# M/S TRIMURTHI FRAGRANCES (P) LTD. THR. ITS DIRECTOR SHRI PRADEEP KUMAR AGRAWAL v. GOVT. OF N.C.T. OF DELHI THROUGH ITS PRINCIPAL SECRETARY (FINANCE) AND ORS

- **Citation:** [2023] 7 S.C.R. 1046
- **Court:** Supreme Court of India
- **Decided:** 2023-05-04
- **Case number:** Civil Appeal No. 8486 of 2011
- **Bench:** S. Ravindra Bhat, Dipankar Datta
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-trimurthi-fragrances-p-ltd-thr-its-director-shri-pradeep-kumar-agrawal-v-37227
- **Pages:** 36

## Headnote

Central Sales Tax Act, 1956 - ss.14, 15 - Finance Act, 1988
- Central Excise Tariff Act, 1985 - Chapter 21, 24 of the Schedule
- Additional Duties of Excise (Goods of Special Importance) Act,
1957 - Finance Act, 2001 - Delhi Sales Tax Act, 1975 - Tamil
Nadu General Sales Tax Act, 1959 - Uttar Pradesh Trade Tax Act,
1948 - Taxability of pan masala or gutka/gutkha under the aforesaid
State enactments - Whether pan masala was an exempted item, being
"tobacco" - Held: The holding in Trimurti Fragrances (P) Ltd case
that there is no conflict between the Agra Belting Works line of cases,
and the Kothari Products Ltd. line of cases, concludes the question
w.r.t the efficacy/validity of notifications introducing as entries in a
Schedule(s) and subjecting them to tax, when those articles are part
of the statute or are exempted from taxation - Assessees' contentions
fail on this point - Further, the CET Act itself made a distinction
between pan masala, whether it contained tobacco or not and all
forms of tobacco - Right from 1995, the distinction in the CET Act
between pan masala (Chapter 21) and tobacco (Chapter 24) had
been made - The definition of pan masala also clarified that despite
one of its ingredients being tobacco, it would nevertheless be a
separate article - Till 2001, "Pan masala" and chewing tobacco
received different treatment - They are not interchangeable or
synonymous expressions - Entry 2404 refers to chewing tobacco
"including preparations commonly known as "Khara Masala",
"Kimam", "Dokta", "Zarda", "Sukha" and "Surti"" - Gudaku and snuff
are dealt with under a separate heading - The effect of inclusion of
pan masala with tobacco in Chapter 24 and simultaneously that
product's exclusion from Chapter 21, as well as imposition of ADE
with effect from 2001, on 'pan masala containing tobacco' meant
that the product (i.e. pan masala without tobacco) went out for the
[2023] 7 S.C.R. 1046
1046
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first time of the reach of State sales tax - All along, goods and
products described as pan masala and gutkha were included in
Chapter 21 - Therefore, till 2001 and the introduction of ADE, these
two products were covered by local or Sales tax levies - Before
2001, pan masala and gutkha fell within Chapter 21, as pan masala,
regardless of whether they contained tobacco - Goods classifiable
under Chapter 24 i.e. tobacco items were more general, also they
did not include pan masala - Subsequent changes made introducing
2404.40 in the CET Act do not affect or change the CST Act - Thus,
gutkha and pan masala are not covered under sub-heading 2404.40
so far as CST Act is concerned - Thus, the arguments of the
assessees that the rate of local tax cannot exceed the limit under
the CST Act, rejected.
Disposing of the appeals, the Court
HELD: 1.1 At the relevant time, 'Pan Masala' was described
as a preparation containing betel nuts and any one or more other
ingredients such as lime, katha, katechu, cardamom, copra,
menthol and tobacco. This is the definition of Pan Masala under
the CET Act which continued till 1995. Heading 21.06 covered
'Pan Masala' containing "lime, katha, katechu, cardamom, copra,
menthol and tobacco" or any one or more of these ingredients.
Chapter 24 dealt with tobacco and manufactured tobacco
substitutes and the relevant sub-heading at that time was 2404.41
which deals with chewing tobacco, including preparations
commonly known as khara masala, kimam, dokta, zarda, sukha
and surti. Parliament Act 22 of 1995, substituted Note-3 to
Chapter 21 of the CET Act. "Pan Masala" was described as "any
preparation containing betel nuts and any one or more of the
following ingredients, viz., lime, katha, katechu or tobacco,
whether or not containing any other ingredients such as
cardamom, copra and menthol". The primary ingredient of pan
masala therefore, is betel nut, which could be mixed with other
ingredients in combination or in isolation. This position prevailed
as on 01.03.1988. In 1995, the definition u

## Text

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SUPREME COURT REPORTS
[2023] 7 S.C.R.
M/S TRIMURTHI FRAGRANCES (P) LTD. THR. ITS
DIRECTOR SHRI PRADEEP KUMAR AGRAWAL
v.
GOVT. OF N.C.T. OF DELHI THROUGH ITS PRINCIPAL
SECRETARY (FINANCE) AND ORS.
(Civil Appeal No. 8486 of 2011)
MAY 04, 2023
[S. RAVINDRA BHAT AND DIPANKAR DATTA, JJ.]
