Excise duty paid on raw tobacco used in the manufacture of chewing tobacco is not deductible in the computation of the taxable turnover of the dealer under Rule 5 (l) (i) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, because it is not paid "in respect of the goods" sold by the dealer.

Judgment

SHAH, J.

( 1 ) MESSRS Bell Mark Tobacco Company-respondents in this appeal-are dealers in tobacco and tobacco products. They were assessed to sales tax by the Deputy Commercial Tax Officer, Puduk- kottai, on their turnover in the years 1955-56, 1956-57 and 1957-58 from sales of "chewing tobacco". Their appeals to the Commercial Tax Officer and the Sales Tax tribunal, Madras, were dismissed. The respondents then approached the High court of Madras in exercise of its revisional jurisdiction and raised three principal contentions : (1) that they were not liable to pay sales tax on their turnover from the sales of packets of chewing tobacco prepared by them; (2) that the cost of packing material was not liable to be included in computing the taxable turnover ; and (3) that they were entitled to rebate of the excise duty paid by them on the raw tobacco from which the chewing tobacco was prepared. The High court held that in computing the taxable turnover of the respondents, the turnover from the sales of "chewing tobacco" was liable to be included and the cost of packing material could not be excluded from the taxable turnover of the respondents. But in theview of the High court, the respondents were entitled to rebate of excise duty paid by them on raw tobacco from which chewing tobacco was manufactured. Contentions Nos. (1) and (2) were therefore decided in favour of the State and the third against them. With certificate granted by the High court, these appeals have been preferred by the State. Whether a dealer who pays excise duty on raw tobacco purchased by him is entitled to rebate of that duty in the computation of taxable turnover from the sale of chewing tobacco manufactured out of that raw tobacco was recently considered by this court in The State of Madras v. Swasthik Tobacco Factory 1. It was held by this court that the expression "in respect of the goods" in rule 5 (l) (i) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, means "on the goods", and therefore only the excise duty paid on the goods sold by the dealer is deductible. In Swasthik Tobacco Factorys case1, the dealer purchased raw tobacco and converted it by a manufacturing process into chewing tobacco and sold it in small packets. His claim in computing the taxable turnover for rebate in respect of excise duty paid on raw tobacco used in manufacturing "chewing tobacco" was disallowed. This decision is prima facie determinative of the only question which is raised in these appeals by the State. But counsel for the respondents contended that chewing tobacco is the same commodity as raw tobacco, and therefore excise duty paid on raw tobacco is an admissible deduction. Counsel said that in Swasthik Tobacco Factorys case1, it was conceded by counsel that "chewing tobacco" was a manufactured product, and the court decided the case on the footing of that concession, whereas in the present case there is no such concession made. The Sales Tax tribunal has set out the process of preparation of chewing tobacco. Raw tobacco is purchased under a transport permit issued by the central Excise Department and is warehoused in different lots. Jaggery water or plain water is sprinkled on the bundles of tobacco and tobacco is allowed to ferment for about 40 days. Heat is thereby generated and "the tobacco gets well processed". Stalks of tobacco are broken and removed, and sand and dust are removed. After payment of excise duty the bundles of tobacco are brought to the premises of the factory, where chewing tobacco is prepared. "jaggery juice" is sprinkled on tobacco, and it is then cut into thin strips by shearing machines. The resulting tobacco is called "nice" tobacco. This "nice" tobacco is allowed to dry for some days. Then "flavoring essences" are sprinkled on it and it is thenpacked in special wrappers. The packets are known as "chewing tobacco" packets. A large number of workmen are employed to carry out these several processes. In the view of th