1. The petitioners in all these cases were dealers in chewing tobacco which they also sold in the packets prepared by them. When they were assessed to sales tax, the turnover of these sales was included in their taxable turnover. In the relevant assessment years tobacco and tobacco products were subject to the levy of sales tax at the single points specified in clauses (vii) and (viii) of Section 5 of the Madras General Sales Tax Act, IX of 1939.
2. The main question that arises for consideration in all these applications to revise the orders of the Sales Tax Appellate Tribunal is, whether the Tribunal was right in sustaining the assessment on such sales of packets of chewing tobacco effected by the petitioners. Two other questions also arise, which we shall set out in detail later.
3. T. C. Nos. 62 to 65 of 1959, and T. C. Nos. 32 to 34 of 1960 have come up for final disposal after notice to the respondent, the State. T. C. Nos. 49 to 53, 56, 67, 79 and 80 of 1960 came up before us for orders as to admission, that is, whether notice should issue to the respondent. The questions that arise for determination by us are the same in the case of each of the assessees-petitioners.
4. T. C. Nos. 62 and 65 of 1959 preferred by the same assessee, Bell Mark Tobacco Co., relate respectively to the assessment years 1955-56 and 1956-57. They are applications to revise the orders of the Tribunal rejecting the appeals preferred by the assessee. The assessee preferred applications to the Tribunal to review its appellate judgments, but they were dismissed. Against these orders the assessee preferred T. C. Nos. 49 and 50 of 1960.
5. Similarly T. C. Nos. 63 and 64 of 1959 preferred by another assessee were against the appellate orders of the Tribunal with reference to assessment years 1955-56 and 1956-57. T. C. Nos. 79 and 80 were applications to review the orders of the Tribunal declining to review the appellate judgment in those cases.
6. T. C. Nos. 32 to 34 of 1960 preferred by the same assessee Md. Ibrahim related respectively to the assessment years 1955-56, 1956-57 and 1957-58. With reference to the same three assessment years another assessee Abdul Khader preferred T. C. Nos. 51 to 53 of 1960.
7. T. C. Nos. 66 and 67 of 1960 preferred by yet another assessee relate to assessment years 1955-56 and 1956-57.
8. Of the several Contentions of the assessees-petitioners which the Tribunal negatived, those still in issue before us and which are common to all the petitioners are : (1) Whether the petitioners-assessees were liable to be taxed on the turnover of the sales of the packets of chewing tobacco prepared by them ; (2) whether the cost of the packing materials should be excluded in computing the taxable turnover of each of the assessees; and (3) whether each of the assessees was entitled to the rebate of the excise duty paid by him on the tobacco from which he prepared and sold the packets of chewing tobacco.
9. Only these three questions were argued before us by the learned counsel for the assessees. He did not raise any other question for determination,
10. The statutory provisions with reference to which we have to answer the first of these questions are clauses (vii) and (viii) of Section 5. They ran :-
5. Subject to such restrictions and conditions as may be prescribed, including conditions as to licences and licence fees...(vii) the sale of cigars and cheroots at less than two annas per cigar or cheroot, and bidis, snuff, chewing tobacco or any other product manufactured from tobacco, shall be liable to tax under Section 3, Sub-section (1), only at the point of the first sale effected in the State of Madras by a dealer who is not exempt from taxation under Section 3, Sub-section (3), but at the rate of six pies for every rupee on his turnover;
(viii) raw tobacco, whether cured or uncured, shall be liable to tax under Section 3, Sub-section (1), only at the point of the first purchase effected in the State of Madras by a dealer who is not exempt from taxation under Section 3, Sub-section (3) but at the rate of six pies for every rupee on his turnover:
Provided that where a dealer who has paid tax in respect of his turnover relating to goods included in Clause (vii) has also paid the tax on the purchase of raw tobacco used in the manufacture of such goods under Clause (viii) he shall be entitled to a rebate to the extent of tax paid in respect of the raw tobacco so used.
