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A.R. Bachawat Trading (P) Limited rep. by Hemant Raj, Managing Director v/s The Deputy Commercial Tax Officer & Another

    W.P.No.28080 of 2010
    Decided On, 16 December 2010
    At, High Court of Judicature at Madras
    By, THE HONOURABLE MR. JUSTICE P. JYOTHIMANI
    For the Petitioner: C. Venkatraman, Advocate. For the Respondents: R. Mahadevan, Additional Government Pleader (Taxes).


Judgment Text
(PRAYER: Petition under Article 226 of the Constitution of India for issue of a writ of Certiorarified Mandamus to call for the records on the files of the first respondent in G.D.No.79/RS-III/C/2010-11, dated 1.12.2010, to quash the same as being invalid and illegal, arbitrary and without jurisdiction, and to further direct the first respondent to release the entire consignment immediately without payment of tax and other amounts.)


1. The issue involved in this case relates to the Hans Chap Khaini, which is stated to be a Chewing Tobacco, and as to whether the same is eligible for exemption from tax as per the Government Notification in G.O.Ms.No.149/CT & R (B2) Department/2009, dated 12.10.2009.


2. Admittedly, Chewing Tobacco was exempted from tax before 1.4.2007. However, when that was removed from the declared goods on 1.4.2007, it was taxable till the date of notification, viz., 12.10.2009, and it was due to that reason the petitioner has paid tax in respect of the Chewing Tobacco. Now, by virtue of the said government order, by which exemption has been granted from payment of tax at the rate of 12.5%, the petitioner claims exemption of tax for the said commodity.


3. However, treating that the said commodity is liable to tax at the rate of 12.5% and denying the exemption, the Assessing Authority has passed the detention order dated 1.12.2010, which is challenged in this proceedings.


4.1. The petitioner relies upon an order of the Joint Commissioner (CT), Salem Division dated 5.6.2010, in which a similar issue as to whether the goods Hans Chap Khaini Chewing Tobacco is eligible for exemption under the government order was considered. In the said order, while elaborately dealing with the contents of the said goods, the Joint Commissioner has relied upon a judgment of the Supreme Court in Crane Betel Nut Powder Works v. Commissioner of Customs and Central Excise, 6 VST 532, wherein the Supreme Court has considered that when betel nut powder is processed with some non-essential oil, menthol and sweetening agent making it as a suphari powder, the same should to be treated as a Chewing Tobacco eligible for exemption, and has given a decision that as a dealer in scented Chewing Tobacco in the brand name of "Hans Chap Khaini Chewing Tobacco", which is produced by mixing tobacco leave cuttings with lime, spices and flavoring agents, it is eligible for tax exemption under the government order. The learned counsel for the petitioner would rely upon the finding of the Joint Commissioner, which is as follows:


"9. If all the above referred cases would be analyzed, it could be realized that all the cases are similar in facts, circumstances and issue involved. The issue involved in all the cases above referred is that, "Whether in a manufacture involving a major ingredient predominant in quantity and other ingredients in minute quantities added to improve its appearance, fragrance and taste would result in a product distinct from the predominant ingredient to enable that to be treated as a new and different commercial commodity for the purpose of taxation?" The decisions by all the court are also on similar lines concluding that the ingredient in minute quantities added in a process for improving the qualities of a predominant ingredient, does not amount to a process of manufacture resulting in a new and district product with different qualities when compared to the predominant ingredient of the process and therefore the resultant product is not one different or distinguishable from the predominant ingredient as the predominant ingredient remains to be with the same basic qualities with improvement in smell and taste. If the present case on hand would be viewed in the light of the above, the petitioner is found to be a dealer in a branded, scented Chewing Tobacco, in a brand name "Hans Chap Khini Chewing Tobacco", which is produced by mixing tobacco leave cuttings with lime, spices and some flavoring agents."


4.2. According to the learned counsel for the petitioner, the order of the Joint Commissioner is binding upon the Assessing Authority and therefore, the detention of goods as on date should become invalid and the respondents should be directed to release the goods without any condition.


5.1. On the other hand, on instructions, it is the contention of Mr.R.Mahadevan, learned Additional Government Pleader (Taxes) appearing for the respondents that on the face of it the decision of the Joint Commissioner is not valid in law and the exemption granted as per the government order cannot be extended to the said commodity, viz., Hans Chap Khaini Chewing Tobacco. He would submit that the Joint Commissioner has exceeded his limit by even referring to the various items like Zarda, Sukha, Surki and Khara Masala as the commodities produced by mixing tobacco leave cuttings with lime, spices and some flavoring agents and that the Department has taken steps to file appeal against the said order.


5.2. In any event, it is his submission that whether the order of the Joint Commissioner is binding on the Assessing Authority or not is not a point which can be raised by the petitioner before this Court under Article 226 of the Constitution of India.


6. On a reference to the order of the Joint Commissioner, it is no doubt true that the Joint Commissioner has misquoted the judgment of the Supreme Court in Crane Betel Nut Powder Works v. Commissioner of Customs and Central Excise, 6 VST 532, which appears to be a simple case of adding sweetening agent to the betel nut powder. Under such circumstances, the Supreme Court has held that such goods are eligible for exemption as per the government order. However, the Joint Commissioner has proceeded to analyse some other goods also, about which the validity is yet to be decided.


7. When it is the stand of the respondents that the department is taking steps to file appeal to the Appellate Authority against the order of the Joint Commissioner, the contention of the learned counsel for the petitioner by placing reliance on the judgment of the Supreme Court in Union of India v. Kamlakshi Finance Corporation Ltd., 1991 (55) ELT 433 (SC) about the binding nature of the order of the superior authority on the assessing authority is of no help to the petitioner. It is no doubt true that normally the orders of the superior authorities are binding on the lower authorities in the taxing statute. But the judgment which is relied upon by the learned counsel for the petitioner is about the strictures that have been passed by the High Court against the Assessing Authority (Assistant Collector) in passing orders flouting the orders of the Collector. It was in those circumstances, the Supreme Court has made an observation that the orders of the higher authorities are binding on the lower authorities.


8. But in the case on hand, as correctly submitted by the learned Additional Government Pleader, inasmuch as the petitioner has now challenged the order of detention made by the Assessing Authority before this Court, it is this Court which has to decide about the prima facie case of the petitioner. Even though it is true that the order of the Joint Commissi

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oner is distinguishable from the judgment of the Supreme Court, the fact remains that in respect of the same commodity, which is the subject matter of issue in this writ petition, as on date a higher authority under the taxing statute in the State of Tamil Nadu, viz., the Joint Commissioner, has passed an order granting exemption from tax. In such view of the matter, the writ petition is disposed with a direction to the respondents to release the detained goods on the petitioner paying 50% of the amount demanded by the respondents in respect of the said commodity, making it clear that the said payment shall be without prejudice to the rights of the petitioner and subject to the final adjudication order that may be passed by the respondents. No costs. Consequently, M.P.No.1 of 2010 is closed.
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