1963 (3) TMI 29

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....n 5(viii) of the Madras General Sales Tax Act, raw tobacco, whether cured or uncured, is liable to tax at the point of first purchase effected in the State of Madras. Under section 5(vii) the sale of manufactured products, such as cigars, cheroots, beedis, snuff, chewing tobacco or "any other product manufactured from tobacco" is liable to tax at the point of first sale effected in the State of Madras. There is a proviso to section 5(viii) which confers upon the dealer who has been taxed under section 5(vii) a rebate to the extent to which he has also been taxed under section 5(viii) on the raw tobacco. The contention advanced by the respondents before the department and the Tribunal was that the tobacco purchased by them was not raw tobacc....

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.... to and indeed necessary for the purpose of manufacturing the beedis. That these processes were done not by the growers of the tobacco themselves but only by the beedi manufacturers or the distributing merchants was also stressed by the Tribunal. Applying the decision in Bell Mark Tobacco Company case(1) to the facts herein, the Tribunal reached the conclusion that the tobacco as purchased by the respondents was not raw tobacco. Nevertheless, the Tribunal thought that it was necessary that the matter had to be remitted to the authorities below for the purpose of verification of the facts alleged in the affidavits of the sellers. For all practical purposes, the Appellate Tribunal decided in what circumstances tobacco would cease to be raw to....

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....purchased tobacco before they sold it was a manufacturing process. While the general principle that was laid down in this decision was that the expression "chewing tobacco" used in section 5(vii) as one of the products manufactured from tobacco would take in only such chewing tobacco as had been subjected to a process of manufacture, where tobacco, though sold under the name of chewing tobacco, had not been subjected to any process of manufacture, it would not come within the scope of section 5(vii). On the facts of the case before them, the learned Judges took the view that some manufacturing process had in fact been employed so that the chewing tobacco sold by them was taxable under section 5(vii). In another decision of this Court, Pa....

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....cco should establish that what the assessee sold was a product substantially different from what he had purchased." These observations clearly indicate that merely soaking the tobacco in jaggery water or sugar water and drying the tobacco in the shade did not convert raw tobacco into some other product. There were certain additional processes employed in that case which had the effect of bringing the product within the scope of the expression "product manufactured from tobacco". In Pachiappa Chettiar v. State of Madras[1962] 13 S.T.C. 202. which was decided by us, we specifically held that the Bell Mark Tobacco Company case[1961] 12 S.T.C. 126. was an authority for the position that up to the stage of these processes of soaking in jaggery w....

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....ected to any process of manufacture". The learned Judges had to interpret this item and they reached the conclusion already stated. Whether or not the tobacco had been subjected to a process of manufacture within the meaning of the notification was the matter that called for decision therein. In the present case however what we have to decide is whether notwithstanding the processes which were adopted, the tobacco continued to be raw tobacco within the meaning of section 5(viii) or became a product manufactured from tobacco. We are not satisfied that there is any principle derivable from the Allahabad decision which can apply to the facts of the present case. We may also point out that the learned Judges of the Allahabad High Court took not....