2019 (11) TMI 718

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....in the brand names Ghai Chhap Zarda, Thambaku, Badshaw, Singam. It is submitted that unmanufactured tobacco is obtained by beating, crushing and sieving the raw tobacco. The said unmanufactured tobacco is packed in sachets and sold. 4. It is submitted that the Notification issued by the State Government dated 1.10.2013 amending the Notification dated 30.3.2002 with effect from 2.10.2013 insofar as levying tax at 5% on sub-item (ii) of item No.5 namely "unmanufactured tobacco in sealed container" is against the First schedule to the KTEG Act. 5. Learned counsel for the petitioners submitted that the State Government has no power to levy entry tax on the unmanufactured tobacco in sealed container contrary to Articles 301 and 304 (b) of the Constitution of India. Reliance was placed on the following judgments: 1. Avinyl Polymers Pvt. Ltd., Vs. State of Karnataka and others reported in (1998) 109 STC 26; 2. Commissioner of Central Excise, Kanpur Vs. Ravindra and Company reported in 2000(120) ELT 699 (Tri) Delhi; 3. M/s. Bellary Steels and Alloys ltd., and Others V/s. State of Karnataka reported in [2001] 123 STC 189 [Kar.HC] 6. It was further contend....

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....n respect of any of the goods enumerated under the first schedule to the Act. 11. Entry 96 of the first Schedule reads thus: "Tobacco products of all description including beedies, cigarettes, cigars, churuts, zarda, quimam, etc.," 12. Notification dated 30.3.2002 was issued by the State Government levying entry tax on certain goods. Entry 5 of the said notification is extracted hereunder: "Tobacco products of all description including cigarettes, cigars, churuts, zarda, quimam, etc., but excluding snuff [i] Gutka [ii] Beedies." 13. The said Notification has been amended by the Notification dated 1.10.2013 with effect from 2.10.2013. In the table, for Sl.No.5 and entries relating thereto, the following has been substituted. "(5) (i) Tobacco products of all description including cigarettes, cigars, churuts zarda, quiman etc., but excluding snuff and beedies; 5% (ii) Unmanufactured tobacco in sealed container. 5% 14. The main ground of attack of the petitioners is the substituted entry-sub item(ii) of Sl.No.5 is not in conformity with the goods described in Sl.No.96 of the First schedule and is hit by Articles 301 and 304[b]....

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.... the given commodity into further groups thereby levying tax on similar goods fulfilling certain condition and leaving the remaining out of the taxing net. (b) the impugned notifications are also constitutionally invalid as offending article 304(a) of the Constitution since these have resulted in causing discrimination in the matter of levy of entry tax under the Act between similar goods manufactured or produced in the State of Karnataka and those imported from other States; (c) the second notification to the extent its operation has been retrospective with effect from April 1, 1994 is ultra vires the powers of the State Government since the expressions "retrospectively or prospectively" were inserted by Karnataka Act No. 8 of 1993 which never came into force for want of the President's assent as required under the proviso to article 304(b) of the Constitution of India." 18. It is beneficial to refer the constitutional bench decision of the Hon'ble Apex Court in Jindal Stainless Limited Vs. State of Haryana reported in AIR 2016 SC 5617, wherein, it is held thus:- "129. Restrictions referred to in Article 304[b] are non-fiscal in nature. Constituti....

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....eration or word whether such derivation is by a simple physical process or by a chemical reaction would not make any different to the end product... Collector of C. E. Coimbatore V/s. M/s. Protein Products of India Ltd., AIR 1989 SC 627, 629. [Central Excises and Salt Act (I of 1946), S. 37]. A thing produced by nature or a natural process [S. 108[a], T.P. Act]. 2. Something produced by physical labour or intellectual effort ; the result of work or thought." 23. 'Agriculture Produce' is defined under Section 2A(1) of the KTEG Act and the same is quoted hereunder for ready reference:- "Agricultural produce or horticultural produce" shall not include tea, [beedi leaves] coffee, rubber, cashew, cardamom, pepper and cotton; and such produce as has been subjected to any physical, chemical or other process for being made fit for consumption, save mere cleaning, grading, sorting or drying." 24. In view of the product sold in sachet under a brand name after subjecting raw tobacco to physical process of cutting, shredding and sizing so as to make it fit for consumption including the process of being packed in a sealed container, the unmanufactured tobacco ceases to be an agri....