STATE OF MADRAS v. M/S. SWASTIK TOBACCO FACTORY, VEDARANYAM
Citation: [1966] 3 S.C.R. 79; 1965 INSC 299
Court: Supreme Court of India
Bench: K. SUBBA RAO , J.C. SHAH, S.M. SIKRI
Judgment date:
Case summary
1965 INSC 299. Supreme Court of India judgment dated 1965-12-14. STATE OF MADRAS v. M/S. SWASTIK TOBACCO FACTORY, VEDARANYAM. Read the judgment and case...
Judgment text
A STATE OF MADRAS v. .. MIS. SWASTIK TOBACCO FACTORY, VEDARANYAM ' December 14, 1965 B [K. SUBBA RAO, J. C. SHAH AND S. M. S! KRI, JJ. ] Madras General Sa/es Tax (Turnover and Assessment) Rules 1939, r. 5(1) (i) Excise duty paid on raw tobacco--Raw tobacco processed and sold as chewing tobacco-Excise duty whether to be deducted from turn- over of chewing tobacco under r. 5(1) (i). ' The respondent factory used to purchase raw tobacco and after pro· c cessing it, sell it as chewing tobacco. Excise duty was paid by the factory in respect of raw tobacco purchased by it. In sales tax proceedings the factory contended that th_e excise duty so paid to the Central Government must be deducted to arrive at the net turnover under r. 5(1)i) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939. The assessing officer as well as the Appellate Assistant Commissioner rejected the contention but it was accepted by the Tribunal.
The revision filed D by the State in the High Court \Vas dismissed, whereupon the State ap- • pealed to this Court by special leave. • It was contended on behalf of the appellant that the raw tobacco wa• converted by a manufacturing process into chewing tobacco, a different commodity and that, therefore, under r. 5(l)(i) of the Rules, as excise duty was paid only in respect of raw tobacco and not chewing tobacco the said duty was not deductible from the turnover of the assessee. E HELO: The object of the concession in r. 5(1)i) is presumably to avoid payment of tax on tax in respect of the same goods. This con~ cession would have no relevance if the goods subjected to excise duty were different from the goods sold. Tobacco when converted by a pro~ cess of manufacture into chewing tobacco becomes a different marketable ' product. Duty on raw tobacco cannot therefore be said to be paid in respect of the manufactured product. [82 B-D] F The expression "in respect of the goods" in r.
5(1) (i) means only ' "on the goods", and cannot take in the raw material out of which the goods were made. [83 E] Inland Revenue Commissioners v. Court & Co. [1963] 2 All. E. R. 722 and Asher v. Seaford Court Estates Ltd. , L. R. [1950] A. C. 508, considered . • G The excise duty paid by the respondent was only on the raw tobacco .. , and not on the goods sold by it, and therefore, the said dnty could not be deducted from its turnover under r. 5(1)(i). [83 E-F] , CML APPELLATE JURISDICTION : Civil Appeals Nos. 90 and ·' and 91 of 1965. H Appeals by special leave from the judgment and order dated September 4, 1963 of the Madras High Court in Tax Cases Nos. 120 and 121 of 1963. I I , ~ I ' '. : n raw tobacco may have some effect on the cost of the manu- factured product, but it cannot possibly be said that the said D . duty is paid in respect _of the manufactured product.
Rule 5(l)(i) ·of the Rules, therefore, permits deduction from the gross turn- over of the dealer only the excise duty paid by him in respect of . the same goods sold by him. Learned counsel for the respondent cited some English deci- E csions in support of his contention that the expression "in respect of the goods" was very wide and that it took in the raw_ material . out of which the goods were made .. ' ' The House of Lords iri Inland Revenue Commissioners v. ·courts & Co. ('), in the context of payment of estate duty, con- strued the words "in respect of' in s. 5(2) of the Finance Act, 1894 (57 & 5 8 Viet. c. 30) and observed that the phrase denoted . :some imprecise kind of nexus between the property and the estate duty. The House of Lords in Asher v. Seaford Court Estates Ltd. ( 2 ) in construing the provisions of s. 2, sub-s. (3) of Increase of Rent and Mortgage Interest (Restrictions) Act, 1920 (10 & 11 Geo. 5, c.
17), held that the expression "in respect of" must be read as equivalent to "attributable". The- Privy Council in Bieber, Ltd. v. Commissioners of Income-tax( 1 ) observed that the said words could mean more than "consisting of' or "namely". F G It is not necessary to refer to other. decisions. It may be · accepted that the said. expression received a wide interpretation, H (1) (1963] 2 All. E. R. 722, 732. (2) L. R. [1950] A. C. SOB. (3) [1962] 3 All. E. R. 294. > , • • • • • .. A B c D E F MADRAS v. SWASTIK TOBACCO (Subba Rao, !. ) 83 having regard to the object of the provisions and the setting in which the said words appeared. On the other hand, Indian tax laws use the expression "in respect of" as synonymous with the expression "on" : see Art. 288 of the Constitution of India; s. 3 of the Indian Income-tax Act, 1922; ss. 3(2) and 3(5), Second Proviso, of the Madras General Sales Tax Act, 1939; s. 3(1A) of the Central Excise and Salt Act, 1944; and ss.
9 of the Kerala Sales Tax Act. We should not be understood to have construed the said provisions, but only have referred to them to state the legislative practice. Consistent with the said practice, r. 5(l)(i) of the Rules uses the same expression. When the said rule says "excise duty paid in respect of the goods", the excise duty referred to is the excise duty paid under s. 3(1), read with the Schedule, of the Central Excises and Salt Act, 1944 (1 of 1944). Under the said section, read with the Schedule, excise duty is levied on the goods described in the Schedule. Therefore, when r. 5(1)(i) of the Rules refers to the duty paid in respect of the goods to the Central Government, it necessarily refers to the duty paid on the goods mentioned in the Schedule. As the duty exempted from the gross turnover is the duty so paid under the Central Act, read with the Schedule, the expression "in respect of' in the context can ouly mean excise duty paid on goods.
In our view, the expression "in respect of the goods" in r. 5(1)(i) of the Rules means only "on the goods". Even if the word "attributable" is substituted for the words "in respect of', the result· will not be different, for the duty paid shall be attributable to the. goods. If it was paid on the raw material it can be attributable only to the raw material and not to the goods. We, therefore, hold that only excise duty paid on the goods sold by the assessee is deductible from the gross turnover under r. 5(1)(i) of the Rules. We cannot, therefore, agree with the construction of r. 5(1)(i) of the Rules accepted by the High Court. No other question ·was raised before us. In the result, we modify the order of the High Court accordingly. In the circum- G stances, we direct the parties to bear their respective costs. Order modified .
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