Central Sales Tax Act, 1956 - ss.14, 15 - Finance Act, 1988
- Central Excise Tariff Act, 1985 - Chapter 21, 24 of the Schedule
- Additional Duties of Excise (Goods of Special Importance) Act,
1957 - Finance Act, 2001 - Delhi Sales Tax Act, 1975 - Tamil
Nadu General Sales Tax Act, 1959 - Uttar Pradesh Trade Tax Act,
1948 - Taxability of pan masala or gutka/gutkha under the aforesaid
State enactments - Whether pan masala was an exempted item, being
"tobacco" - Held: The holding in Trimurti Fragrances (P) Ltd case
that there is no conflict between the Agra Belting Works line of cases,
and the Kothari Products Ltd. line of cases, concludes the question
w.r.t the efficacy/validity of notifications introducing as entries in a
Schedule(s) and subjecting them to tax, when those articles are part
of the statute or are exempted from taxation - Assessees' contentions
fail on this point - Further, the CET Act itself made a distinction
between pan masala, whether it contained tobacco or not and all
forms of tobacco - Right from 1995, the distinction in the CET Act
between pan masala (Chapter 21) and tobacco (Chapter 24) had
been made - The definition of pan masala also clarified that despite
one of its ingredients being tobacco, it would nevertheless be a
separate article - Till 2001, "Pan masala" and chewing tobacco
received different treatment - They are not interchangeable or
synonymous expressions - Entry 2404 refers to chewing tobacco
"including preparations commonly known as "Khara Masala",
"Kimam", "Dokta", "Zarda", "Sukha" and "Surti"" - Gudaku and snuff
are dealt with under a separate heading - The effect of inclusion of
pan masala with tobacco in Chapter 24 and simultaneously that
product's exclusion from Chapter 21, as well as imposition of ADE
with effect from 2001, on 'pan masala containing tobacco' meant
that the product (i.e. pan masala without tobacco) went out for the
[2023] 7 S.C.R. 1046
1046
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first time of the reach of State sales tax - All along, goods and
products described as pan masala and gutkha were included in
Chapter 21 - Therefore, till 2001 and the introduction of ADE, these
two products were covered by local or Sales tax levies - Before
2001, pan masala and gutkha fell within Chapter 21, as pan masala,
regardless of whether they contained tobacco - Goods classifiable
under Chapter 24 i.e. tobacco items were more general, also they
did not include pan masala - Subsequent changes made introducing
2404.40 in the CET Act do not affect or change the CST Act - Thus,
gutkha and pan masala are not covered under sub-heading 2404.40
so far as CST Act is concerned - Thus, the arguments of the
assessees that the rate of local tax cannot exceed the limit under
the CST Act, rejected.
Disposing of the appeals, the Court
HELD: 1.1 At the relevant time, 'Pan Masala' was described
as a preparation containing betel nuts and any one or more other
ingredients such as lime, katha, katechu, cardamom, copra,
menthol and tobacco. This is the definition of Pan Masala under
the CET Act which continued till 1995. Heading 21.06 covered
'Pan Masala' containing "lime, katha, katechu, cardamom, copra,
menthol and tobacco" or any one or more of these ingredients.
Chapter 24 dealt with tobacco and manufactured tobacco
substitutes and the relevant sub-heading at that time was 2404.41
which deals with chewing tobacco, including preparations
commonly known as khara masala, kimam, dokta, zarda, sukha
and surti. Parliament Act 22 of 1995, substituted Note-3 to
Chapter 21 of the CET Act. "Pan Masala" was described as "any
preparation containing betel nuts and any one or more of the
following ingredients, viz., lime, katha, katechu or tobacco,
whether or not containing any other ingredients such as
cardamom, copra and menthol". The primary ingredient of pan
masala therefore, is betel nut, which could be mixed with other
ingredients in combination or in isolation. This position prevailed
as on 01.03.1988. In 1995, the definition underwent a change.
Betel nuts remained the essential ingredient along with "lime,
katha or tobacco" together, or separately. Whether the product
contained cardamom, copra, and menthol or not was irrelevant:
M/S TRIMURTHI FRAGRANCES (P) LTD. THR. ITS DIRECTOR SHRI
PRADEEP KUMAR AGRAWAL v. GOVT. OF N.C.T. OF DELHI THR. ITS
PRINCIPAL SECRETARY (FINANCE)
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[2023] 7 S.C.R.
yet one of the three ingredients (lime, katha and tobacco), had to
be found in the preparation known as 'pan masala'. By Parliament
Act 33 of 1996, the description to Chapter Heading 24.04 and
sub-headings under it were re-numbered. The description of
goods was reclassified. There was no change in Chapter 21;
Heading 21.06 continued to be only 'pan masala'. That changed
with effect from 01.03.2001, through Note-3. Entry No. 2 of PartJ in the First Schedule to the ADE Act is similar to sub-heading
2404.49 - as amended from 01.03.2001. As a result, additional
excise duty could be imposed on ''Pan Masala containing
tobacco".[Paras 46, 47 and 49][1070-G-H; 1071-B-D; 1072-CD]
1.2 As far as the first point argued by the appellants are
concerned, which is, whether in a state law which contains two
provisions: one which taxes entries, and another which exempts
articles from levy (the latter being listed separately, in a notification,
or a schedule to the enactment itself), the inclusion, or insertion
into the list or schedule of articles that can be taxed (like Section
4 of the DST Act) without amending the subsisting notification
that excludes levy (as under Section 7 DST) would the levy fail?
