1. Dispute over the taxability of pan masala and gutkha under state sales tax enactments and their classification as tobacco under central excise laws. (Para 1 , 2 )
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2023 Supreme(SC) 478
SUPREME COURT OF INDIA
S. RAVINDRA BHAT, DIPANKAR DATTA, JJ.
M/s Trimurthi Fragrances (P) Ltd. – Appellant
Versus
Govt. of NCT of Delhi and Others – Respondents
Civil Appeal Nos. 8485, 8486, 8487, 8488, 8491-8494, 8495, 8496-8501, 8502 of 2011, Civil Appeal Nos. 8617, 10374-10379 of 2014, Civil Appeal No. 289 of 2023
Decided On : 04-05-2023
Important Points
Pan masala and gutkha are distinct from 'tobacco' under the CET Act and not exempt under state laws listing tobacco as tax-free. Additionally, a subsequent notification specifying a tax rate effectively withdraws a previous general exemption without requiring a separate revocation notification.
Subject
Tax Law - Indirect Tax / Sales Tax
Act Referred
ADDITIONAL DUTIES OF EXCISE GOODS OF SPECIAL IMPORTANCE ACT: S.2(c)
CENTRAL SALES TAX ACT: S.14, S.15
DELHI SALES TAX ACT: S.3, S.4, S.7
STATE SALES TAX ACT: S.8
TAMIL NADU GENERAL SALES TAX ACT: S.3, S.8
UTTAR PRADESH SALES TAX ACT: S.4
UTTAR PRADESH TRADE TAX ACT: S.3(a)
CENTRAL SALES TAX ACT: S.14, S.15
DELHI SALES TAX ACT: S.3, S.4, S.7
STATE SALES TAX ACT: S.8
TAMIL NADU GENERAL SALES TAX ACT: S.3, S.8
UTTAR PRADESH SALES TAX ACT: S.4
UTTAR PRADESH TRADE TAX ACT: S.3(a)
Headnote
TAXATION - SALES TAX - PAN MASALA - WHETHER PAN MASALA IS TOBACCO - WHETHER PAN MASALA IS EXEMPTED FROM TAXATION - WHETHER STATE LEGISLATURES ARE EMPOWERED TO LEVY SALES TAX ON PAN MASALA - WHETHER THE RATE OF STATE TAX CANNOT EXCEED THE LIMIT PRESCRIBED BY THE CENTRAL SALES TAX ACT, 1956.
Fact of the Case:
The appellants unsuccessfully argued that state legislatures were not empowered to levy sales tax on those articles, in view of the provision in the Constitution enabling the Union to levy additional duties of excise, and further that in any case, the rate of state tax cannot exceed the limit prescribed by the Central Sales Tax Act, 1956.
Finding of the Court:
The court held that state legislatures were competent to levy taxes on the sale or purchase of the commodities subjected to additional excise duty. The levy of any sales taxes only meant that additional excise duty levied on such commodities by the Central Government would not be distributed among the states which had chosen to levy a tax on the sale of such article.
Issues: 1. Whether state legislatures are empowered to levy sales tax on pan masala? 2. Whether the rate of state tax cannot exceed the limit prescribed by the Central Sales Tax Act, 1956?
Ratio Decidendi: 1. The court held that the definition of 'tobacco' in the Central Excise Act, 1944 (CEA) does not include pan masala. Pan masala is a distinct product from tobacco and is not covered by the definition of 'tobacco' under the CEA. 2. The court held that the state legislatures are competent to levy taxes on the sale or purchase of the commodities subjected to additional excise duty. The levy of any sales taxes only meant that additional excise duty levied on such commodities by the Central Government would not be distributed among the states which had chosen to levy a tax on the sale of such article.
Final Decision: The appeals by the assessees have to fail. The revenue’s appeals are consequently allowed. There shall be no order on costs.
Legal Category Hierarchy
Advocates appeared:
For the Appellant(s) : Mr. Madhav Bhatia, Adv. Mr. Shreshth Arya, Adv. Mr. Aditya Pandey, Adv. Mr. Abhishek Arora, Adv. Ms. Bharti Tyagi, AOR Mr. Pawanshree Agrawal, AOR Mr. S.K. Bagaria, Sr. Adv. Mr. Nalin Talvar, Adv. Mrs. Prabha Swami, AOR Mr. Nikhil Swami, Adv. Mr. Vipin Kumar Jai, AOR Mr. G. Prakash, AOR Mr. Jishnu M L, Adv. Mrs. Priyanka Prakash, Adv. Mrs. Beena Prakash, Adv. Mr. Dhruv Agrawal, Sr. Adv. Mr. Nalin Talwar, Adv. Mr. Praveen Kumar, AOR Mr. Nishit Agrawal, Adv. Ms. Sunaina Kumar, Adv. Ms. Kanishka Mittal, Adv.
