Subba Rao, J.
1. These appeals, by special leave, raise the question of the trueconstruction of the provisions of r. 5(1)(i) of the Madras General Sales Tax(Turnover and Assessment) Rules, 1939, hereinafter referred to as the Rules.
2. The facts are not in dispute and they may be briefly stated. Therespondent, Messrs. Swastik Tobacco Factory, is a dealer in tobacco. Itpurchased raw tobacco; by processing it in a prescribed manner, converted itinto chewing tobacco and sold it as such in small paper packets. The saidprocess has been described by a Division Bench of the Madras High Court in BellMark Tobacco Co. v. Government of Madras (1961) 12 S.T.C. 126 thus :
'Taking, however, the cumulative effect of thevarious processes to which the assessee subjected the tobacco before he soldit, it is clear that what was eventually sold by the assessee was amanufactured product, manufactured from the tobacco that the assessee hadpurchased. Soaking in jaggery water is not the only process to be considered.The addition of flavouring essences and shredding of the tobacco shouldestablish that what the assessee sold was a product substantially differentfrom what he had purchased.'
3. for the purpose of these appeals, it was not disputed that the respondentpurchased raw tobacco, converted it by a manufacturing process into chewingtobacco and sold it in small paper packets. The respondent paid excise duty inrespect of the raw tobacco purchased by it. For the assessment years 1955-56and 1956-57, the Assistant-cum- Deputy Commercial Tax Officer assessed therespondent to sales tax on the turnover of Rs. 10,67,923-10-9 and Rs.7,71,661-11-0 respectively. The respondent claimed that the excise duty paid byit to the Central Government in respect of the raw tobacco should be deducted fromthe turnover ascertained by the said Officer. But his contention was rejected.On appeal, the order of the said Officer was confirmed by the AppellateAssistant Commissioner of Commercial Taxes. On a further appeal to the SalesTax Appellate Tribunal, the assessee, in addition to the question of deduction,raised an additional ground that the entire turnover of the sales on chewingtobacco was not liable to be assessed. The Tribunal set aside the order ofAppellate Assistant Commissioner. The state carried the matter in two revisionsto the High Court of Madras. A Division Bench of the said High Court agreedwith the view expressed by the Tribunal and dismissed the revisions. Hence thepresent appeals.
4. Mr. A. V. Rangam, learned counsel for the State, argued that the rawtobacco was converted by a manufacturing process into the chewing tobacco, adifferent commodity and that, therefore, under r. 5(1) of the Rules, as exciseduty was paid only in respect of raw tobacco and not chewing tobacco, the saidduty was not deductible from the turnover of the assessee. He did not contestthe correctness of the decision of the High Court on the question of thetaxability of the chewing tobacco under s. 5(vii) of the Act.
5. Mr. T. A. Ramachandran, learned counsel for the respondent, contendedthat the said rule was couched in a comprehensive language so as to take inexcise duty paid on raw tobacco converted by a manufacturing process intochewing tobacco. The relevant rule reads thus :
'Rule 5. (1) The tax or taxesunder section 3 or 5 or 5A or the notification or notifications under section6(1) shall be levied on the net turnover of the dealers.
In determining the net turnoverthe amounts specified in the following clauses shall, subject to the conditionsspecified therein, be deducted from the gross turnover of a dealer :
(i) the excise duty, if any, paidby the dealer to the Central Government in respect of the goods sold byhim;......'
6. Both the advocates argued, on the basis of the factual position, thatpackets of chewing tobacco were goods different from tobacco from which thesaid goods were manufactured. While the learned counsel for the said State laidemphasis on the words 'goods sold by him', the learned counsel forthe respondent relied upon the expression 'in respect of' precedingthe said words. If, instead of the expression 'in respect of', theword 'on' were there, the intention of the rule would be manifest andthe answer to the question raised would be obvious. The excise duty paid by therespondent was only on the raw tobacco and not on the goods sold by it and,therefore, the said duty was not deductible thereunder. So far there is nodispute. But it was said that the expression 'in respect of' made allthe difference. The words 'in respect of', it was said, meant'attributable' and, therefore, the argument proceeded, the exciseduty paid on the tobacco, though it was not paid on the goods sold by therespondent, was attributable to the said goods sold.