There was apparent conflict between two lines of judgments of
this court i.e., Radheshyam Gudakhu Factory and Kothari Products
Ltd. on the one hand, and Dealing Dairy Products, Krishna Kuthar
Kabra and Agra Belting Works on the other hand. This court, in
the latter three judgments held that notification introducing an
entry and subjecting it to levy, when previously, it was exempt in
another part of the taxing statute, the intention was to withdraw
the exemption and make the sale leviable to tax at the rate
prescribed in the later notification. The court held it to be
unnecessary that "a specific or separate notification withdrawing
or revoking the notification should be issued". This conflict was
referred to a larger bench of five judges, in Trimurti Fragrances
(P) Ltd v. Govt of NCT of Delhi (a case, which is part of the present
batch). The holding, that there is no conflict between the Agra
Belting Works line of cases, and the Kothari Products Ltd. line of
cases, therefore, concludes the question urged with respect to
efficacy or validity of notifications introducing as entries in a
schedule(s) and subjecting them to tax, when those articles are
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part of the statute or are exempted from taxation. The assessees'
contentions therefore, fail on this point. [Paras 53-55][1074-GH; 1075-A-C]
Trimurti Fragrances (P) Ltd v. Govt of NCT of Delhi
[2022] 15 SCR 516 - followed.
State of Orissa v. Radheshyam Gudakhu Factory (2018)
11 SCC 505; Commissioner, Sales Tax, U.P. v. Agra
Belting Works [1987] 3 SCR 93; Sale Tax Officer, Sector
IX, Kanpur v. Dealing Dairy Products & Anr (1994) 2
Supp SCC 639; State of Bihar v. Krishna Kuthar Kabra
(1997) 9 SCC 763 - referred to.
2. Pan masala was expressly mentioned in Chapter 21 for
the first time, in 1995 in the CET Act. Note 3 defined 'Pan Masala'
as "any preparation containing betel nuts and any one or more of
the following ingredients, namely lime, katha (catechu) and tobacco,
whether or not containing any other ingredients". However, at the
same time, Chapter 24 contained a specific entry "tobacco" which
enumerated tobacco, manufactured tobacco, substitutes etc. The
relevant sub-heading at that time was 2404.41 which enumerated
chewing tobacco, including preparations commonly known as
khara masala, kimam, dokta, zarda, sukha and surti. Thus, the
CET Act itself made a distinction between pan masala - whether
it contained tobacco, or not, and all forms of tobacco. Right from
1995, the distinction in the CET Act between pan masala (Chapter
21) and tobacco (Chapter 24), had been made. The definition of
pan masala also clarified that despite one of its ingredients being
tobacco, it would nevertheless be a separate article. Throughout
(till 2001), "Pan masala" and chewing tobacco have received
different treatment. They are not interchangeable or synonymous
expressions. Entry 2404 refers to chewing tobacco "including
preparations commonly known as "Khara Masala", "Kimam",
"Dokta", "Zarda", "Sukha" and "Surti"". Gudaku and snuff are
dealt with under a separate heading. The effect of inclusion of
pan masala with tobacco in Chapter 24 and simultaneously that
product's exclusion from Chapter 21, as well as imposition of
ADE with effect from 2001, on 'pan masala containing tobacco'
meant that the product (i.e. pan masala without tobacco) went
out, for the first time, of the reach of state sales tax. All along,
M/S TRIMURTHI FRAGRANCES (P) LTD. THR. ITS DIRECTOR SHRI
PRADEEP KUMAR AGRAWAL v. GOVT. OF N.C.T. OF DELHI THR. ITS
PRINCIPAL SECRETARY (FINANCE)
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[2023] 7 S.C.R.
goods and products described as pan masala and gutkha, were
included in Chapter 21. The conclusion therefore, is that till 2001,
and the introduction of ADE, these two products were covered
by local or sales tax levies. On a plain application of the
interpretive rules, especially Rule 3(a) it is clear that the heading
which provides the most accurate description has to be followed.
In the present case, there is no doubt, that before 2001, pan
masala and gutkha fell within Chapter 21, as pan masala,
regardless of whether they contained tobacco. Goods classifiable
under Chapter 24, i.e. tobacco items were more general; also
they did not include pan masala. As regards the question of the
rate of tax, in view of the restrictions under Section 15 CST Act,
neither gutkha nor pan masala were "declared goods" under
Section 14 of the CST Act. The amendment to the CET Act did
not become part of Section 14(ix). The goods under the relevant
sub-headings of the CET Act were absent in the list of declared
goods of the CST Act; they were not part of the provisions
introduced to the Finance Act, 1988. Therefore, the subsequent
changes made introducing 2404.40 in the CET Act do not affect
or change the CST Act. Consequently gutkha and pan masala
are not covered under sub-heading 2404.40 so far as CST Act is
concerned. Resultantly the arguments of the assessees that the
rate of local tax, cannot exceed the limit under the CST Act, are
rejected as unmerited. [Paras 56, 62, 63][1076-B-D; 1078-A-D;
1080-D-G]
Pioneer Land & Urban Infrastructure v. Union of India
[2019] 10 SCR 381; Kothari Products Ltd. v.
Government of A.P (2000) 9 SCC 263; Mahalakshmi
Oil Mills v. State of Andhra Pradesh [1988] 2 Suppl
SCR 1088; P. Kasilingam v. PSG College of Technology
[1995] 2 SCR 1061; Collector of Central Excise Nagpur
v. Simplex Mills Co. Ltd. [2005] 2 SCR 441; Tata Sky
Ltd. v. State of Madhya Pradesh [2013] 2 SCR 849;
Reliance Trading Company v. State of Kerala (2011)
15 SCC 762; Narottamdas v. State of Madhya Pradesh
& Ors. [1964] 7 SCR 820; Girnar Traders (3) v. State
of Maharashtra & Ors. [2011] 3 SCR 1; Pappu Sweets
and Biscuits v. Commissioner of Trade Tax, U.P,
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Lucknow [1998] 2 Suppl. SCR 119; Madhya Pradesh
v. M.V. Narsimhan [1976] 1 SCR 6; Nagpur
Improvement Trust v. Vasantrao [2002] 2 Supp SCR 636;
U.P. Avas Evam Vikas Parishad v. Jainul Islam & Anr
[1998] 1 SCR 254 - referred to.