11. Taking into account the scheme of clauses (vii) and (viii) including the proviso, it seems clear to us that what is brought to tax under Clause (vii) is the sale of manufactured products of tobacco while Clause (viii) provides for the levy of tax on sale of raw tobacco, whether cured or uncured, that is, tobacco which has not been subjected to any manufacturing process.
12. Cigars, cheroots, bidis and snuff referred to in Clause (vii) are obviously products manufactured from tobacco. After enumerating these items and chewing tobacco, Clause (vii) takes within its scope 'any other product manufactured from tobacco'. In our opinion, even had there been nothing else, the expression 'manufactured from tobacco' would have to be read distributively with reference to each of the enumerated items, including chewing tobacco. The expression 'any other product' following the enumerated items also seems to call for such an interpretation, that the expression 'manufactured from tobacco' has to be read distributively. The proviso to sub-clause (viii), in our opinion, makes the position even clearer. The expressions in the proviso are 'goods included in Clause (vii)' and 'the manufacture of such goods'. They emphasise the distinction between clauses (vii) and (viii). As we said, Clause (vii) provides for the levy of tax on products manufactured from tobacco including chewing tobacco, while Clause (viii) provides for levy of tax on sale of unmanufactured tobacco, that is, tobacco which has not been subjected to manufacturing process.
13. The learned counsel for the petitioners contended that Clause (vii) applied to chewing tobacco, whether it was a manufactured product or not. He contended that in the absence of a statutory definition, the words chewing tobacco should be understood in the sense of commercial usage. He referred to passages from the Report on the Marketing of Tobacco in India, second edition, and pointed out that more than 80 per cent, of chewing tobacco was sold to consumers without subjecting that tobacco to any manufacturing process. The Report discloses that manufacture of chewing tobacco in the form of powder, pills and paste was common in North India. In South India to a large extent the cured leaf or portions thereof are sold for chewing. Recently dealers have marketed chewing tobacco by shredding cured tobacco and packing the shredded tobacco in packets of convenient sizes. Independent of the question, whether the process to which the petitioners subjected the tobacco they had bought was manufacturing process or not, the learned counsel for the petitioners contended that in the commercial sense the expression chewing tobacco covered both manufactured products of tobacco and chewing tobacco which had not been subjected to any process of manufacture. We shall have to revert again to the plea of the learned counsel for the petitioners, that what the petitioners purchased, from out of which they prepared the packets of chewing tobacco they sold, was itself chewing tobacco within the scope of Clause (vii). Confining ourselves to the consideration of the plea, that the expression 'chewing tobacco' in Clause (vii) took within its scope both the manufactured product and the tobacco sold as chewing tobacco without subjecting it to any manufacturing process, we have no hesitation in rejecting that contention. As we said, Clause (vii) provided for the levy of tax on the sale of manufactured products, manufactured from tobacco, the enumerated products as well as the products brought under the comprehensive head 'any other product manufactured from tobacco'. It would follow that, if what is sold as chewing tobacco has not been subjected to any manufacturing process, it could fall only under Clause (viii) and not under Clause (vii). To isolate chewing tobacco alone among the items enumerated in Clause (vii), divorce it from its setting in Clause (vii) and construe that expression independent of Clause (vii) and in accordance with what the petitioner's counsel claimed to be the commercial usage, is not, in our opinion, justified either by the language of Clause (vii) or by the scheme that underlies clauses (vii) and (viii) of Section 5.
14. The findings of the Tribunal with reference to which we have to answer the question were (1) what the assessees purchased was not a manufactured product of tobacco ; the tobacco at that stage had not been subjected to any process of manufacture; and (2) what the assessees sold was a manufactured product of tobacco; the tobacco they had purchased was subjected to manufacturing process before it was sold by them in packets. ,
15. If these findings stand, what we have said above, that Clause (vii) applies to manufactured products, should suffice to sustain the order of the Tribunal, that on the sale of that manufactured product the assessees were liable to pay sales tax. It was not in dispute that they were the first sellers in the Madras State of the packets of chewing tobacco in question.
