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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 ..... al 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 vires Sections 14 and 15 of the Central Sales Tax Act, 1956 ('CST Act' in short) and Article 286 of the Constitution of India and is repugnant to Sl. No. 1(iv)(d) of Part-A to the Third Schedule read with Section 8 of the TNGST Act and the general scheme of levy of additional duty of excise under the Additional Duties of Excise (Goods of special importance) Act, 1957 ('ADE Act' in short). Aggrieved by the orders passed in the said petitions, these writ petitions have been preferred. 2. We will briefly narrate the submissions of the writ petitioners which are dealt with elaborately in the written submissions filed by them. 'Gutkha', according to them, is a preparation which, apart from tobacco, contains betel nut, katechu, lime, flavours, permitted spices and saffron and tobacco is its essen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u 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 restriction. The description of goods in Section 14 was aligned by the Central Act 26 of 1988 with the product description in the CET Act with effect from 16-3-1988. By Finance Act 2 of 1996, Chapter Heading 2404 of the Central Excise Tariff Act was re-cast and substituted, and chewing tobacco preparations earlier covered by sub-heading 2404.41 were substituted as 2404.40. Therefore, according to the petitioners, since their product contain tobacco it falling within the description 'chewing tobacco and preparations containing chewing tobacco', they would be goods of special importance, and the restriction under section 15 of the CST Act comes into operation. Therefore, the State can neither tax such goods beyond one stage nor over 4% of the sale price during the relevant period. Therefore, according to the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 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 'chewing tobacco and preparations containing tobacco". The words in the Third Schedule of the TNGST Act, by virtue of Section 8, show that the goods in question are exempt from tax and the inclusion thereof in the First Schedule cannot in any manner take away the exemption granted by Section 8. For this proposition, the learned senior counsel relied on (2006) 147 STC 211 (SC) [Reliance Trading Co. v. State of Kerala] and (2008) 114 STC 559 (SC) [Fenoplast v. State of A.P.]. If this is not accepted, then the goods are any way 'declared goods' as per section 14 of the CST Act and there is a ceiling on tax on such declared goods as per Section 15. For all these reasons, the writ petitioners pray that the impugned order of the Tribunal be quashed and the writ petitions be allowed. 8. In response, the learned Additional Advo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) 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. The learned Additional Advocate General also submitted that the words used in the Andhra Pradesh Government Sales Tax Act were different and all inclusive as compared to the TNGST Act and so, that decision will not cover the issue on hand. He also relied on (2006) 144 STC 529 (Del.) [Shanti Fragrances v. Union of India] and (2006) 145 STC 211 (Del.) [M.R. Tobacco Pvt. Ltd. v. Union of India] which referred to the basis of differences existing between the entries in the APGST Act and the Delhi Act. Therefore, according to the learned Additional Advocate General, on the first ground, viz. whether the goods fall under Chapter 21.06 or 2404.41/40, the answer has to be the former. 10. Then the learned Additional Advocate General submitted that if this submission is not accepted, then it should be understood under Article 246 read wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 petitions fail. If we hold that 'Pan Masala" containing tobacco commonly known as 'Gutkha' answers the description contained in Chapter 24, more particularly under sub-heading 2404.41/1404.40, then we have to answer the following questions: (a) whether the state Legislature is competent to levy tax on the sale or purchase of goods declared to be of goods of special importance and subjected to the levy of additional excise duty under the ADE Act, 1957? 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 su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 of the tobacco plant, but does not include any part of a tobacco plant while still attached to the earth. ... II. Manufactured Tobacco ... (5) Chewing tobacco, including preparations commonly known as "Khara Masala", "Kimam", "Dokta", "Zarda", "Sukha" and "Surti"." Central Act 26 of 1988 substituted the words in section 14(ix) with the following words with effect from 13-5-1988 : "14(ix). Unmanufactured tobacco and tobacco refuse covered under Sub-Heading No. 2401.00, cigars and cheroots of tobacco covered under Heading No. 24.02, cigarettes and cigarillos of tobacco covered under the sub-Heading Nos. 2403.11 and 2403.21, and other manufactured tobacco