Case Law Reference
(2000) 9 SCC 263
referred to
para 14
(2018) 11 SCC 505
referred to
para 14
[1987] 3 SCR 93
referred to
para 17
(1994) 2 Supp SCC 639
referred to
para 17
(1997) 9 SCC 763
referred to
para 17
[1988] Suppl 2 SCR 1088
referred to
para 19
[2013] 2 SCR 849
referred to
para 30
(2011) 15 SCC 762
referred to
para 30
[1964] 7 SCR 820
referred to
para 33
[2011] 3 SCR 1
referred to
para 33
[1998] 2 Suppl. SCR 119
referred to
para 34
[1976] 1 SCR 6
referred to
para 43
[2002] 2 Supp SCR 636
referred to
para 43
[1998] 1 SCR 254
referred to
para 43
[2022] 15 SCR 516
followed
para 54
[1995] 2 SCR 1061
referred to
para 58
[2019] 10 SCR 381
referred to
para 59
[2005] 2 SCR 441
referred to
para 61
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 8486
of 2011.
From the Judgment and Order dated 05.04.2006 of the High Court
of Delhi at New Delhi in Writ Petition (C) No. 2925 of 2005.
With
M/S TRIMURTHI FRAGRANCES (P) LTD. THR. ITS DIRECTOR SHRI
PRADEEP KUMAR AGRAWAL v. GOVT. OF N.C.T. OF DELHI THR. ITS
PRINCIPAL SECRETARY (FINANCE)
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[2023] 7 S.C.R.
Civil Appeal Nos. 8485, 8487, 8488, 8491-8494, 8495, 8496-8501,
8502 of 2011, 8617, 10374-10379 of 2014 and 289 of 2023.
Dhruv Agrawal, Sr. Adv., Madhav Bhatia, Aditya Pandey,
Ms. Bharti Tyagi, Pawanshree Agrawal, Ms. Shubhangi Negi, Mrs.
Prabha Swami, Shwetank Sailakwal, Nishit Agrawal, Kanishk Mittal,
Ms. Vanya, Zaid Raza, Vipin Kumar Jai, G. Prakash, Jishnu M L, Mrs.
Priyanka Prakash, Nalin Talwar, Praveen Kumar, Ms. Sunaina Kumar,
Advs. for the Appellant.
R Venkataramani, AG, N. Venkatraman, A.S.G., Arijit Prasad,
R K Raizada, K. Radha Krishnan, Sr. Advs., Mukesh Kumar Maroria,
Rupesh Kumar, Kanu Agarwal, V. Chandra Shekhra Bharathi, H.R.
Rao, Zoheb Hussain, H. Raghvendra Bajaj, Ms. Amrita Vijay Kumar,
Vikas Bansal, M. Yogesh Kanna, Bhakti Vardhan Singh, V. M. Vishnu,
Ankit, Sabarish Subramanian, Vishnu Unnikrishnan, Ms. Shivani Jena,
Naman Dwivedi, P. Shankar, R. Nedumaran, Gurmeet Singh Makker,
Ms. Kannu Agarwaal, Arijit Prasad, Ms. V.C. Bharathi, H.R. Rao, Zoheb
Hussain, Advs. for the Respondents.
The Judgment of the Court was delivered by
S. RAVINDRA BHAT, J.
1. This judgment will dispose of appeals arising from judgments
of three High Courts, on the question of taxability of pan masala or
gutka/gutkha1, under state enactments. The appellants unsuccessfully
argued that state legislatures were not empowered to levy sales tax on
those articles, in view of the provision in the Constitution enabling the
Union to levy additional duties of excise, and further that in any case, the
rate of state tax cannot exceed the limit prescribed by the Central Sales
Tax Act, 1956.
Brief Facts
2. The relevant central enactments are the Central Sales Tax
Act, 1956 (hereafter "CST Act"), the Central Excise Tariff Act, 1985
(hereafter "CET Act"), and the Additional Duties of Excise (Goods of
Special Importance) Act, 1957 (hereafter "ADE Act"). The state
enactments in question are the Delhi Sales Tax Act, 1975 (hereafter
1 Which is spelt differently in regional contexts as 'gutka' or 'gutkha' or 'guhtka', For
convenience, this is hereafter referred to uniformly as 'gutkha'.
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"DST Act"); Tamil Nadu General Sales Tax Act, 1959 (hereafter
"TNGST Act") and the Uttar Pradesh Trade Tax Act, 1948 (hereafter
"UPTT Act").
3. Section 14 of the CST Act declares certain goods to be of
special importance; and Section 15 restricts the power of taxation on the
said goods. Originally Section 14(ix) of the CST Act read as follows:
"(ix) tobacco, as defined in Item No. 4 of the First Schedule
to the Central Excises and Sale Act, 1944 (1 of 1944)"
Entry 4 of the CET Act, which defines 'tobacco', reads as follows:
"4. Tobacco
"Tobacco" means 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.
...
II. Manufactured Tobacco
...
(5) Chewing tobacco, including preparations commonly
known as "Khara Masala", "Kimam", "Dokta", "Zarda",
"Sukha" and "Surti"."
4. The Finance Act, 1988 (Central Act No. 26/1988) substituted
the expressions in Section 14(ix) of the CST Act, with the following
words, w.e.f. 13.05.1988:
"14(ix). Unmanufactured tobacco and tobacco refuse covered
under sub-Heading No. 2401.00, cigars and cheroots of
tobacco covered under Heading No. 24.02, cigarettes and
cigarillos of tobacco covered under the sub-Heading Nos.
