Statutory exemption tied to central excise schedule prevents State tax reclassification of gutka as pan masala.

Gutka sold under a brand name was treated as falling within the tariff-linked exemption scheme because the State sales tax Fourth Schedule was tied to goods covered by the central excise-linked schedule. The Court reasoned that, once the commodity fell within that exempting linkage as tobacco, the State could not validly tax it by reclassifying it as pan masala in entry 194 of the First Schedule. The challenged inclusion was therefore inconsistent with the statutory exemption and was struck down, leaving the product within the section 8 exemption under the Andhra Pradesh General Sales Tax Act, 1957.

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Issues: Whether gutka manufactured and sold under a brand name was exempt from tax under section 8 of the Andhra Pradesh General Sales Tax Act, 1957 by reason of its inclusion in the tariff-linked Fourth Schedule, and whether its inclusion in entry 194 of the First Schedule as pan masala was valid.

Analysis: The governing scheme linked the State Act's Fourth Schedule to goods included in the relevant heads and sub-heads of the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957. Gutka was treated as a form of tobacco falling within entry 2404 of that Schedule, with a distinction drawn between branded and unbranded gudaku. Since the branded product manufactured by the appellants fell within the goods covered by the exempting scheme, it could not be subjected to State tax by reclassifying it as pan masala in entry 194 of the First Schedule. The amendment, so far as it included gutka in that manner, was inconsistent with the statutory exemption and was therefore unsustainable.

Conclusion: The inclusion of gutka in entry 194 of the First Schedule was struck down, and the exemption under section 8 of the Andhra Pradesh General Sales Tax Act, 1957 applied to the product.

Final Conclusion: The appeal succeeded, the challenged tax entry was invalidated, and the appellants obtained the consequential relief flowing from the exemption.

Ratio Decidendi: Where a State sales tax exemption is expressly linked to goods covered by a central excise-linked schedule, the State cannot validly tax the same commodity by reclassifying it contrary to that statutory linkage.

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