TN THE HIGH COURT OF DELHI. WPfONo.11251 of 2004 Date of Decision:- November 05. 2004 ShantiFragrances Petitioner Throng: Mr.C.Hari Shankar and Mr.S.Sunil, Advocates, Versus Union of India and others -«.Respondents Through: Mr.Rajeev Mehra for respondent No,l Mr^H.C.Bhatia for respondent No.2, CORAM: HON'BLE THE CHIEF JUSTICE HON'BLE MR.JUSTICE BADAR DURREZ AHMED i) Whether Reports of the local papers may be allowed to see the Judgment? li) .To be referred to the Reporter or not? _ ill] Whether the Judgment should be reported in Digest? B.C.PATEK C.J. fORA-Ll 1. The petitioner, by filing this petition, has challenged the insertion of Entiy No,46 "Pan Masala and Gutkd' by notification dated 31.3.2000 In the First Schedule of the Delhi Sales Tax Act, 1975 (hereinafter referred to as "the Act"). 2. The incidence and levy of sales tax is provided in WP(C)No.11251/2.004 0)/^ ^ ^^ Digitally Signed By:AMULYA Certify that the digital file and physical file have been compared and the digital data is as per the physical file and no page is missing. Signature Not Verified w Chapter 11 of the Act. The rate of tax Is provided In Section 4 of the Act and in view of Section 4(1) (a) of the Act, the tax can be levied in respect of the goods sped&ed in the First Schedule, at the rate of twelve jjalse in a rupee. Tax free goods are speci&ed in Section 7 of the Act, Sub-section (1) of Section 7 of the Act reads as under:- "(1) No tax shall be payable under this Act on the sale of goods specified in the Third Schedule subject to the conditions and exceptions, if any, set out therein." Sub section (2) of Section 7 of the Act reads as under:- "(2) The Lieutenant Governor may, by notification in the Official Gazette, add to, or omit from, or otherwise amend, the Third Schedule either retrospectively or prospectively and thereupon the Third Schedule shall be deemed to be amended accordingly: Provided that no such amendment shall be made retrospectively affecting the interests of any dealer." 3. Thus, it is clear that the items referred to in the First Schedule shall be subject to Sales Tax while those referred to in the Third Sched_ule wUl be tax: free. It is also clear that the Lt,Governor is authorised to change the entries,as indicated in Section 7, that is to say, from ta>: free V/P(C) No.11251/2004 Page 2 of 13 goods to tajced goods and vice versa. 4. The learned coimsel for the petitioner subnntted that Tobacco is mentioned in the Third Schedule at Sr, No,22 and the entiy reads as imder:- •Tobacco, as defined in the Central Excises and Salt Act, 1944/' 5. Thus, for ascertaining what Is meant by "tobacco", we wUl have to refer to the Central Excises and Salt Act, 1944 read with Chapter 24 of the Schedule to the Central Excise Tariff Act, 1985, Chapter Note 3 thereof reads as under "In this Chapter, "tobacco" m_eans any form of tobacco, whether cured or uncured and whether manufactured or not, and includes the leaf, stalks and stems of the tobacco plant, but does not include any part of a tobacco plant while still attached to the earth," 6. Chapter Note 6 reads as imder:- "In this Chapter, "Pan masala containing tobacco", commonly Imown as 'gtiika' or by any other name, means any preparation contaming betel nuts and tobacco and any one or more of tlie following ingredients, namely:- (i) lime; and (il] kattha (catechu), whether or not containing any other ingredients, WP(C) No.11251/2004 Page 3 of 13 siicli as cardamom, copra and menthol." 7. Chapter 24 includes heading No.2404.49, which reads as imder:- "Pan masala containing tobacco" S, The learned counsel for the petitioner submitted that "giitka" is "tobacco" and has placed reliance on 1he decision of Apex Court in Kothari Products U± iJ, Ga^iemment of A.P.: (2000} 9 S.aa263 for this purpose and also on State of Orissa v. Radheshmm Gudakhu FactonrJWSS) 68 STC 92, In State of Orissa's case [supra.), the expression"Tobacco" as defined in Section 2[c) of the Additional Duties of Excise [Goods of Special Importance) Act, 1957 has the meaning given to it in item 9 of the First Schedule to the Central Excises and Salt Act, 1944 which is in the following terms "Tobacco' m_eaiis any form of tobacco, whether cured or uncured and whether manufactured or not, and includes the leaf, staUcs and stems of the tobacco polant, but does not include any part of a tobacco plant while still attached to the earth," 9. In that case the question was whether 'gudaku' was coveredby the expresf^on,'tobacco'as defined above. W WP(C) No.11251/2004 P^ge4of13 The Court held that "giidalm" Is a form of smokmg tobacco and Is a product of tobacco in commonparlance. Beforethe Court there was no dispute that "giitka" is not included in "tobacco". Thus, it Is clear that "gufka." and "gudaku" are both covered by tJie expression "tobacco" as imderstood in Chapter Note 3 of the Central ExciseTariffAct, 1985. The learned coimsel for the petitioner submitted that when 'gudalm' and 'giitfci' are tobacco and fallwithin Entry No.22 of Schedule III of the Act, there is a bar to levy sales tax by introducing Entry No,46 by a notification and by including it in Schedule 1. The petitioner has relied upon the decision of Apex Court in Kothari Products Ltd.'s case (supra]. In that case the appellant manufactured and was dealing