LexSTATE OF MADRAS versus M/S. SWASTIK TOBACCO FACTORY, VEDARANYAM
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
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STATE OF MADRAS
v.
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MIS. SWASTIK TOBACCO FACTORY, VEDARANYAM
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December 14, 1965
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[K. SUBBA RAO, J. C. SHAH AND S. M. S!KRI, JJ.]
Madras General Sa/es Tax (Turnover and Assessment) Rules 1939,
r. 5(1) (i) Excise duty paid on raw tobacco--Raw tobacco processed and
sold as chewing tobacco-Excise duty whether to be deducted from turn-
over of chewing tobacco under r. 5(1) (i).
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The respondent factory used to purchase raw tobacco and after pro·
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cessing it, sell it as chewing tobacco.
Excise duty was paid by the factory
in respect of raw tobacco purchased by it.
In sales tax proceedings the
factory contended that th_e excise duty so paid to the Central Government
must be deducted to arrive at the net turnover under r. 5(1)i) of the
Madras General Sales Tax (Turnover and Assessment) Rules, 1939. The
assessing officer as well as the Appellate Assistant Commissioner rejected
the contention but it was accepted by the Tribunal.
The revision filed
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by the State in the High Court \Vas dismissed, whereupon the State ap-
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pealed to this Court by special leave .
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It was contended on behalf of the appellant that the raw tobacco wa•
converted by a manufacturing process into chewing tobacco, a different
commodity and that, therefore, under r. 5(l)(i) of the Rules, as excise
duty was paid only in respect of raw tobacco and not chewing tobacco
the said duty was not deductible from the turnover of the assessee.
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HELO: The object of the concession in r. 5(1)i) is presumably to
avoid payment of tax on tax in respect of the same goods.
This con~
cession would have no relevance if the
goods subjected to excise duty
were different from the goods sold.
Tobacco when converted by a pro~
cess of manufacture into chewing tobacco becomes a different marketable
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product.
Duty on raw tobacco cannot therefore be said to be paid in
respect of the manufactured product. [82 B-D]
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The expression "in respect of the goods" in r. 5(1) (i)
means only
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"on the goods", and cannot take in the raw material out of which the
goods were made. [83 E]
Inland Revenue Commissioners v. Court & Co. [1963] 2 All. E.R.
722 and Asher v. Seaford
Court Estates
Ltd., L.R. [1950] A.C. 508,
considered .
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The excise duty paid by the respondent was only on the raw tobacco
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and not on the goods sold by it, and therefore, the said dnty could not
be deducted from its turnover under r. 5(1)(i). [83 E-F]
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CML APPELLATE JURISDICTION : Civil Appeals Nos. 90 and
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and 91 of 1965.
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Appeals by special leave from the judgment and order dated
September 4, 1963 of the Madras High Court in Tax Cases Nos.
120 and 121 of 1963.
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' SUPREME COURT
REPORTS ___ [1966] 3 s_c.R.
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A,,· Ranganandhan Chetty and A. V .~ Rangam, for the appel-
lant.
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T. A. Ramachandran and 0. C. Mathur for the respondent.
The Judgment of the Court was delivered by
Subba -Rao, J. These appeals, by special leave, raise the
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question of the true construction of the provisions of r. 5(1)(i) of
the Madras General Sales Tax (Turnover and Assessment) Rules,
1939, hereinafter referred to as the Rules.
The facts are not in dispute and they may be briefly stated.
The respondent, Messrs Swastik Tobacco Factory, is a dealer in - C- -
tobacco. It purchased raw tobacco; by processing it in a pres-
cribed manner, converted it into chewing tobacco and sold it as
such in small paper packets.
The said process has been des-
cribed by a Division Bench of the Madras High Court in -Bell -
Mark Tobacco Co._v. Govermentof Madras(') thus: - --
''Taking,' however,. the cumulative effect of the
various processes to which the assessee subjected the
tobacco before he sold it, it is clear that what was even-
tually sold by the assessee was a manufactured product,
manufactured from the tobacco that the assessee had
purchased.
Soaking in jaggery water is not the only
process to be considered.
The addition of flavouring
essences and shredding of the tobacco should establish
that what the assessee sold was a product substantially
different. from-what he had purchased."
for the purpose of these appeals, it was not disputed that· the
respondent purchased raw tobacco, converted it by a manufac-
turing- process into chewing tobacco and· sold it in small paper
packets. The respondent paid excise duty in respect of the raw
tobacco purchased by it. For the assessment years 1955-56 and
1956:57, the AssisExcerpt shown. Read the full judgment & AI analysis in Lexace.