1. In this reference two questions have been referred by the Tribunal as under :-
'(1) Whether on the facts and in the circumstances of the case the sale of Ipco Dental Creamy Snuff by the applicant under its bill dated 25th December, 1962, is covered by entry 49 in Schedule A to the Bombay Sales Tax Act, 1959
(2) If the answer to the above question is in the negative, whether the said sale is covered by entry 13 in Schedule C to the Act ?'
2. The short facts which have given rise to this reference are as under :-
The applicant is a manufacturing chemist who sells the preparation described as 'Ipco Dental Creamy Snuff' as per leaflet at annexure A. The preparation contains 55 per cent. snuff, 40 per cent. water, 2.5 per cent. preservative and 2.5 per cent. flavouring agents and it is in the form of a paste filled in collapsible tubes, which are packed in cartons. The leaflet at annexure A describes the preparation as Ayurvedic Ipco Dental Creamy Snuff, Tobacco Paste. It was claimed that it strengthened teeth and sweetened breath. It was stated that the paste was highly effective in cases of even extreme dental pain such as toothache, swelling and decay of gums, bleeding from gums etc. It was stated that it definitely strengthened weak and spongy gums and destroyed harmful bacteria and also prevented pyorrhoea. It was further stated that those people who were highly sensitive to the effects of tobacco should start with small quantities of the paste until they got accustomed. It was also stated that the use of that unique paste stimulated the mind and gave a spur to action. On the application of the applicant under section 52 in respect of the bill for sale dated 25th December, 1962, the Deputy Commissioner of Sales Tax held that the article was one of toilet under entry 21-A in Schedule E. In appeal the Tribunal held that the preparation was not merely a form of tobacco, but was a preparation from snuff. The Tribunal also rejected the alternative contention that it was a drug within the meaning of entry 13 of Schedule C. As the Tribunal did not accept the finding that the article was a toilet preparation, it held that the same was covered only under the residuary entry 22 in Schedule E. The State had not questioned the finding as regards it being not a toilet article and, therefore, the Tribunal has referred only the aforesaid two questions to this Court.
3. The relevant entry 49 in Schedule A runs as under :
'Tobacco as defined in item No. 4 of the First Schedule to the Central Excises and Salt Act, 1944.'
4. Item 4 in the said Central Excises and Salt Act, 1944, reads as under :
''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.'
5. Therefore, so far as the definition is relevant for our purpose it defines 'tobacco' to mean any form of tobacco whether manufactured or not. The expression 'manufacture' is defined in section 2(f) of the said Central Excises and Salt Act, 1944, as under :
''Manufacture' includes any process incidental or ancillary to the completion of a manufactured product; and
(i) in relation to tobacco, includes the preparation of cigarettes, cigars, cheroots, biris, cigarette or pipe or hookah tobacco, chewing tobacco or snuff;...'
6. As entry 4 in the Schedule to the Central Excises and Salt Act, 1944, defines tobacco as any form of tobacco, whether manufactured or not, it would include not only the manufactured products but in relation to tobacco would even include various preparations which are mentioned in section 2(f), clause (i), that is to say, it would include even snuff. The learned Advocate-General, however, argued that even if the definition of tobacco includes such a form of manufactured tobacco, i.e., its preparation in the form of snuff, it would not include its further manufacture of snuff into some other commercial commodity, viz., such dental creamy snuff, especially when the said article had been manufactured not only from snuff but has been prepared by addition to it of various other articles like water, preservative and flavouring agents. As we have already stated, the content of snuff in this preparation is 55 per cent., while the remaining 45 per cent. is water, preservative and flavouring agents. The learned Advocate-General also referred to us the dictionary definition of 'snuff'. In Webster's New Twentieth Century Dictionary at page 1721 snuff is defined as 'a preparation of powdered tobacco taken up into the nose by sniffing or applied to the gums with a snuff-stick.' Another meaning is any powder taken by inhaling. It is, therefore, clear that snuff is capable of two recognised uses : One, when it is taken up into the nose by sniffing and the other, when it is applied to gums with a snuff-stick. The learned Advocate-General, therefore, argued that in the present preparation not only other substances had been added to convert this article into a different marketable commodity, but the snuff had lost one out of its original uses and it was now reduced to that article which would be applied to the gums, not with snuff-stick but with a tooth-brush or with finger. Besides, the essential characterstic of snuff had been lost in the process as it had ceased to be in the powdered form, when it would have been put to both these uses, viz., for inhaling through the nostrils or for application to the gums. The learned Advocate-General, therefore, argued that considering all these aspects it must be held that this article was not snuff and it had ceased to be excisable goods even within the meaning of entry 4 of the Central Excises and Salt Act, 1944, and, therefore, it would become taxable even under the present Act. Mr. Kaji, on the other hand, argued that in the present preparation snuff retained its character as snuff and even the commodity was sold in the market as Ipco Dental Creamy Snuff. Merely because water, preservative and flavouring agents were added, snuff did not lose its original character as snuff. It is true that instead of the powder form or the solid form it had been put in the paste form, but that process or adaptation had been done only with a view to make it marketable as snuff when sold for applying to the gums. As the literature indicates, people have to be accustomed for using this type of paste for