covered under Sub-Heading Nos. 2404.41, 2404.50 and 2404.60 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986)." The above amendment was made to Section 14 of the Central Act in order to align the descr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the figures and word '24.02, 24.03 and 24.04', the figures and word '24.01, 24.02, 24.03 and 24.04' shall be substituted." Clause (9) in Chapter XXI reads as follows : "(i) for Heading Nos. 21.06 and 21.07 and the entries relating thereto, the following shall be inserted, namely:- 21.06 2106.00 'Pan Masala' 50%" By Finance (No. 2) Act, 1996, there was again a change and the same is reproduced hereunder: "(7) in Chapter 24, after NOTE 4, the following NOTE shall be inserted, namely:- 5. in this Chapter, 'smoking mixtures for pipes and cigarettes' of sub-heading No. 2404.10 does not cover 'Gudaku'." "(iii) For Heading No. 24.03 and the entries relating thereto, the following shall be substituted, namely:- Heading No. Sub-Heading No. Description of goods Rate of duty (1) (2) (3) (4) 24.04 Other Manufactured tobacco and manufactured tobacco substitutes; homogenized or 'reconstituted' tobacco, extracts and essences 2404.40 Chewing tobacco and preparations containing chewing tobacco 40% The relevant extracts from the Finance Act, 2001 read as follows: THE FOURTH SCHEDULE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Act in respect of such goods". Item-1 in Part-A of the Third schedule which deals with 'tobacco' reads as follows: "1. (i) Unmanufactured tobacco and tobacco refuse (produced or manufactured in India), as described in column(3, against the heading '24.01' in column (1), of the First Schedule to the Additional Duties of Excise - (Goods of Special Importance) Act, 1957 (central Act 50 of 1957) (hereinafter in this Schedule referred to as the said Act); (ii) Cigars and cheroots of 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; (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 tob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, when two or more Headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those Headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be one of the essential ingredients along with lime, katha or tobacco in combination or in isolation. It did not matter whether it also contained cardamom, copra and menthol, but one of the three ingredients, viz., lime, katha and tobacco had to be found in the preparation which was known as 'Pan Masala'. By Act 33 of 1996, the description with regard to chapter Heading 24.04 and the Sub-Headings thereunder were re-numbered and the description of goods were re-classified. There was no change as far as chapter 21 was concerned and Heading 21.06 continued to be 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 on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g gutka sold in sealed containers or pouches or any other type of packages At the point of 10 paise in the rupee 8-2-1996 Sl. No. 7 of the Fourth Schedule to the APGST Act pertaining to exempted goods reads as follows: Sl. No. Description of goods 7. Tobacco "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 supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een amended by including gutka as a kind of pan masala in entry 194 of its First schedule, it must, therefore, be held that the inclusion of gutka in the said entry 194 in the manner in which it is done is bad in law and is struck down. The appellants 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at "charitable bequest" shall mean one or other of the things which are enumerated, but that it shall "include" them. The word "include" is very generally used in interpretation clauses in order to enlarge the meaning of words or 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, particu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nknown. The observation of Lord Watson in Dilworth v. Commissioner of Stamps (1899) A.C. 105-106, which is usually referred to on the use of 'include' as a word of extension, is followed by these lines : "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"." 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the importance of commercial understanding of the products in the following words : "My findings must be that as products and as general commodities in the market, neither salted peanuts nor cashews, or 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Constitution does not mean that they all constitute one commodity" - vide AIR 1964 SC 1729 [A. Hajee Abdul Shukoor & Co. v. State of Madras] and (1998) 1 SCC 437 [Tvl. K.A.K. Anwar & Co. v. State of Tamil 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come under Chapter Heading 2404 because "Pan Masala containing tobacco" is introduced therein for the first time. Prior to 2001, the words used in Chapter 21 are 'Pan Masala' containing lime, 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 Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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