in 'giitka' imder tlie brand name "Pan Parag" and the introduction of Entry 194 in tiie First Schedule to the A.P.GeneralSales Tax Act was in question. That entry sou^t to tax "pan masala mcluding gutka, 10. In that case the contention on behalf of the petitioner was that it is not open to the State of Andhra Pradesh to tax: giitka. Section 8 of the State vSales Tax Act WP(C)No.11251/2004 ' Page5 of13 provides that a dealer who deals in the goods specified in the Fourth Schedule thereto shall be exempt from tax thereunder in respect of such goods. Entry 7 of the Fourth Schedule of the State Sales Tax Act refers to tobacco and the explanation in this behalf is that lihe goods mentioned in Entrv 7 ' "shall be 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, but does not include goods where no additional, duties of excise are le\ded imder that Schedule," 11, The said item refers to tobacco. In para 4, the Court held as imder:- "Clearly, therefore, giitka is a tobacco that is covered by an entry in the First Schedule to the said Additional Duties of Excise Act and the branded giitka that the appellants manufacture is liable to tax thereunder. Gutka,therefore, is 'goods' covered by the explanation to the Fourth Schedule to the State Sales Tax Act and, therefore, covered by the exemption contained in Section 8 thereof. The Schedule to the State Act could, therefore, not have been amended by including gutka as a kind of pan masala in Entry 194 of its First Schedule, It miLst, therefore, be held that the inclusion of gutlva in the said Entry 194 in the manner in which it is done is bad in law and is struck down. The appellants will be entitled to all consequential benefits." WP(C) No.11251/2004 Page 6 of 13 12. The leamed counsel for the Revemie submitted that tobacco in Entiy No.22 of the Third Schedule Is a general entiy. Chapter 24 of the Schedule to the Central Excise Tariff Act, 1985 refers to various items under six beads. The learned counsel for tJie Revenue submitted tJiat V it is always open for the State to levy tax in accordance with the Sales Tax Act. All we require to do is to test the legislative competence in levying the tax in the instant case. The leamed counsel for the Revenue further submitted that Entiy No.22 in Third Schedule is a general entry and Entiy No,46, which is now in the First Schedule is a specific entry and further there is no question of entertaining this petition. The leamed counsel drew our attention to the decision of the Apex Court in Commissioner of Sales Tax, U.P. v. Agra Belting Works (1987) 66 STC 1, wherein, the Court pointed out as under:- "As has been pointed out above, section 3 is the charging provision; section 3A authorises variation of the rate of tax and section 4 provides for exemption from tax, AH the three sections are parts of the taxing scheme incorporated in the Act and the power both under section 3A as also under section 4 is exerclsable by the State Government tj only. When, after a notification under section 4 WP(C) No.11251/2004 Page7 of 13 (6- granting exemption from HabiHIy, a subsequent notification nnder section 3A prescribes the rate of tax, it is beyond doubt that the intention is to withdraw the exemption and make the sale liable to tax at the rate prescribed in the notification. As the power both for the grant of exemption and the variation of the rate of tax vests in the State Government and it is not the requirement of the statute that notification of recall of exemption is a condition precedent to imposing tax at any prescribed rate by a valid notification under section 3A, we see no force in the contention of the assessee which has been upheld by the High Court, In fact, the second notification can easily be treated as a combined notification - both for withdrawal of exemption and also for providing higher tax. When power for both the operations vests in the State and the intention to le^?y the tax is clear we see no justification for not 0ving effect to the second notification. We would M^e to uoint out that the exemution was in regard to a class of goods and while the exem_T)tlon contmues, a specific Item, has now been notified under section 3A of the Act. 13. The learned counsel for the Revenue relied on the decision of Apex Court in Salex Tax Officer, Sector IX. Kanpur v. Darling Dairy Products and another (1994) 94 STC 93, In that case the special leave petition was dismissed. However, It appears that the review petition was allowed following the ratio of the decision of the Apex Court in AjP^ra Belting Works's case (supra). At page 94, it was held as under:- WP{C) No. 11251/2004 Page 8 of 13 "In Commissioner, Sales Tax v Ag:ra Beling Works [1987] 66 STC 1; (1987) 3 SCC 140 a bench of this Court, comprising R.S.Pathali, C.J., Rangnath Misra and B.C.Ray, JJ,, held by a majorily, that sections 3, 3-A and 4 of the U,P.Sales Tax Act are parts of the taxing scheme incorporated in the Act and, therefore, where a notification is issued under y section 3-A prescribing a rate of tax for goods which may have been exempted from tax by an earlier notification under section 4, it must be held that the intention was to withdraw the exemption and make the sale leviable to tax at the rate prescribed in the notification. It was held that it Is not necessaiy in such a case that a specl&c or separate notification -svithdrawing or revoMng the exemption Is issued. .Following the said decision it must be held that the exemption granted to ice cream by notification dated 21®^ May, 1974, was undone by the notification dated 4^ November, 1974 as well as by the NotUication dated 30^^' May, 1975. For the above reasons the review petition is allowed and the order of the High Court dated 12^^^December, 1986 (which was the subject matter ^ of S.L.P.No. 14648 of 1988) is set aside. For the same reasons, the order dated 9^^^January, 1989 in the aforesaid S.L.P. 14648 of 1988 is also set aside and the order of the assessing authority holding the turnover relating to ice cream as taxable Is restored.' 