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TMI Blog2012 (10) TMI 621X X X X Extracts X X X X X X X X Extracts X X X X ..... s and cheroots, cigarettes, biries, smoking mixtures or pipes and cigarettes, chewing tobacco and snuff'. Pan Masala is not a mixture of tobacco but when it is mixed with tobacco, it becomes a tobacco preparation. The deduction under Section 80I is provided on the income from the manufacture of the articles other than articles or thing in the Schedule XI and which includes in Entry-2, 'tobacco and tobacco preparations, such as cigars and cheroots, cigarettes, biries, smoking mixtures or pipes and cigarettes, chewing tobacco and snuff'. Pan Masala is not a mixture of tobacco but when it is mixed with tobacco, it becomes a tobacco preparation - Zarda Yukta Pan Masala is not a tobacco preparation under Item 2 of Schedule XI - deductions under Section 32AB and 80I disallowed - in favour of the revenue - ITA No.110 of 2001, ITR 12 of 2001, 526 of 2012, 93 of 2001, 83 of 2001, 528 of 2012 - - - Dated:- 16-10-2012 - Sunil Ambwani, And Aditya Nath Mittal, JJ. 1. We have heard Shri R.K. Upadhyay and Shri Dhananjay Awasthi, learned counsel for the income tax department. Shri V.B. Upadhyay, Sr. Advocate assisted by Shri S.K. Garg, Shri R.S. Agrawal and Shri Ashish Bansal appear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee filed an appeal before the CIT (A), Kanpur, which by its order dated 25.2.2000 allowed the appeal and directed the A.O. to allow the claim under Section 80I at Zarda Yukta Pan Masala. The CIT (A) dismissed the appeal for the assessment year 1990-91 vide order dated 17.3.1993 on identical issues. The department filed an appeal against the order before the ITAT, Allahabad, which by its order dated 30.3.2001 dismissed the appeal with following observations:- "We have considered the rival submission. In view of the fact that the Tribunal following its order in case of M/s Kothari Products Ltd., Kanpur, a sister concern having the same proportion of zarda yukta pan masala there cannot be a different conclusion in respect of the appellant-assessee also. Therefore we direct the AO not to treat the zarda yukta pan masala as a tobacco preparation within the meaning of entry 2 of Schedule XI of the I.T. Act and also direct that the claim of deduction u/s 80-I be allowed to the appellant assessee." 6. In the judgment dated 30.3.2001 the Tribunal relied upon its own order in Kothari Products Ltd. in the assessment year 1987-88 to 1991-92, where it had held that Zarda Yukta Pan Masala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered, when it is appropriately raised and questioned. The revenue has relied upon Indian Steel and Wire Products Ltd. v. Commissioner of Income-tax, West Bengal-I, 108 ITR 802 in which while considering the use of the word metal in conjunction with iron and steel in Item no.1 of Schedule V of the Act it was held that iron and steel can be treated upto a certain stage as raw material, which can take several shapes. But there comes a stage, when by further processing or manufacture its ceases to be a raw material and enters into a category of finished products and therefore iron and steel (metals) has to be considered separately as thing or an article, but articles made or produce from such a thing or an article cannot come within the same item. Other items in the schedule namely steel castings and forgings are product of iron and steel yet they have been separately itemized in the schedule. 10. The revenue has relied upon CIT, Kerala-II v. West India Steel Com. Ltd., 108 ITR 601 in which the Kerala High Court held that M.S. rods and steel sections are basically iron and steel; and in Ramavatar Budhaiprasad v. Assistant Sales Tax Officer, 12 STC (SC) in which it was he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n from tax under that Act for the period from July 1, 1967. The entry continued in force up to March 31, 1968. The expression "tobacco" as defined in section 2 (c) of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 has the meaning given to it in item 9 of the First Schedule to the Central Excises and Salt Act, 1944 set out in the following items: "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." The assessee in these appeals dealt in a product called "gudakhu". They did not include the turnover of "gudakhu" in their assessment return under the Orissa Sales Tax Act and under the Central Sales Tax Act, although they were entering into internal and inter-State sales. They took the stand that both categories of sales of "gudakhu" were exempt from tax under the two enactments, and relied on serial No.35 of the Schedule to the Orissa Sales Tax Act. The Sales Tax Officer levied sales tax on the turnover of "gudakhu" both under the State and the Central Sales Tax Acts, bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot show that any question was raised or considered. It was only an opinion of the High Court that no question of law arise, which was upheld by the Supreme Court. The question still remain undecided. In V.M. Salgaokar Bro. Pvt. Ltd. v. CIT, (2000) 5 SCC 373; Kunhayammed v. State of Kerala, (2000) 6 SCC 359; U.P. State Road Transport Corporation v. Omaditya Verma, (2005) 4 SCC 424; Satrucharla Vijaya Rama Raju v. Nimmaka Jaya Raju, (2006) 1 SCC 212, the Supreme Court held that the dismissal of the Special Leave Petition in limine does not operate as confirmation of the reasoning in the decision sought to be appeal against. Such an order does not constitute law. 15. The deduction under Section 80I is provided on the income from the manufacture of the articles other than articles or thing in the Schedule XI and which includes in Entry-2; 'tobacco and tobacco preparations, such as cigars and cheroots, cigarettes, biries, smoking mixtures or pipes and cigarettes, chewing tobacco and snuff'. Pan Masala is not a mixture of tobacco but when it is mixed with tobacco, it becomes a tobacco preparation. In State of Orissa v. Radheshyam Gudakhu Factory (Supra), the Supreme Court held that ' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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