For the Respondent(s): Mr. Mukesh Kumar Maroria, AOR Mr. M. Yogesh Kanna, AOR Mr. R K Raizada, Sr. Adv. Mr. Bhakti Vardhan Singh, AOR Mr. Ankit, Adv. Mr. Sabarish Subramanian, AOR Mr. Vishnu Unnikrishnan, Adv. Mr. C Kranthi Kumar, Adv. Mr. Naman Dwivedi, Adv. Mr. Danish Saifi, Adv. Mr. R. Nedumaran, AOR Mr. Gurmeet Singh Makker, AOR
For the Appellant(s) : Mr. Madhav Bhatia, Adv. Mr. Shreshth Arya, Adv. Mr. Aditya Pandey, Adv. Mr. Abhishek Arora, Adv. Ms. Bharti Tyagi, AOR Mr. Pawanshree Agrawal, AOR Mr. S.K. Bagaria, Sr. Adv. Mr. Nalin Talvar, Adv. Mrs. Prabha Swami, AOR Mr. Nikhil Swami, Adv. Mr. Vipin Kumar Jai, AOR Mr. G. Prakash, AOR Mr. Jishnu M L, Adv. Mrs. Priyanka Prakash, Adv. Mrs. Beena Prakash, Adv. Mr. Dhruv Agrawal, Sr. Adv. Mr. Nalin Talwar, Adv. Mr. Praveen Kumar, AOR Mr. Nishit Agrawal, Adv. Ms. Sunaina Kumar, Adv. Ms. Kanishka Mittal, Adv.
For the Respondent(s): Mr. Mukesh Kumar Maroria, AOR Mr. M. Yogesh Kanna, AOR Mr. R K Raizada, Sr. Adv. Mr. Bhakti Vardhan Singh, AOR Mr. Ankit, Adv. Mr. Sabarish Subramanian, AOR Mr. Vishnu Unnikrishnan, Adv. Mr. C Kranthi Kumar, Adv. Mr. Naman Dwivedi, Adv. Mr. Danish Saifi, Adv. Mr. R. Nedumaran, AOR Mr. Gurmeet Singh Makker, AOR
Table of Contents
2. Appellants contend gutkha is tobacco and thus exempt; Revenue argues pan masala is a distinct taxable commodity and subsequent rate notifications withdraw previous exemptions. (Para 29 , 30 , 31 , 36 , 40 , 41 , 44 )
3. The court analyzed CET Act classification rules, noting that specific descriptions of pan masala prevail over general tobacco entries and rate notifications override general exemptions. (Para 45 , 46 , 47 , 56 , 57 , 58 , 59 , 60 , 61 , 62 )
4. Specific rate notifications withdraw general exemptions; pan masala containing tobacco is a distinct commodity from tobacco under the most specific description rule of classification. (Para 54 , 55 , 62 )
5. Appeals by the assessees are dismissed and the appeals by the revenue are allowed. (Para 64 )
6. Does a subsequent notification prescribing a tax rate automatically withdraw a previous general exemption for the same goods?
Yes. A notification introducing an entry and subjecting it to levy, when previously exempt, indicates an intention to withdraw the exemption and make the sale taxable at the prescribed rate without requiring a separate revocation notification. (Para 17 , 54 , 55 )
7. Is pan masala containing tobacco classified as tobacco or as a distinct commodity under the Central Excise Tariff Act?
It is a distinct commodity. Under the General Rules of Interpretation, the heading providing the most specific description is preferred; pan masala is a specific description that prevails over the general heading for tobacco. (Para 47 , 56 , 60 , 62 )
8. How does the word includes function in a statutory definition compared to means and includes?
The word includes enlarges the natural meaning of an expression to encompass the listed items, whereas means and includes typically indicates an exhaustive explanation of the meaning. (Para 58 )
9. Does the classification of gutkha or pan masala as tobacco under the CET Act make them declared goods under the CST Act?