2403.11 and 2403.21, and other manufactured tobacco
covered under sub-heading Nos. 2404.41, 2404.50 and
2404.60 of the Schedule to the Central Excise Tariff Act, 1985
(5 of 1986)."
5. The 1988 amendment to Section 14 of the CST Act was with a
view to align the description of goods in that law, with the description in
M/S TRIMURTHI FRAGRANCES (P) LTD. THR. ITS DIRECTOR SHRI
PRADEEP KUMAR AGRAWAL v. GOVT. OF N.C.T. OF DELHI THR. ITS
PRINCIPAL SECRETARY (FINANCE) [S. RAVINDRA BHAT, J.]
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[2023] 7 S.C.R.
the CET Act, as is clear from the Finance Bill, 1988. Heading 24.04 of
the CET Act originally read to include "Gudaku with brand name and
without brand name" (Entries 2404.11 and 2404.12); cut tobacco (Entry
2404.13); hookah tobacco, chewing tobacco (including preparations
known as khara masala, khiman, dokta, zarda and surti (Entry
2404.39); snuff (Entry 2404.49); and snuff of tobacco (Entry 2404.50).
The entry in relation to chewing tobacco was amended w.e.f. 1993-94.
6. By Finance Act, 1995, 'Pan Masala' was brought under the
Heading 21.06. In the year 1995, the Fourth Schedule was amended,
and the relevant Clause (8) in Chapter 21 read as follows:
"(8) in Chapter 21, -
(i) for NOTE 3, the following NOTE shall be substituted,
namely:
'3. In this Chapter, 'Pan Masala' means any preparation
containing betel nuts and any one or more of the following
ingredients, namely lime, katha (catechu) and tobacco,
whether or not containing any other ingredients, such as
cardamom, copra and menthol'.
Clause (10) in Chapter XXIV reads as follows:
(i) for NOTE 2, for the figures and word '24.02, 24.03 and
24.04', the figures and word '24.01, 24.02, 24.03 and 24.04'
shall be substituted."
Clause (9) in Chapter XXI reads as follows:
"(i) for Heading Nos. 21.06 and 21.07 and the entries relating
thereto, the following shall be inserted, namely:
21.06 2106.00 'Pan Masala' 50%"
Finance (No. 2) Act, 1996, again changed the entry, in the following
manner:
"(7) in Chapter 24, after NOTE 4, the following NOTE shall
be inserted, namely:
5. In this Chapter, 'smoking mixtures for pipes and cigarettes'
of sub-heading No. 2404.10 does not cover 'Gudaku'."
.....
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"(iii) For Heading No. 24.03 and the entries relating thereto,
the following shall be substituted, namely
The relevant extracts from the Finance Act, 2001, which again
carried out changes, read as follows:
" THE FOURTH SCHEDULE
[See Section 134 (a)]
PART - I
In the First Schedule to the Central Excise Tariff Act, -
(1) in Chapter 21, for NOTE 3, the following NOTE shall be
substituted, namely:
3. In this Chapter, 'Pan Masala' means any preparation
containing betel-nuts and any one or more of the following
ingredients, namely:
(i) lime; and
(ii) kattha (catechu),
but not tobacco, whether or not containing any other
ingredients such as cardamom, copra and menthol";
(2) in Chapter 24, after NOTE 5, the following NOTE shall
be inserted, namely:
'6. In this Chapter, 'Pan Masala' containing tobacco",
commonly known as 'Gutkha' or by any other name, means
M/S TRIMURTHI FRAGRANCES (P) LTD. THR. ITS DIRECTOR SHRI
PRADEEP KUMAR AGRAWAL v. GOVT. OF N.C.T. OF DELHI THR. ITS
PRINCIPAL SECRETARY (FINANCE) [S. RAVINDRA BHAT, J.]
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any preparation containing betel-nuts and tobacco and any
one or more of the following ingredients, namely:
(i) lime; and
(ii) kattha (catechu),
Whether or not containing any other ingredients such as
cardamom, copra and menthol."
On the above products, a special excise duty of 16% was also
levied in the V Schedule, apart from additional duties of excise in PartII of the VI Schedule as indicated below:
The Delhi batch of appeals: Shanti Fragrances2, Trimurti
Fragrances3, Kuber Tobacco4, Sunrise Food Products5, and Dharam
Pal Satyapal6
7. In this batch of appeals, the grievance is in respect of five
judgments of the Delhi High Court, on the interpretation of the DST Act.
2 CA No. 8485/2011, against impugned judgment dated 05.11.2004 in WP (C) No.
11251/2004 (DHC).
3 CA No. 8486/2011, against impugned judgment dated 05.04.2006 in WP (C) No.
2925/2005 (DHC)
4 CA No. 8491-94/2011, against impugned judgment dated 01.12.2006 in WP (C) No.
17886/2006 (DHC); and CA No. 8487/2011, against impugned judgment dated
05.04.2006 in WP (C) No. 23698/2005 (DHC).
5 CA No. 8488/2011, against impugned judgment dated 05.04.2006 in WP (C) No.
9837/2005 (DHC).
6 CA No. 8495/2011, against impugned judgment dated 14.11.2007 in WP (C) 7883/
2007 (DHC)
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The earliest judgment was delivered in relation to the appeal by
M/s Shanti Fragrances; the subsequent judgments have reiterated the
ruling in that case.
8. Section 3 of the DST Act imposes local sales tax on every
dealer whose turnover exceeds the limit specified in a notification, and
who is registered or is liable to pay tax under the CST Act, on all sales
effected on or after the commencement of the DST Act. Section 3(6)
reads as follows:
"no dealer who deals exclusively on one or more classes of
goods specified in the Third Schedule shall be liable to pay
any tax under this Act."
