Tobacco exemption for Gudakhu under sales tax law applies where the commodity is covered by the excise schedule.

Gudakhu, being covered by the tobacco description in the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957, fell within Entry 38 of the Orissa Sales Tax Act exemption list. The settled position applied was that goods specifically identified as tobacco under that scheme are not liable to sales tax when the exemption extends to such tobacco. Accordingly, the sale of Gudakhu was not taxable under the Orissa Sales Tax Act, 1947, and the contrary view of the taxing authorities and Tribunal was incorrect in law.

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Issues: (i) Whether sale of Gudakhu was taxable under the Orissa Sales Tax Act, 1947; (ii) Whether Gudakhu, as tobacco covered by the Additional Duties of Excise (Goods of Special Importance) Act, 1957, was exempt from sales tax under Entry 38 of the exemption list.

Issue (i): Whether sale of Gudakhu was taxable under the Orissa Sales Tax Act, 1947.

Analysis: Entry 38 of the exemption list under the Orissa Sales Tax Act, 1947 exempts tobacco as described in the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957. Gudakhu is identified in the relevant schedule entry under the ADE Act and is also treated in later amendments as a tobacco product. The legal position accepted in earlier decisions is that Gudakhu answers the description of tobacco in common parlance and is not to be treated as a taxable commodity under the sales tax law when the exemption applies.

Conclusion: The sale of Gudakhu was not liable to sales tax under the Orissa Sales Tax Act, 1947.

Issue (ii): Whether Gudakhu, as tobacco covered by the Additional Duties of Excise (Goods of Special Importance) Act, 1957, was exempt from sales tax under Entry 38 of the exemption list.

Analysis: The schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957 includes Gudakhu within the tobacco entry, and the statutory exemption under Entry 38 of the Orissa Sales Tax Act, 1947 extends to such tobacco. The Court applied the settled principle that goods attracting additional duty of excise and falling within the relevant tobacco description are exempt from sales tax. The Tribunal's view that Gudakhu was not specifically covered was held to be incorrect in law.

Conclusion: Gudakhu is tobacco covered by the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and is exempt from sales tax under Entry 38 of the exemption list.

Final Conclusion: The assessee succeeded, the taxing authorities were held to have wrongly levied sales tax on Gudakhu, and the impugned orders were set aside.

Ratio Decidendi: Where a commodity is specifically brought within the tobacco description in the schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957, the corresponding sales tax exemption applicable to such tobacco must be given effect and the commodity cannot be subjected to sales tax contrary to that exemption.

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