7. The object of the concession is presumably to avoid payment of tax on taxin respect of the same goods. If excise duty was paid by a dealer on certaingoods, it would be deducted from the gross turnover of the dealer in regard tothe said goods, as otherwise, in effect, sales-tax would have to be paid on theamount paid towards excise duty. This concession could have no relevance if thegoods subjected to excise duty were different from the goods sold. Raw tobacco,when converted by a process of manufacture into chewing tobacco, becomes a differentmarketable product. There will be no comparison between the raw tobacco and thechewing tobacco in the matter of demand or even price. Duty on raw tobacco mayhave some effect on the cost of manufactured product, but it cannot be possiblybe said that the said duty is paid in respect of the manufactured product. Rule5(1)(i) of the Rules, therefore, permits deduction from the gross turnover ofthe dealer only the excise duty paid by him in respect of the same goods soldby him.
8. Learned counsel for the respondent cited some English decisions insupport of his contention that the expression 'in respect of thegoods' was very wide and that it took in the raw material out of which thegoods were made.
9. The House of Lords in Inland Revenue Commissioners v. Courts & Co.,(1963) 2 All.722 in the context of payment of estate duty,construed the words 'in respect of' in s. 5(2) of the Finance Act,1894 (57 & 58 Vict. c. 30) and observed that the phrase denoted some imprecisekind of nexus between the property and the estate duty. The House of Lords inAsher v. Seaford Court Estates Ltd. L.R. (1950) A.C. 508 in construing theprovisions 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 Bicber, Ltd. v. Commissioners ofIncome-tax (1962) 3 All. 294 observed that the said words could meanmore than 'consisting of' or 'namely'.
10. It is not necessary to refer to other decisions, It may be accepted thatthe said expression received a wide interpretation,having regard to the objectof the provisions and the setting in which the said words appeared. On theother hand, Indian tax laws use the expression 'in respect of' assynonymous with the expression 'on' : see Art. 288 of theConstitution of India; s. 3 of the Indian Income-tax Act, 1922; Sections 3(2) and3(5), Second Proviso, of the Madras General Sales Tax Act, 1939; s. 3(1 A) ofthe Central Excise and Salt Act, 1944; and Sections 9 of the Kerala Sales Tax Act.We should not be understood to have construed the said provisions, but onlyhave referred to them to state the legislative practice. Consistent with thesaid practice, r. 5(l)(i) of the Rules uses the same expression. When the saidrule says 'excise duty paid in respect of the goods', the excise dutyreferred to is the excise duty paid under s. 3(1), read with the Schedule, ofthe 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 theSchedule. Therefore, when r. 5(1 )(i) of the Rules refers to the duty paid inrespect of the goods to the Central Government, it necessarily refers to the dutypaid on the goods mentioned in the Schedule. As the duty exempted from thegross turnover is the duty so paid under the Central Act, read with theSchedule, the expression 'in respect of' in the context can only meanexcise duty paid on goods. In our view, the expression 'in respect of thegoods' in r. 5(l)(i) of the Rules means only 'on the goods'.Even if the word 'attributable' is substituted for the words 'inrespect of', the result will not be different, for the duty paid shall beattributable to the goods. If it was paid on the raw material it can beattributable only to the raw material and not to the goods. We, therefore, holdthat only excise duty paid on the goods sold by the assesses is deductible fromthe gross turnover under r. 5(l)(i) of the Rules.
11. We cannot, therefore, agree with the construction of r. (5)(i) of theRules accepted by the High Court.
12. No other question was raised before us. In the result, we modify theorder of the High Court accordingly. In the circumstances, we direct theparties to bear their respective costs.
13. Order modified.