R.F.NARIMAN,J. - (1.) This batch of cases concerns Pan Masala containing tobacco and Gutka and their taxability under three State legislations, namely, the Delhi Sales Tax Act, 1975, the U.P. Trade Tax Act, 1948 and the Tamil Nadu General Sales Tax Act, 1959. The central question raised in all these appeals is the same. We shall first take up the Delhi case.
(2.) Under the Delhi Sales Tax Act, 1975, all sales (of goods) that are effected after the commencement of the Act, are made to suffer tax under Section 3(1) of the Delhi Act, whose marginal note reads "incidence of tax". Section 3 (1) states as under:- "3. Incidence of Tax (1) Every dealer whose turnover during the year immediately preceding the commencement of this Act exceeds the taxable quantum and every dealer who at the commencement of this Act, is registered or is liable to pay tax under the Central Sales Tax Act, 1956 (74 of 1956) shall be liable to pay tax under this Act on all sales effected by him on or after such commencement." The obverse side of incidence of tax is provided by Section 7 of the said Act, which reads as under:- "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 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."
(3.) Under Section 4, the marginal note of which reads "rate of tax", if tax is payable by a dealer under the Act, various rates in respect of taxable turnover are set out depending upon whether the goods are "declared goods" under the Central Sales Tax Act, 1956 or are goods which suffer tax at the rate of either twelve paise or twenty paise in the rupee, depending upon whether they are specified in the First Schedule or Fourth Schedule of the Act. In addition, food or drink served for consumption in a hotel or restaurant with which a cabaret, floor show or similar entertainment is provided, is taxed at the rate of forty paise in the rupee. All cases not covered by the above are then covered by a residuary sub-clause, in which the relevant rate at the given time was eight paise in the rupee. Section 4 of the said Act reads as under: "4. Rate of tax (1) The tax payable by a dealer under this Act shall be levied - (a) in the case of taxable turnover in respect of the goods specified in the First Schedule, at the rate of twelve paise in the rupee; (b) in the case of taxable turnover in respect of the goods specified in Schedule II, at such rate not exceeding four paise in rupee as the Central Government may, from time to time, by notification in the official Gazette, determine; (c) in the case of taxable turnover in respect of any food or drink served for consumption in a hotel or restaurant or part thereof, with which a cabaret, floor show or similar entertainment is provided therein, at the rate of forty paise in the rupee; [(cc) in the case of taxable turnover in respect of the goods specified in the Fourth Schedule, at the rate of twenty paise in the rupee;] [(ccc) [***] (d) in the case of taxable turnover of any other goods, at the rate of eight paise in the rupee: [PROVIDED that the Lieutenant Governor may, by notification in the Official Gazette, add to, or omit from, or otherwise amend, the First Schedule, the Second Schedule or the Fourth Schedule, either retrospectively or prospectively, and there upon the First Schedule or the Second Schedule or, as the case may be, the Fourth Schedule, shall be deemed to be amended accordingly:] PROVIDED FURTHER that no such amendment shall be made retrospectively if it would have the effect of prejudicially affecting the interests of any dealer: PROVIDED ALSO that in respect of any goods or class of goods if the Lieutenant Governor is of the opinion that it is expedient in the interest of the general public so to do, he may, by notification in the Official Gazette, direct that the tax in respect of taxable turnover of such goods or class of goods shall, subject to such conditions as may be specified, be levied at such modified rate not exceeding the rate applicable under this section, as may be specified in the notification. (2) For the purpose of this Act, "taxable turnover" means that part of a dealer's turnover during the prescribed period in any year which remains after deducting there from: (a) his turnover during that period on- (i) sale of goods, the point of sale at which such goods shall be taxable is specified by the Lieutenant Governor under section 5 and in respect of which due tax is shown to the satisfaction of the Commissioner to have been paid; (ii) sale of goods declared tax-free under section 7; (iii) sale of goods not liable to tax under section 8; (iv) sale of goods which are proved to the satisfaction of the Commissioner to have been purchased within a period of twelve months prior to the date of registration of the dealer and subjected to tax under the Bengal Finance (Sales Tax) Act, 1941 (Bengal Act VI of 1941), as it was then in force, or under this Act; (v) sale to a registered dealer; (A) of for "the Administrator is of opinion that it is expedient in the interest of the general public to do, he may, with the previous approval of the Central Government and" goods of the class or classes specified in the certificate of registration of such dealer, as being intended for use by him as raw materials in the manufacture in Delhi of any goods, other than goods specified in the Third Schedule or newspapers, - (1) for sale by him inside Delhi; or (2) for sale by him in the course of inter-State trade or commerce, being a sale occasioning, or effected by transfer of documents of title to such goods during the movement of such goods from Delhi; or (3) for sale by him in the course of export outside India being a sale occasioning the movement of such goods from Delhi, or a sale affected by transfer of documents of title to such goods effected during the movement of such goods from Delhi, to a place outside India and after the goods have crossed the customs frontiers of India; or (B) of goods of the class or classes specified in the certificate of registration of such dealer as being intended for resale by him in Delhi, or for sale by him in the course of inter-State trade or commerce or in the course of export outside India in the manner specified in sub-item (2) or subitem (3) of item (A), as the case may be; and (C) of containers or other materials used for the packing of goods, of the class or classes specified in the certificate of registration of such dealer, other than goods specified in the Third Schedule, intended for sale or resale; (vi) such other sales as are exempt from payment of tax under section 66 or as may be prescribed: PROVIDED that no deduction in respect of any sale referred to in sub-clause (iv) shall be allowed unless the goods, in respect of which deduction is claimed, are proved to have been sold by the dealer within a period of twelve months from the date of his registration and the claim for such deduction is included in the return required to be furnished by the dealer in respect of the said sale: [PROVIDED FURTHER that no deduction in respect of any sale referred to in sub-clause (v) shall be allowed unless a true declaration duly filled and signed by the registered dealer to whom the goods are sold and containing the prescribed particulars in the prescribed form obtainable from the prescribed authority in the manner and subject to such condition as may be prescribed is furnished in the prescribed manner and within the prescribed time, by the dealer who sells the goods:] PROVIDED ALSO that where any goods are purchased by a registered dealer for any of the purposes mentioned in sub-clause (v), but are not so utilised by him, the price of the goods so purchased shall be allowed to be deducted from the turnover of the selling dealer but shall be included in the taxable turnover of the purchasing dealer; and (b) the tax collected by the dealer under this Act, as such and shown separately in cash memoranda or bills, as the case may be." The question that has been raised in the present appeals relates to "tobacco" specified in the Third Schedule, read with Section 7, as tax free goods as follows:- "22. Tobacco as defined under the Central Excises and Salt Act, 1944 (1 of 1944)." ;