Section 7 of the DST reads as follows:
"7. Tax Free Goods
(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.
(2) The 7[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
if it would have the effect of prejudicially affecting the interests
of any dealer."
Entry 22 of the Third Schedule reads as follows:
"22. Tobacco as defined under the Central Excise and Salt
Act, 1944 (1 of 1944)."
9. The effect, prima facie, of an overall reading of provisions of
the DST Act therefore, is that all dealers whose turnover exceeds the
quantified amount which is termed "as taxable quantum" during the
relevant period, are liable to pay state or local sales tax. Section 3(6) of
7 Substituted for "The Administrator may, with the previous approval of the Central
Government and " by Notification No. F4(120)/94 -Fin.(G)/2137 to 2145 dated
02.03.1998.
M/S TRIMURTHI FRAGRANCES (P) LTD. THR. ITS DIRECTOR SHRI
PRADEEP KUMAR AGRAWAL v. GOVT. OF N.C.T. OF DELHI THR. ITS
PRINCIPAL SECRETARY (FINANCE) [S. RAVINDRA BHAT, J.]
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the Act states that the dealer who exclusively deals in goods specified in
the Third Schedule shall not be liable to pay tax.
10. By a notification dated 31.03.2000 issued by the competent
authority i.e. the Lt. Governor of the National Capital Territory of Delhi
(hereafter "NCTD"), Entry 46 was inserted in the First Schedule to the
DST Act. That Entry reads as follows:
"46. Pan Masala and Gutkha"
11. The First Schedule is dealt with under Section 4 of the DST
Act ("rate of tax") it broadly enacts [by Section 4(1)(a)] that the taxable
turnover "in respect of the cases specified in the First Schedule"
would be at the rate of 12 paise to a rupee. Thus, goods enumerated in
the First Schedule are per se subjected to be local or state sales tax levy
under the DST Act @ 12%. Similarly, goods referred to in the Third
Schedule are 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 taxfree goods to taxed goods and vice versa.
12. The appellants had argued before the Delhi High Court, that
tobacco is mentioned in the Third Schedule at Sl. No. 22 and that the
expression (tobacco) refers to what is defined as such under the Central
Excise Act, 1944 (hereafter "CEA"). Consequently, to ascertain
"tobacco", one has to refer to the CEA read with Chapter 24 of the
Schedule to the CET Act. Chapter Note 3 thereof reads as under:
"In this Chapter, 'tobacco' means 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."
13. Chapter Note 6 reads as follows:
"In this Chapter, "Pan Masala containing tobacco",
commonly known as 'Gutka' or by any other name, means
any preparation containing betel nuts and tobacco and any
one or more of the following ingredients, namely:
(i) lime; and
(ii) kattha (catechu),
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whether or not containing any other ingredients, such as
cardamom, copra and menthol."
Chapter 24 includes Heading No. 2404.49, which reads as under:
"Pan Masala containing tobacco"
14. The appellants had urged before the High Court that "gutkha"
is "tobacco" and relied on Kothari Products Ltd. v. Government of
A.P8 and State of Orissa v. Radheshyam Gudakhu Factory9. This
court in Radheshyam Gudakhu Factory (supra), noted that "tobacco"
in Section 2(c) of the ADE Act means goods in Entry 9 of the First
Schedule to the CET Act which is as follows:
"'Tobacco' means 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."
15. In Radheshyam Gudakhu Factory (supra) the issue was
whether 'Gudaku' was covered by the expression, 'tobacco' defined in
ADE Act. The court held that "gudaku" is a form of smoking tobacco
and is a product of tobacco, in common parlance. Before the Court
there was no dispute that "gutkha" is not included in "tobacco". Thus, it
is clear that "Gutkha" and "Gudaku" are both covered by the expression
"tobacco" as understood in Chapter Note 3 of the CET Act. The
appellants argued that when 'Gudaku' and 'Gutkha' are tobacco and
fell within Entry No. 22 of the Third Schedule of the Act, local sales tax
cannot be levied by introducing Entry No. 46 through a notification and
by including it in the First Schedule. Kothari Products Ltd. (supra) was
relied on; the dealer was dealing in 'Gutkha' (under the brand "Pan
Parag"). The introduction of Entry 194 (which taxed "pan masala
including gutkha") in the First Schedule to the A.P. General Sales Tax
Act (APGST Act) was in issue. APGST Act had a provision10 like Section
7 of the DST Act which exempted goods in the Fourth Schedule. The
Fourth Schedule referred to tobacco (Entry 7) and its explanation stated
that it shall be
8 (2000) 9 SCC 263 [hereafter 'Kothari Products Ltd.']
9 1988 (68) STC 92 (SC); (2018) 11 SCC 505 [hereafter 'Radheshyam Gudakhu Factory']
10 See Section 8.
M/S TRIMURTHI FRAGRANCES (P) LTD. THR. ITS DIRECTOR SHRI
PRADEEP KUMAR AGRAWAL v. GOVT. OF N.C.T. OF DELHI THR. ITS
PRINCIPAL SECRETARY (FINANCE) [S. RAVINDRA BHAT, J.]
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"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 levied under that
Schedule."
16. This court held that 'gutkha' is tobacco covered by an Entry
in the First Schedule to the said ADE Act and that the branded gutka in
question was "gutkha", and therefore, "goods" covered by Explanation
to the Fourth Schedule to the APGST Act. It was hence exempted by
Section 8. It was held that the Schedule to the APGST Act could not be
amended by including gutkha as a kind of pan masala in Entry 194 of
the First Schedule. Its inclusion was held to be invalid in law.