16. The Tribunal went elaborately into the question with reference to the evidence placed before it and with reference to the passage in the Report on the Marketing of Tobacco to which its attention was drawn and came to the conclusions we have recorded above, that what the petitioners sold wa3 a manufactured product of tobacco, manufactured from the tobacco that they purchased, which at that stage had not been subjected to any manufacturing process. We have been taken through the evidence and the report, and we see no reason to differ from the Tribunal, even independent of the question whether the findings of fact recorded by the Tribunal should not conclude the question at issue, provided of course, there was material on which these findings could be rested.
17. The relevant factors to be considered at this stage are as follows :- The assessee purchases the tobacco and stores it in his licensed warehouse till it is required for being made into packets for sale. At the stage when the assessee issues the tobacco from the warehouse for being subjected to the further process before it was packed, he pays the prescribed excise duty. The learned counsel for the petitioner contended that even at the stage of purchase what the assessee purchased was known to the trade as chewing tobacco. It was found that the maximum period during which the tobacco is stored in the warehouse of the assessee is about 40 days. The learned counsel for the petitioners, however contended that very often the tobacco is taken out from the warehouse much earlier. During the time the tobacco is bonded in the warehouse it has to be looked after, and one of the principal items of work to be done is known as 'bulking'. That process consists of sprinkling leaves with a solution of jaggery water and turning over the leaves to keep them soft and pliable and to prevent driage. After the leaf is taken out of the warehouse, it is again soaked in jaggery water. Then flavouring essences are added. The leaf is then shredded. Shredded tobacco is taken packed and labelled. It should be noted that even before the assessee purchased the tobacco it had been subjected to some process. The Tribunal was of the view that that was not a manufacturing process, but only a process to cure the leaf and keep it in a fit condition for sale. The main process to which the tobacco is subjected at that stage is that it is soaked in jaggery water, dried in shade and subjected periodically to the process of bulking we have mentioned above.
18. We see no reason to differ from the Tribunal, that the process of bulking and desanding to which the tobacco was subjected before the assessee purchased it did not amount to manufacturing process. What the assessee purchased was certainly not raw tobacco in the sense that it was straight off the field. It was cured tobacco. But then Clause (viii) of Section 5 takes within its scope both cured and uncured tobacco, which constitutes raw material for the manufacture of the products to which Section 5(vii) applies. What however is excluded from Section 5(viii) is tobacco which has itself been subjected to a manufacturing process. Whether, if tobacco which has been subjected to a manufacturing process is again subjected to a further manufacturing process by the purchaser it will fall under Section 5(vii) does not arise for consideration in this case, and we express no opinion of ours on that question. Factually the position was that what the assessee purchased had not been subjected to any manufacturing process, and, therefore, the sale of the tobacco, no doubt known even at that stage to the trade as chewing tobacco, did not bring that sale within the scope of Section 5(vii). It was the sale of the manufactured product effected by the assessee, manufactured from the tobacco that he had purchased, that came within the scope of Section 5(vii). No doubt, soaking in jaggery water and the process of bulking were processes common both to the seller and to the assessee who purchased the tobacco. In other words, the assessee subjected the tobacco he had purchased to the same process. Had he stopped with that alone, it might be possible to contend that what he sold subsequently was not a manufactured product. Taking, however, the cumulative effect of the various processes to which the assessee subjected the tobacco before he sold it, it is clear that what was eventually sold by the assessee was a manufactured product, manufactured from the tobacco that the assessee had purchased. Soaking in jaggery water is not the only process to be considered. The addition of flavouring essences and shredding of the tobacco should establish that what the assessee sold was a product substantially different from what he had purchased. Once again, we have to point out that the fact that this assessee purchased the tobacco as chewing tobacco did not determine the question, whether the sale of the products manufactured by him from out of that tobacco falls within the scope of Section 5(vii) or not.
