STATE OF MADRAS Vs. SWASTIK TOBACCO FACTORY VEDARANYAM

JUDGEMENT

(1.) These appeals, by special leave, raise the 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.

(2.) The facts are not in dispute and they may be briefly stated. The respondent, Messrs Swastik Tobacco Factory, is a dealer in tobacco. It purchased raw tobacco; by processing it in a prescribed manner, converted it into chewing tobacco and sold it as such in small paper packets. The said process has been described by a Division Bench of the Madras High Court in Bell Mark Tobacco Co. v. Government of Madras, 1961-12 STC 126 at p. 132 (Mad) thus:

(3.) Mr. A.V. Rangam, learned counsel for the State, argued that the raw tobacco was converted by a manufacturing process into chewing tobacco, a different commodity and that, therefore, under R. 5(1) of the Rules, as excise duty was paid only in respect of the raw tobacco and not chewing tobacco, the said duty was not deductible from the turnover of the assessee. He did not contest the correctness of the decision of the High Court on the question of the taxability of the chewing tobacco under S.5(vii) of the Act.