A V PACHIAPPA CHETTIAR Vs. STATE OF MADRAS

JUDGEMENT

(1.) IN these cases a common question arises. It is whether the goods sold by the assessee, which is described as tundu tobacco, is "chewing tobacco" produced as a result of any manufacturing operations and assessable as a manufactured product. Under section 5(viii) of the Madras General Sales Tax Act, 1939 tax is leviable on sales of raw tobacco whether cured or uncured, only at the point of first purchase effected in the State of Madras by a dealer at the rate of six pies for every rupee on his turnover. Under clause (vii) of that section, the sale of cigars and cheroots at less than two annas per cigar or cheroot and beedies, snuff, chewing tobacco or any other product manufactured from tobacco shall be liable to tax only at the point of first sale effected in the State of Madras by a dealer but at the rate of six pies for every rupee on his turnover. There is a proviso to sub-clause (viii) which states that where a dealer has been taxed in respect of his turnover relating to goods included in sub-clause (vii) and has also paid tax on the purchase of the raw tobacco used in the manufacture of such goods under clause (viii) he shall be entitled to a rebate to the extent of the tax paid in respect of the raw tobacco so used. IN these cases, the question arose before the Sales Tax Appellate Tribunal, whether the tundu tobacco sold by the assessees could be described as chewing tobacco manufactured from raw tobacco.

(2.) THE Tribunal called for a report from the Commercial Tax Officer asking that officer to report upon the details of the actual process employed by the assessee. THE relevant part of the report was in these terms :

(3.) IN T.C. Nos. 161 and 170 of 1959 relating to the assessment years 1955-56 and 1956-57 respectively, Pachiappa Mudaliar and Bros. is the petitioner. The turnovers in dispute in these cases are Rs. 50, 956, and Rs. 32, 924. T.C. Nos. 171 and 172 of 1959 relate to the assessment years 1956-57 and 1957-58 and the respective turnovers in dispute are Rs. 34, 516 and Rs. 66, 160. IN these two cases. Sheik Batcha Saheb is the petitioner.IN a decision of this Court, in Bell Mark Tobacco Co. v. Government of Madras this very question of chewing tobacco arose and it fell to be determined whether the sales tax was leviable under clause (vii) or clause (viii) of section 5 of the Act. Precisely in the same manner as in the present case, in the case dealt with in the above decision, the raw tobacco purchased by the assessees was subjected to soaking in jaggery water, dried in the shade and periodically subjected to the process of bulking. The same process was followed during the time when the tobacco was in the bonded warehouse. After the tobacco was taken out of the warehouse, it was again soaked in jaggery water. Thereafter certain processes were employed which do not obtain in the present case. Flavouring essences were added, leaf was shredded and the shredded tobacco was packed and labelled. The learned Judges agreed with the Tribunal that the latter part of the process amounted to a manufacturing process.