically stated by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r phrases occurring in the body of the statute; and when it is so used these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include. But the word include is susceptible of another construction, which may become imperative, if the context of the Act is sufficient to show that it was not merely employed for the purpose of adding to the natural significance of the words or expressions defined. It may be equivalent to mean and include , and in that case it may afford an exhaustive explanation of the meaning which, for the purposes of the Act, must invariably be attached to these words or expressions . (emphasis ours) 13. Can then the words 'tobacco' and 'any form of tobacco' in the first part of the definition be given a wider meaning and read as including the seeds also, particularly as it talks of tobacco in any form, cured or uncured, manufactured or unmanufactured? We do not think they can be for several reasons, in the first place, tobacco seeds hardly answer to the description of either the expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord 'include' is susceptible of another construction, which may become imperative, if the context of the Act is sufficient to show that it was not merely employed for the purpose of adding to the natural significance of the words or expressions defined. It may be equivalent to 'mean and include', and in that case it may afford an exhaustive explanation of the meaning which, for the purposes of the Act, must invariably be attached to these words or expressions . The expression that is to say is descriptive, enumerative, exhaustive and subscribes to a great extent the scope of the entry vide 2005 (181) E.L.T. 367 (S.C.) = (2005) 3 SCC 30 [Castrol India Ltd. v. Commissioner of Central Excise]. This is another clue to the meaning of the word 'include', viz., the other, restrictive, limited construction can alone be employed. 30. One other method of understanding the meaning of the words is to follow the meaning attributed by a common man and consistently. In (1996) 102 STC 566 [City Distributors v. State of Pondicherry], which related to Parag Zarda, which is chewable tobacco, our High Court has referred to (1990) 76 STC 319 [Parimala Agencies v. State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuts of any sort, are generally denominated or known in Canada as either fruits or vegetables. I think it may be assumed, therefore, that if Parliament had intended to include nuts' among the exempted foodstuffs, the word 'nuts' would have appeared in the Schedule. That being so, it must follow that salted peanuts and cashew nuts, which as I have said above are considered generally in Canada to be within the category of nuts,' do not fall within the exemptions provided for fruit and vegetables in Schedule III. The learned Judge also posed one test, which was, Would a house holder, when asked to bring home fruit or vegetables for the evening meal, bring home salted peanuts, cashew nuts or any salt? The answer is obviously no . We will adopt the same test to fit the case on hand. If a common man is asked to buy 'Pan Masala', he may ask us With or without tobacco? . But he will understand what is the product that he has been asked to buy. On the other hand, if he is asked to buy chewing tobacco, he may buy kimam or zarda, which is mainly chewing tobacco, but he will not buy 'Pan Masala'. That is why 'Pan Masala' containing tobacco has all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nadu]. It is clear from the present amendment with effect from 2001 that chewing tobacco does not include, and never included Pan Masala containing tobacco and but for the inclusion of Pan Masala containing tobacco in Chapter 24 and sub-heading 2404.49 with effect from 2001, it would have been goods covered by Heading 21.06. 36. Applying the General Rules for Interpretation, we find that the words 'Pan Masala containing tobacco' provides the most specific description for the goods in question and even if the fact that tobacco is one of the ingredients in the goods in question, since the description of 'Pan Masala' in Heading 21.06 describes the goods most specifically, that has to be preferred. It is, therefore, not necessary to go to Rule 3(b). Even if we do, by its very description, the goods in question is 'Pan Masala' containing tobacco. 37. Even in the Words and Phrases of Central Excise, Customs and service Tax, 2006, the relevant page of which has been enclosed in the typed set, under chewing tobacco, it says many kinds of chewing tobacco are manufactured, for example Surti, Zarda, Kimam, Dokta and Sukha. 'Pan Masala' is obviously ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kattha, catechu, cardamom, copra, menthol and tobacco or any one or any of these ingredients. And Chapter 24 used the words 'chewing tobacco including preparations commonly known as khara masala, kimam, zarda, surti. 40. After the Finance Act 2001, under the sub-heading 2404.40, which read previously as chewing tobacco and preparations containing chewing tobacco, the words, chewing tobacco and preparations containing chewing tobacco; 'Pan Masala' containing tobacco' were substituted and under sub-heading 2404.49, the words 'Pan Masala' containing tobacco were substituted. In the Fifth Schedule which relates to the Second Schedule to the CET Act and in the sixth Schedule which relates to the First Schedule to the A.D.E. Act, in the Seventh Schedule which relates to the First Schedule to the CET Act under Heading 21.06, sub-heading 2106.00, the description of the goods is 'Pan Masala'. In the Fourth Schedule of the Finance Act, we find that Note-3 of Chapter 21 of the First Schedule to the CET Act was amended by modifying the definition of 'Pan Masala' by using the words but not tobacco . Therefore, the reference to 'Pan Masala' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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