applying to the gums. The flavouring agents or the preservative or water when added to snuff would not change the composition of snuff by such physical mixture, even though the process may make it more marketable when intended for the use of snuff for applying to the gums. Even if in this paste form it may be useful only for applying to the gums, it retained its character of a preparation of powdered tobacco and even retained its use as such. It did not cease to be snuff at all. If it retained the character of snuff, it would definitely fall within the item of tobacco which is given a very wide meaning by defining it as any form of tobacco, whether manufactured or not. Mr. Kaji in this connection rightly relied upon the various decisions of the Supreme Court which have settled the legal position in this connection. In Tungabhadra Industries Ltd. v. Commercial Tax Officer, Kurnool ( 11 S.T.C. 827), their Lordships had to consider whether hydrogenated groundnut oil (commonly known as vanaspati) was 'groundnut oil' so as to get the benefit of deduction under the Madras General Sales Tax (Turnover and Assessment) Rules, 1939. By the process of hydrogenation a chemical change had taken place and the liquid oil had changed even its physical state. At page 834 their Lordships pointed out that the physical state did not determine the identity of the commodity as various kinds of oil harden and assume solid forms at low temperatures, but from that they could not be denied the name of oils because of their not being liquid. Similarly, at page 835 their Lordships pointed out that the change in that case was both additive and inter-molecular, but yet it could not be said that refined groundnut oil was not groundnut oil. It introduces ease of packing and transport without leakage, and still hydrogenated oil served the same purpose as a cooking medium and had identical food value as refined groundnut oil. There was no use to which the groundnut oil could be put for which the hydrogenated oil could not be used, nor was there any use to which the hydrogenated oil could be put for which the raw oil could not be used. Therefore, the refined oil had only become more stable thus improving its keeping qualities for those who desired to consume groundnut oil because of this processing which was done to render it more acceptable to the customers. In State of Madhya Bharat v. Hiralal ( 17 S.T.C. 313), their Lordships had to consider whether scrap iron or iron plates converted into bars, flats and plates in the mills ceased to be 'iron and steel' within the meaning of the relevant entry under that sales tax legislation. Their Lordships considered another entry of goods prepared from any metal other than gold and silver and observed at page 315 that the distinction was between raw materials of iron and steel and the goods prepared from iron and steel because the former was exempted from tax while the latter was taxed. So long as iron and steel continued to be raw materials, they enjoyed the exemption. Their Lordships in terms pointed out that the scrap iron purchased by the assessee was merely re-rolled into bars, flats and plates and they had been processed for convenience of sale as the raw materials were only re-rolled to give them attractive and acceptable forms and in such a process they did not lose their character as iron and steel. In State of Gujarat v. Sakarwala Brothers ( 19 S.T.C. 24), their Lordships had to consider whether 'patasa' fell within entry 47 of Schedule A of the Act, which included in sugar all forms of sugar. At page 33 their Lordships pointed out that the Legislature had used the words 'any form of sugar' and the entry included within its ambit all forms of sugar, that is to say, sugar of any shape or texture, colour or density and by whatever name it was called. Their Lordships approved the decision of this Court to be correct as 'patasa', 'harda' and 'alchidana' were only different forms of refined sugar. Their Lordships had relied upon the earlier decision in Tungabhadra Industries Ltd. ( 11 S.T.C. 827), where it had been held that hydrogenated oil retained its essential nature as oil and it continued to be used for the same purpose as groundnut oil which had not undergone the process. It was also held that the mere fact that hydrogenated oil was semi-solid, it did not alter its character as an oil. Thus, the principle which emerges from these decisions is that even when a process is adopted for convenience of sale or making the article more acceptable to the customers, if the article in question retains its essential character, it has to be taxed as such article only and the processing would make no difference. The physical state or even the composition may change but so long as the essential character of the article continues to remain the same, it has to be taxed as that commodity alone. In all these cases the concerned entry was 'of all forms' or even without those words, while in the present case not only all forms of tobacco are covered, but even the tobacco manufactured or not is covered. The Legislature has thus given a very wide exemption which must be given a very liberal interpretation. When there is no dispute that snuff would be an exempted article because of the definition of manufacture given in the Central Excises and Salt Act, 1944, in relation to tobacco, such a dental creamy snuff which completely retains its essential character as snuff and which has only certain flavouring agents, preservative and water added, to change its physical condition in order to make it more acceptable to the customers when intended to use as snuff for application to the gums, there is no reason to hold that the snuff has lost its essential character and a totally different article has been produced which cannot claim exemption. In view of this settled legal position we are of the view that the Tribunal was wrong in holding that the snuff sold by the assessee was not tobacco.
7. In the result our answer to the first question must be in the affirmative and, therefore, question No. (2) would not arise for our consideration. The reference is, therefore, answered accordingly. The State shall pay the costs of this reference to the assessee.
8. Reference answered accordingly.