Zarda, being a product of tobacco, is exempt from sales tax under Entry 25 of Schedule III to the Pondicherry General Sales Tax Act, 1967.

THANIKKACHALAM, J.

The assessee is City Distributors dealing in pan masala and cutlery items at FF-7, Krishna Vasan Building, 147, A. Madam Street, Pondicherry. For the assessment year 1972-73 the assessee claimed exemption on a turnover of Rs. 29, 05, 400, since the sales turnover of zarda is exempted from sales tax as per Schedule III, item 25 to the Pondicherry General Sales Tax Act, 1967. The assessee is selling zarda in the name Parag Zarda. According to the assessing officer, parag zarda is taxable at 3.5 per cent - single point - under section3(1) of the Pondicherry General Sales Tax Act. Hence the exemption claimed was not granted and the sales turnover of parag zarda was taxed at 3.5 per cent single point.

2. Aggrieved, the assessee filed an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner accepted the contention put forward by the assessee that zarda is exempted under entry No. 25 in Schedule III to the Act 6 of 1967 and accordingly deleted the addition. On a perusal of the order passed by the Appellate Assistant Commissioner, the Secretary to the Government in-charge of the Commercial Tax Department by exercising his power under section37 of the Act came to the conclusion that the order passed by the Appellate Assistant Commissioner is erroneous and prejudicial to the interest of Revenue. Accordingly he issued the notice to the assessee.

3. After hearing the learned counsel for the assessee and the departmental representative, the Secretary to the Government came to the conclusion that the Appellate Commissioner was not correct in deleting the addition made by the assessing officer with regard to the sales turnover of zarda, since according to the Secretary to the Government zarda is not exempted under item 25 of Schedule III of the Act. Accordingly, the Secretary to the Government set aside the order passed by the Appellate Assistant Commissioner in deleting the addition with regard to the sales turnover of zarda and directed the assessing authority to assess the sale turnover relating to zarda as originally done by the assessing authority. It is against this order the assessee is in appeal before us.

4. Learned counsel for the appellant, Mr. N. Inbarajan appearing for the assessee submitted before us as under : Entry No. 25 in Schedule III to the Act clearly exempts tobacco and all its products. Zarda is made out of tobacco. Therefore, zarda would include tobacco and all its products as stated under entry 25. Learned Secretary to the Government in order to come to the conclusion that zarda is different from tobacco and all its products relied on a decision of the Orissa High Court in 1990 (76) STC 319 in the case of Parimala Agencies v. State of Orissa. The decision of the Orissa High Court was rendered while interpreting a notification issued by the Orissa Government stating that zarda is different from tobacco and all its products and thereby denied the exemption as granted originally by the Orissa Sales Tax Act. Therefore, according to learned counsel for the assessee, the Secretary to the Government was not correct in holding that in the present case also zarda is different from tobacco and all its products. Learned counsel further pointed out that item 25 in Schedule III to the Act, is in pari materia with item 2 in Schedule III to the Act where also tobacco and all its products were exempted from tax. Learned counsel also relied on a decision in 1988 (68) STC 92 in the case of State of Orissa v. Radheshyam Gudakhu Factory wherein the Supreme Court while considering serial No. 35 of Schedule to Orissa Sales Tax Act was of the view that gudakhu is a product which falls within the exemption covered by serial No. 35 of the Schedule to the Orissa Sales Tax Act, 1947 and the dealer is exempted from sales tax under that Act as well as the Central Sales Tax Act, 1956, for the period from July 1, 1967 to March 31, 1968. Relying upon the decision of the Andhra Pradesh Hi