9911796707
TMI Blog2012 (10) TMI 621X X X X Extracts X X X X X X X X Extracts X X X X ..... ignificant portion of Zarda pungent flavour of tobacco, which according to the department is consumed by persons, who are addicted to tobacco. A normal person does not consume Zarda Yukta Pan Masasla unless he buys it for the purposes of using it as tobacco preparation, which is also injurious to health and which is specifically printed on the pouches. 4. The assessee claimed deduction under Section 80I of the Income Tax Act, which falls in Chapter VI A "Deductions in respect of profits and gains from industrial undertaking after a certain date etc." The assessee was required to explain as to what was the use of tobacco in pan masala, in as much as tobacco preparation as item no.2 in Schedule XI of the Act with reference under Section 80I (2) (iii). In case of an assessee manufacturing or producing any article not being any article or thing specified in the list of Schedule XI etc. is entitled to for deduction under Section 80I of the Act. The assessee was required to explain as to why the deductions under Section 32AB and 80I may not be disallowed on the profits attributable to Zarda Yukta Pan Masala because it was tobacco preparation. Item No.2 of the Schedule XI of the Act incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Rakesh Ranjan Agarwal for the Revenue. None appears for the opposite party. This is an application under Section 256 (2) of the Income Tax Act. Having heard learned counsel Shri Rakesh Ranjan Agarwal and perusing the application, we are of the opinion that no question of law arises out of the order passed by the Tribunal. The application is, therefore, rejected. Dt.18.7.1995 Sd/B.M. Lal Sd/S.N. Saxena" 7. The order passed by the Supreme Court in Special Leave Petition (CC 3095-96) dated 12.7.1996 against the order dated 18.7.1995 of the High Court is quoted as below:- "Delay condoned. The Special Leave Petitions are dismissed." 8. Learned counsel appearing for the revenue submits that questions were not properly presented before the High Court. The High Court without going into the merits of the case held that no question of law arises from the order of the Tribunal. The basic issue as to whether Zarda Yukta Pan Masala is tobacco preparation or not has been left undecided. There are several judgments on the issue, which require consideration by the Court. 9. Learned counsel appearing for the revenue submits that mere dismissal of Special Leave Petition by the Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tobacco will suffer from nausea and giddiness in consuming tobacco. The addition of tobacco, to the extent of 4% in the product, makes it a product, which is not bought and consumed as sada, or plain pan-masala. The sada pan masala is separate and distinct product than the Zarda Yukta Pan Masala, which will fall in Item-2 of Schedule XI as tobacco preparation. The assessee, therefore, was not entitled to deduction under Section 80I. The High court on the earlier occasion, did not consider the question and since there was no discussion on merits at all nor there was any indication as to whether the High Court had applied its mind on merits, the Supreme Court dismissed the special leave petition. In the circumstances, a large scale tax evasion has resulted giving benefit of deduction under Section 80I on the income out of manufacture of Zarda Yukta Pan Masala. 12. Shri V.B. Upadhyaya, learned counsel appearing for the respondent-assessee submits that once a question has been decided, whether rightly or wrongly, by the High Court even if no reasons are given, and the Supreme Court did not interfere with the order, the taxing authorities must interpret the provisions in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7-68 as per the provision contained in section 8 (2A) of the Central Sales Tax Act, 1956? As mentioned earlier, the High Court answered those questions in favour of the assessee and against the Revenue. Hence these appeals. We have heard learned counsel for the parties and we are satisfied that the High Court is right. It appears that "gudakhu" is a product of tobacco and that although a major part of molasses and other constituents are added to the tobacco the essential and effective ingredient remains tobacco, and therefore "gudakhu" is known as a product of tobacco in common parlance. The High Court has referred to "gudakhu" as a form of smoking tobacco and has observed that even though it is also used as a paste for cleansing the gums of the teeth, it would still be regarded as a product of tobacco. We may point out that the Calcutta High Court in Gulabchand Harekchand v. State of West Bengal (1985) 59 STC 224; 23 ELT 306 has also held that "gudakhu" is manufactured out of tobacco and that its essential character is that of a tobacco product even though molasses and other constituents are added to the tobacco and that it is commonly used for cleansing the teeth. We are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Orissa v. Radheshyam Gudakhu Factory (Supra) will help the assessee. The Supreme Court in this case was concerned with the meaning given to the word 'tobacco' in Item 9 of the First Schedule of Central Excise and Salt Act, and not 'tobacco preparation' and held that 'gudakhu' is tobacco preparation and thus not exigible to tax in Item 9 of the First Schedule to the Central Excise and Salt Act. 17. In the present case we are concerned as to whether 'Zarda Yukta Pan Masala' is a tobacco preparation. The percentage of tobacco in the mixture, is not material, in as much as once tobacco is mixed, even in a small quantity, the Pan Masala becomes a tobacco preparation, which is a separate and distinct commercial commodity and clearly identifiable to the consumers, who are addicted to tobacco. 18. In Item No.1 of the list of articles or thing in Schedule XI, the items include beer, wine and other alcoholic spirits. The percentage of alcohol in the spirits is not given. With the same object the percentage of tobacco is also not given in 'tobacco preparation'. 19. In Item No.2 the words 'such as' are indicative and inclusive and do not complete the list of tobacco preparations. For ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
