MISHRA ZARDA TRADERS Vs. STATE OF ORISSA

JUDGEMENT

(1.) THE Additional Sales Tax Tribunal, Orissa, has stated a case under section 24 (1) of the Orissa Sales Tax Act, 1947 ("the Act" for short) and referred the following question of law for the opinion of this Court :

(2.) THE petitioner is a dealer carrying on business in all varieties of pan masala. On the basis of a "fraud report" of the Inspector of Commercial Taxes, Cuttack I Circle, a notice under section 12 (4) of the Act was served upon the petitioner, and on verification of the documents of his business, it was found that the commodity in question, namely, "baba zarda", was shown by him as a chewing tobacco under the tax-free sale. The Sales Tax Officer took the view that the article was "zarda" and as such was taxable. He accordingly included the turnover of sale of zarda in the taxable turnover and charged sales tax at the appropriate rate. The appeals filed by the petitioner before the Assistant Commissioner of Sales Tax and the Sales Tax Tribunal also failed, but on an application under section 24 (1) of the Act, the Tribunal has referred the above question for opinion of this Court.

(3.) THE question that now arises for consideration is as to whether the commodity in question, namely, "baba zarda zafrani pati scented chewing tobacco" is a chewing tobacco as such and thus tax-free or is "zarda" and a taxable item. In another case, namely, Second Appeal No. 447 of 1972-73, the Tribunal, by its decision dated 10th April, 1973, which is also referred to in the Tribunal's order, had taken the view that this commodity was not "zarda" and thus not exigible to sales tax as it was only a chewing tobacco notwithstanding its description as "baba zarda", which was only a trade name. The present Tribunal has taken the view that chewing tobacco means only the tobacco in its raw form not subjected to any process of manufacture and once it is processed by soaking it in jaggery water and adding flavoring essences to it, then the leaf is shredded and the shredded tobacco is then packed and labelled, it has undergone a process of manufacture which would change the nature of the commodity from chewing tobacco to zarda. The Tribunal has also looked to the product, and one file was also produced before us by Mr. Agarwala. Mr. Agarwala placed strong reliance on the case of the State of Madras v. Bell Mark Tobacco Co. [1967] 19 STC 129, a case which had gone to the Supreme Court from the Madras High Court (Bell Mark Tobacco Company v. Government of Madras [1961] 12 STC 126), where the question was as to whether the sale of chewing tobacco prepared from raw tobacco remained the same commodity as raw tobacco or became a manufactured product. The process of preparation of chewing tobacco was as follows : The assessee purchased raw tobacco and after sprinkling jaggery or plain water on the bundles of tobacco allowed the tobacco to ferment for some days. Heat was thereby generated and the tobacco was well processed. Stalks of tobacco were broken and removed and sand and dust were also removed. After paying excise duty, the bundles of tobacco were brought to the premises of the factory. Jaggery juice was sprinkled on the tobacco and it was then cut into thin strips by shearing machines. This tobacco was allowed to dry for some days and flavouring essences were then sprinkled on it. It was then packed in special wrappers and these packets were known as chewing tobacco packets. It was held that the various processes to which the raw tobacco was subjected amounted to a manufacturing process and, therefore, the chewing tobacco sold by the dealer was not the same commodity as the raw tobacco but was a manufactured product. Mr. Agarwala relied upon this case to show that even after all the processings of the raw tobacco as indicated above, it was held to be a chewing tobacco and, therefore, in the present case baba zarda which was also only a processed form of tobacco should be held only as a chewing tobacco. The question in the Madras case was entirely different as to whether chewing tobacco after its manufacture remained the same commodity as raw tobacco for considering whether excise duty could be levied or not. This case, therefore, in my view does not help to solve the riddle before us.