No. Since the relevant sub-headings of the CET Act were not included in Section 14(ix) of the CST Act, they are not declared goods, and state tax rates are not limited by the CST Act. (Para 63 )
JUDGMENT :
S. RAVINDRA BHAT, J.
1. This judgment will dispose of appeals arising from judgments of three High Courts, on the question of taxability of pan masala or gutka/gutkha1 [Which is spelt differently in regional contexts as ‘gutka’ or ‘gutkha’ or ‘guhtka’ for convenience, this is hereafter referred to uniformly as ‘gutkha’] under state enactments. The appellants unsuccessfully argued that state legislatures were not empowered to levy sales tax on those articles, in view of the provision in the Constitution enabling the Union to levy additional duties of excise, and further that in any case, the rate of state tax cannot exceed the limit prescribed by the Central Sales Tax Act, 1956.
Brief Facts
2. The relevant central enactments are the Central Sales Tax Act, 1956 (hereafter “CST Act”) the Central Excise Tariff Act, 1985 (hereafter “CET Act”) and the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (hereafter “ADE Act”). The state enactments in question are the Delhi Sales Tax Act, 1975 (hereafter “DST Act”) Tamil Nadu General Sales Tax Act, 1959 (hereafter “TNGST Act”) and the Uttar Pradesh Trade Tax Act, 1948 (hereafter “UPTT Act”).
3. Section 14 of the CST Act declares certain goods to be of special importance and Section 15 restricts the power of taxation on the said goods. Originally Section 14(ix) of the CST Act read as follows:
“(ix) tobacco, as defined in Item No. 4 of the First Schedule to the Central Excises and Sale Act, 1944 (1 of 1944).”
Entry 4 of the CET Act, which defines ‘tobacco’ reads as follows:
“4. Tobacco
“Tobacco” means any form of Tobacco, whether cured or uncured and whether manufactured or not and includes the leaf, stalks and stems of the tobacco plant, but does not include any part of a tobacco plant while still attached to the earth......
(II) Manufactured Tobacco.
...........
(5) Chewing tobacco, including preparations commonly known as “Khara Masala, Kimam, Dokta, Zarda, Sukha and Surti.”
4. The Finance Act, 1988 (Central Act No. 26/1988) substituted the expressions in Section 14(ix) of the CST Act, with the following words, w.e.f. 13.05.1988:
“14(ix). Unmanufactured tobacco and tobacco refuse covered under sub-heading No. 2401.00, cigars and cheroots of tobacco covered under Heading No. 24.02, cigarettes and cigarillos of tobacco covered under the sub-Heading Nos. 2403.11 and 2403.21, and other manufactured tobacco covered under sub-heading Nos. 2404.41, 2404.50 and 2404.60 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986).”
5. The 1988 amendment to Section 14 of the CST Act was with a view to align the description of goods in that law, with the description in the CET Act, as is clear from the Finance Bill, 1988. Heading 24.04 of the CET Act originally read to include “Gudaku with brand name and without brand name” (Entries 2404.11 and 2404.12); cut tobacco (Entry 2404.13); hookah tobacco, chewing tobacco (including preparations known as khara masala, khiman, dokta, zarda and surti (Entry 2404.39); snuff (Entry 2404.49) and snuff of tobacco (Entry 2404.50). The entry in relation to chewing tobacco was amended w.e.f. 1993-94.
6. By Finance Act, 1995 ‘Pan Masala’ was brought under the Heading 21.06. In the year 1995, the Fourth Schedule was amended, and the relevant Clause (8) in Chapter 21 read as follows:
“(8) in Chapter 21:
(i) for NOTE 3, the following NOTE shall be substituted, namely:
“3. In this Chapter ‘Pan Masala’ means any preparation containing betel nuts and any one or more of the following ingredients, namely lime, katha (catechu) and tobacco, whether or not containing any other ingredients, such as cardamom, copra and menthol.”
Clause (10) in Chapter XXIV reads as follows:
(i) for NOTE 2, for the figures and word ‘24.02, 24.03 and 24.04’ the figures and word ‘24.01, 24.02, 24.03 and 24.04’ shall be substituted.”
Clause (9) in Chapter XXI reads as follows:
“(i) for Heading Nos. 21.06 and 21.07 and the entries relating thereto, the following shall be inserted, n