17. The revenue's stand before the High Court, was that tobacco
in Entry No. 22 of the Third Schedule of the DST Act, is a general entry.
Chapter 24 of the Schedule to the CET Act referred to various items
under six heads. It was open for the state to levy tax in accordance with
the Sales Tax Act; what was needed was to test the legislative competence
of the state in levying the tax. It was urged that Entry No. 22 in Third
Schedule is a general entry, and Entry No. 46, in the First Schedule is a
specific entry. The revenue relied on this court's ruling in Commissioner,
Sales Tax, U.P. v. Agra Belting Works11, where the Court pointed out
that if a notification under a provision12 grants exemption from tax, and
later, a subsequent notification (under another provision) prescribes the
rate of tax, the intention is to withdraw the exemption and impose the
levy at the rate prescribed in the later notification. The court held that
since the power to grant exemption and variation of the rate of tax is
with the State, there is no compulsion in the statute that a separate
notification recalling exemption is a pre-condition for imposing tax at
any rate. The revenue also relied on two cases that followed the ratio in
Agra Belting Works (supra) - Sale Tax Officer, Sector IX, Kanpur v.
Dealing Dairy Products & Anr.13 and State of Bihar v. Krishna Kuthar
Kabra.14. In the latter case, this court followed the two previous decisions
and held that a notification introducing an entry and subjecting it to levy,
when previously, it was exempt in another part of the taxing statute the
11 [1987] 3 SCR 93: (1987) 3 SCC 140 [hereafter 'Agra Belting Works']
12 In that case, Section 4 - as in Section 7 of the DST Act in the present case
13 (1994) 94 STC 93 (SC): 1994 Supp (2) SCC 639 [hereafter 'Dealing Dairy Products']
14 (1997) 9 SCC 763 [hereafter 'Krishna Kumar Kabra']
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"intention was to withdraw the exemption and make the sale leviable
to tax at the rate prescribed in the later notification". The court also
held it to be unnecessary that "a specific or separate notification
withdrawing or revoking the notification should be issued".
18. The Delhi High Court, after examination of the judgments
cited held that it was difficult to depart from the reasoning indicated by
the various judgments of this court indicated in Agra Belting Works
(supra). It therefore, rejected the appellants' writ petition.
19. It was further held in the impugned judgments that State
Legislatures were competent to levy taxes on the sale or purchase of
the commodities subjected to additional excise duty. The levy of any
sales taxes only meant that additional excise duty levied on such
commodities by the Central Government would not be distributed among
the states which had chosen to levy a tax on the sale of such article. The
court relied on Mahalakshmi Oil Mills v. State of Andhra Pradesh15.
The High Court ruled that pan masala containing tobacco is, under Chapter
24, shown at sub-heading No.2404.49, attracting a duty of 16% and an
additional duty of 18% on the same. Pan masala containing tobacco
manufactured by the appellants did not constitute a declared commodity
under Section 14(ix) of the CST Act read with the CET Act because
sub-heading 2404.49 under Chapter 24 of the CET Act are not subheadings included in section 14(ix) of the CST Act. It was also held that
pan masala was not a declared item nor was it a declared item on the
date that Section 14(ix) of the CST Act was introduced in the form in
which it existed in the statute.
The Tamil Nadu case: Dharampal Satyapal and Kothari
Products16
20. In the appeals by Dharampal Satyapal and Kothari Products,
a common judgment of the Madras High Court has been challenged.
The appellants had urged that gutkha, was a preparation containing not
only tobacco, but also betel nut, katechu, lime, flavours, permitted spices,
saffron, and that tobacco is its essential character in relation to the
dominant object of the user. The percentage of tobacco varies from 7%
15 [1988] Suppl 2 SCR 1088 : (1989) 1 SCC 164 [hereafter 'Mahalakshmi Oil Mills']
16 CA No. 8502/2011 and CA No. 8496-8501/2011 respectively directed against common
impugned judgment dated 13.04.2009 in WP No. 4001/2002 and 4604-09/2002 (Madras
HC).
M/S TRIMURTHI FRAGRANCES (P) LTD. THR. ITS DIRECTOR SHRI
PRADEEP KUMAR AGRAWAL v. GOVT. OF N.C.T. OF DELHI THR. ITS
PRINCIPAL SECRETARY (FINANCE) [S. RAVINDRA BHAT, J.]
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[2023] 7 S.C.R.
to 15%. The appellants were aggrieved by the inclusion of the goods as
'Pan Masala' (by whatever name called) - containing betel nuts, that is
to say, nut of areca, katechu broken and perfumed, and lime or menthol
or sandal oils or cardamom or tobacco or any one or more of these
ingredients at Sl. No. 2 of Part-J of the First Schedule read with Section
3(2) of the TNGST Act. The period of dispute is from October, 2000 -
February, 2001. The appellants urged - much like in the Delhi cases,
that if the goods fell within the description of Sl. No. 1(iv)(d) of the Third
Schedule of the TNGST Act, they are exempt from tax by virtue of
Section 8. Once the goods are exempted by enumeration under the Third
Schedule, Section 8 of the State Act operates, to exempt the goods from
levy under the State Act. The subsequent specification of the goods in
the First Schedule will have no effect in view of the exemption. The
exemption under Section 8 of the TNGST Act is not subject to any
restriction or condition as far as Sl. No. 1(iv)(d) of the Third Schedule is
concerned. The definition under Sl. No. 1(iv)(d) of the Third Schedule is
not restricted to chewing tobacco, but includes preparations containing
chewing tobacco and the word 'including' should be construed to enlarge
the Entry to comprehend all preparations of chewing tobacco and not
restricted to just chewing tobacco.
