Vittal A. Nayak vs The Commissioner of Commercial Taxes

B.V. Nagarathna, J.—The clarificatory order dated 21-8-2013 (Annexure-J), issued by the respondent is assailed in this writ petition. Petitioner is a registered dealer under the provisions of Karnataka Tax on Entry of Goods Act, 1979 (hereinafter, referred to as the "Act"). The petitioner claims to be a proprietor engaged in the business of trading "unmanufactured tobacco" along with other commodities.

It is the case of the petitioner that he purchases unmanufactured or natural tobacco from various dealers outside the State and sells it to registered dealers within the State. It is the further case of the petitioner that his trading activity is in natural tobacco which has not undergone any manufacturing process and therefore, would not come within the scope of Entry 96, First Schedule to the Act. Placing reliance on a ruling of the Authority for Advance Ruling in the case of M/s. Somchand Dalichand Shah, Bijapur, the petitioner had sought a clarification insofar as the tobacco products in which he was dealing. By the impugned clarificatory order dated 21-8-2013, the respondent has clarified as under:

"It is clarified that branded unmanufactured tobacco packed in sachets" is liable to entry tax at 4% for the period from 1-4-2007 to 31-3-2010 in terms of Notification No. FD 11 CET 2002(1), dated 30-3-2002 and at 2% from 1-4-2010 onwards in terms of the Notification No. FD 86 CSL 2010, dated 31-3-2010.

Being aggrieved by the said clarificatory order, this writ petition has been filed.

I have heard the learned Counsel for the petitioner and the learned Additional Government Advocate, who appears on advance notice for the respondent and perused the material on record.

It is contended on behalf of the petitioner that nature of the tobacco product in which the petitioner is dealing in is identical with the tobacco product that was considered by the respondent in the case of M/s. Somchand Dalichand Shah. In that case, the respondent who is also the Authority on Advance Ruling had stated as under:

Ghai Chhap Zarda/Tambaku is Tobacco, an agricultural produce exempted under Second Schedule to the Act not liable to tax u/s 3(1) of the Act.

However, in the case of the petitioner in respect of a similar product, the matter has been considered under Entry 96 of First Schedule and accordingly, it is stated to be a taxable item. It is therefore contended that in respect of identical products, there should be consistency in the Rulings of the Authority for Advance Ruling and that in the instant case, that has not happened.

Per contra, learned Additional Government Advocate supporting the impugned order has stated that in the instant case, the petitioner has been selling tobacco product in sachets, as has been noted in the impugned order itself and therefore, it would come within the scope of Entry 96 of First Schedule and therefore, the impugned order would not call for any interference. It is also contended that any Ruling given in respect of any other dealer would not be binding on any other assessee and therefore, the petitioner cannot rely on the Advance Ruling of M/s. Somchand Dalichand Shah, and that he has to establish independently that the product is outside the scope of Entry 96 of First Schedule of the Act.

Having regard to the rival contentions and on perusal of the Advance Ruling given in the case of M/s. Somchand Dalichand Shah and the impugned ruling, it is noted that in the case of M/s. Somchand Dalichand Shah also, samples were produced and examined by the respondent-authority and it was held that Ghai Chhap Zarda/Tambaku is prepared by beating, crushing and sieving the tobacco leaves without adding any foreign material and that there is no manufacturing involved by bringing into existence of any new commercial commodity and in such an event, tobacco would be an agricultural produce, which would be exempted under Second Schedule to the Act.

In the impugned order, no doubt a reference has been made to the Ruling in M/s. Somchand Dalichand Shah but the respondent has taken notice of the fact that the sample produced by the petitioner was subjected to the process of cutting, shuddering and sizing and the sized tobacco was packed in small plastic sachets and sold under a brand name. Therefore, it was subjected to a process, so as to make it fit for human consumption and hence, the commodity could not be considered to be an agricultural produce.

In M/s. Somchand Dalichand Shah''s case also, on examination of the product therein, it has been noted that if tobacco is prepared by beating, crushing and sieving tobacco leaves and packed in retail packets without adding any foreign material therein, then it will remain as an agricultural produce. Such a reasoning has not been applied in the impugned order for the obvious reason that the petitioner did not produce before the respondent the product which was produced by M/s. Somchand Dalichand Shah, in order to obtain the Ruling. It is also not forthcoming as to whether the product which was produced by M/s. Somchand Dalichand Shah, is similar or identical with the product the petitioner is claiming an Advance Ruling as an agricultural produce. Therefore, there is prima facie inconsistent orders passed insofar as the authority for Advance Ruling is concerned between the products of M/s. Somchand Dalichand Shah and the petitioner''s products.

In that view of the matter, the impugned order is set aside. The petitioner is directed to appear before the respondent-authority on 9-12-2013, without insisting on a fresh notice to be served. The petitioner to also produce along with his tobacco products, the products which were considered by the authority in the case of M/s. Somchand Dalichand Shah. The respondent-authority to re-examine the matter after considering both the samples and to dispose of the clarificatory application filed by the petitioner in accordance with law for the period 1-4-2007 onwards. In the result, the writ petition is allowed. All contentions of both sides are left open to be urged before the respondent-authority.