14. These decisions were again followed by the Apex Court in vState of Bihar and another v. Krishna Kumar Kabra and another (1998) 108 STC 1. In para 5, the Court pointed out as under WP(C) No.11251/2004 Page 9 of 13 t- "Our attention has been drawn to two judgments of this Court that squarely cover the issue in favour of the appellant-State. They are the judgments in Comjiiissloner, Sales Tax, U,P. v. Agra Belting Worlds [1987] 66 STC 1 and In Sales Tax Officer, Sector IX, Kanpur v. Darling Daily Products [1994] 94 STC 93. In the earlier case it was held that sections 3A and 4 of the U.P. Sales Tax Act, 1948 were part of the taxing scheme f iQcorporated in that Act and, therefore, where a notification was issued under section 3A prescribing the rate of tax on goods which had been exempted from tax by an earlier notification under section 4, it had to be held that the intention was to withdraw the exemption and malce the sale leviable to tax at the rate prescribed in the later notification. It was not necessary that a specific or separate notification wiilidjawing or revoking the notification should be issued. The latter judgment of this court, on simHar facts, followed the earlier judgm_ent", 15. The learned counsel for the Revenue submitted that the Kerala High Court in ReliaTice Trading Company v. State of Kerala (2000) 119 STC 321 following the aforesaid decision in para 8 pointed out as under "If there are two entries, one general and the other specific, the ordinaay^ rule of construction that a general entiy must give way to a specific entiy is to be followed. The authoritj^ is to see that if two entries are apparently in conflict with one another, an attempt must be made to consti ue them harmoniously and not to treat them repugnant each other. A commodily falling under the general entiy as also a specific entry has to be taxed in terms of special entry as the same is to prevail over ^ • WP(C)No.11251/2004 Page 10 of 13 i3- the general entiy. That itself Is siifTlclent to reject the stand of the assessee," i 16. The learned coimsel for the Revenue, in view of these decisions, submitted that when it is competent for the State to levy tax and by general entiy exemption is granted, it is always open to levy the tax for a specific item by naming the same. It is not in. dispute before the Court that the Lt.Governor had the power to issue such notification under the Act. 17. The learned counsel for the petitioner submitted that when the later decision of the Apex Court in Kothari Products Ltd.'s case [supra] pointed out that gutka is a tobacco, then there is no question of levying the tax on the same as it is already exempted imder Section 7 of the Act vide Entry No.22. Before the Apex Court the question was whether "pan masala"which includes "gutka" can be taxed or not? In the instamt case the entries are 'pan masala' and 'gutka'. Before the Apex Court In Kothari Products Ltd.'s case (supra) tiiere was a question of inclusion of 'guthka' in 'pan masala' and, therefore, the Court pointed out that the manner in which it is done is bad in law and, therefore, the WP(C) No.11251/2004 Page 11 of 13 ll Court stTiick down the said entiy. In the instant case, both 'pan masala' and Viifka' are separate and spectfically mentioned. The learned counsel for the petitioner further submitted that in view of the later decision this Court should follow the later decision. 18, It was submitted by the learned counsel for the petitioner that the decision in case of Kothari Products Ltd (supra] should be followed. We have considered the decision of the Apex Court in Agra Belting Works and other cases. It is required to be noted that even if two Judgments of the Apex Court appear to be Inconsistent on common issues brought before it in two different cases, it is expected to followboth the verdicts and try as best as possible to resolve the seeming conflict, if any, between the two decisions of the Supreme Court. We have examined aU the judgments and we are required to follow the principles laid down by the Courts, It is difficult for the Court to depart from the reasoning indicated by various judgments of the Supreme Court as indicated in Agra Beltmg Works case (supra) and more particularly when the later judgment in Kothari. 0/ WP(C)No.11251/2004 Page 12 of 13 r Products Limited (supra) the matter was on a different point 19. In view of the above, we find no merits in the petition and the same is dismissed. November 05,2004 as WP(C) No. 11251/2004 CHIEF JUSTICE BADAR DURREZ AliMED, J. Page 13 of 13