21. Section 3 of the TNGST Act is the charging section; Section
3(2) enacts as follows:
"(2) Subject to the provisions of sub-section (1), in the case
of goods mentioned in the First Schedule, the tax under this
Act shall be payable by a dealer, at the rate and at the point
specified therein on the turnover in each year relating to such
goods."
22. Much like Section 7 of the DST Act, Section 8 of the TNGST
Act reads as follows:
"Subject to such restrictions and conditions as may be
prescribed, a dealer who deals in the goods specified in the
Third Schedule, shall not be liable to pay any tax under this
Act in respect of such goods."
23. Serial No. 1 (iv)(d) of the Third Schedule to the TNGST Act
(which enumerated exempted articles) read as follows:
"1. (iv) Other manufactured tobacco as described against
the heading '24.04", including-
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(a) smoking mixtures for pipes and cigarettes.
(b) cut tobacco
(c) Bins
(d) Chewing tobacco and preparations containing chewing
tobacco.
(e) Snuff of tobacco and preparations containing snuff of
tobacco in any proportion"
24. The High Court's judgement considered all previous decisions
of the courts, including the judgement in Kothari Products Ltd. (supra)
as well as judgments of various High Courts as to whether Pan masala
is tobacco. The court adopted the test indicated as the 'common parlance
test' i.e., whether a common man understands "pan masala" as tobacco
or a product containing tobacco. It held that if the common man is asked
to buy chewing tobacco, he may buy an article that is mainly chewing
tobacco and in fact falls within the same class of the CET Act
classification, but one would not buy pan masala. It was, therefore, held
that pan masala is different from chewing tobacco or even tobacco. The
court also ruled - that applying the General Rules for Interpretation under
the CET Act, it was discernible that "pan masala containing tobacco"
provides the most specific description for the goods in question, even if
tobacco is one of the ingredients in the goods, since the description of
pan masala in Heading 21.06 describes the goods more specifically, it
had to be preferred, without going into Rule 3(b). What therefore, was
held was that the amendment, brought into force from 2001, to the effect
that chewing tobacco did not include and never included pan masala
containing tobacco, and but for the inclusion of 'pan masala containing
tobacco' in Chapter 24 (Heading 2404.49) with effect from 2001, they
were goods separately covered under another class altogether, i.e.
Heading number 21.06.
The Allahabad judgments: P.J. Aromatics17, Sarin & Sarin18
and Raj Pan Products19
17 CA No. 10374-10379/2014, against impugned judgments dated 12.03.2014 in STR
No. 1281-82/2004, and 11.04.2014 in STR No. 789-792/2004 (Allahabad HC).
18 CA No. 8617/2014, against impugned judgment dated 25.04.2014 in TTR No. 91/
2005 (Allahabad HC).
19 CA No. 289/2023, against impugned judgment dated 08.11.2017 in TTR No. 1830/
2004 (Allahabad HC).
M/S TRIMURTHI FRAGRANCES (P) LTD. THR. ITS DIRECTOR SHRI
PRADEEP KUMAR AGRAWAL v. GOVT. OF N.C.T. OF DELHI THR. ITS
PRINCIPAL SECRETARY (FINANCE) [S. RAVINDRA BHAT, J.]
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25. In these cases, the assesses manufacture gutkha and disputed
imposition of tax on sale of the same. The authorities, under the UPTT
Act ruled that 10% tax was leviable on sale of gutkha which was treated
as an 'unclassified item'. Section 3 under the UPTT Act, imposes the
levy of trade tax on the sale by registered dealers, of various articles.
Section 4 of the Act empowers the state to exempt articles from the
levy; the relevant part of that provision, reads as follows:
"Section 4 - Exemption from tax shall be payable on (a) the
sale or purchase of water, milk, salt excluding processed and
branded salt, newspapers, or any other goods which the State
Government may, by notification, exempt."
26. The State Government issued a notification dated 31.01.1985
exempting certain goods from tax under the UPTT Act, with effect
from 01.02.1985. That notification20, contained the Serial No. 14, which
reads as under:
"14. Cigars, cigarettes, biris (both machine made and handmade) and tobacco in any form whether cured and uncured
and whether manufactured or not, including the leaf, stalk
and stems of the tobacco plant and all products of tobacco,
but including any part of the tobacco plant while still attached
to the earth."
27. By Notification dated 26.06.1997, published in Gazette on
01.07.1997, Entry 14 was amended to exclude, specifically "pan masala
containing tobacco", by whatever name called. Another amendment
by Notification21 dated 06.04.1999 published in Gazette dated 10.04.1999
resulted in Entry 14 reading as follows:
"14. Cigars, cigarettes, biris (both machine made and handmade) and tobacco in any form whether cured and uncured
and whether manufactured or not, including the leaf, stalk
and stems of the tobacco plant and all products of tobacco,
excluding pan masala containing tobacco but including any
part of the tobacco plant while still attached to the earth."
28. The exemption specifically withdrawn in respect to "pan
masala containing tobacco", by whatever name called, by notification
20 dated January 31.01.1985
21 No. T.I.F.-2-595/XI-9(4)/99-U.P. Act-15-48-Order-98
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dated 26.06.1997, continued after issuance of notification dated
06.04.1999 as well. The Allahabad High Court noted the previous High
Court decisions, as well as the judgment of this court, in Kothari Products
Ltd. (supra) and held that in view of the specific provision in the APGST
Act, the High Court held that gutkha (gudaku), an entry under the First
Schedule to the ADE Act, was exempted from tax under the APGST
Act.