19. As what constitutes a manufacturing process has not been defined by the Sales Tax Act itself, that expression has to be construed as it is normally understood in the English language. Even then there can be no inflexible standard of universal application. What constitutes a manufactured product will have to be decided with reference to the circumstances of the case. See North Bengal Stores Ltd. v. Board of Revenue, Bengal  1 S.T.C. 157, Hiralal Jitmal v. Commissioner of Sales Tax  8 S.T.C. 325. In our opinion, the Tribunal was right in holding that the process to which the assessee subjected the tobacco he had purchased before lie sold it in packets as onewing tobacco was manufacturing process, and that what was sold was a manufactured product of tobacco. We also agree with the Tribunal, and the material on record justified its other finding that the tobacco the assessee purchased had not been subjected to any manufacturing process prior to that purchase.
20. As we said, once the findings of the Tribunal are accepted, it should be clear that the sales effected by the assessee fell within the scope of Section 5(vi) of the Act. The turnover of these sales was rightly included by the Tribunal in the taxable turnover of the assessee.
21. The next question is, whether the Tribunal was right in including in the taxable turnover of the assessee the cost of the packing material they used when they effected sales of chewing tobacco. It was common ground that the requirements of Rule 5(1)(g)(ii) of the Turnover and Assessment Rules were not satisfied. The assessee did not specify the charges and charge separately for packing. The liability to have the cost of packing materials, estimated if necessary, included in the taxable turnover under such circumstances is really concluded by the earlier decisions of this Court, which were reviewed in United Bleachers Ltd. v. State of Madras  11 S.T.C. 278 and by the last of our decisions (unreported) in T.C. No. 20 of 1958, Since reported as M. S. Chidambara Nadar Sons and Co. v. State of Madras  11 S.T.C. 321. The Tribunal was right in sustaining the inclusion of the cost of packing materials in the taxable turnover of the assessees.
22. The last question is whether the assessees were entitled to the rebate they claimed. Rule 5(1)(i) of the Turnover Rules entitles an assessee to deduct from the assessable turnover the excise duty, if any, paid by the dealer to the Central Government in respect of the goods sold by him. Earlier we pointed out that the assessee has a licensed warehouse in which the tobacco he has purchased is bonded till it is issued for use, and that before it is taken out of bond excise duty is paid by the assessee. That factually each of the assessees paid ' excise duty to the Government was never in issue. The Tribunal held :
The appellants have paid excise duty when the raw tobacco was transported by them from the godown where they were warehoused-Under the Excise Rules it is the grower who is liable to pay the excise duty. One of the conditions before excise duty could be deducted under Rule 5(1)(i) of the Turnover and Assessment Rules is that it should be paid by the dealer to the Central Government in respect of the goods sold by him. The appellants have paid such excise duty only on behalf of the grower in respect of the raw tobacco, i.e., raw chewing tobacco which was used by them for the manufacture of manufactured chewing tobacco on which no excise duty is payable.
23. We have not been shown the basis on which the Tribunal came to the conclusion, that the liability to pay excise duty lay only on the grower of the tobacco. Section 3 of the Central Excise and Salt Act (Act I of 1944) provides for the levy of excise duty 'in such manner as may be prescribed'. Prescribed means prescribed by rules made under the Act [See Section 2(g)]. Rule 2(v) of the Central Excise Rules, 1944, defines 'duty' as 'duty payable under Section 3 of the Act.' Rule 7 runs:-
Every person who produces, cures or manufactures any excisable goods, or who stores such goods, in a warehouse, shall pay the duty or duties leviable on such goods, at such time and place and to such person as may be designated in, or under the authority of these rules, whether the payment of such duty or duties is secured by bond or otherwise.
24. We have already pointed out that the stage at which the assessee paid the excise duty was when he removed the tobacco from his licenced warehouse to be subjected to the manufacturing process to which we have adverted before it was eventually sold either in packets or otherwise. Therefore, as a person who stored goods in a warehouse he was one on whom Rule 7 cast a liability to pay the excise duty. Until he paid the excise duty he could not remove the tobacco. So it was in discharge of a tax liability imposed on him in the prescribed manner, that is by Rule 7, that the assessee paid the excise duty. Rule 144 specifically provides that no goods shall be removed from any warehouse that is, a licensed warehouse, except on payment of the duty. Rule 140 regulates licensing of warehouses. That each of the assessees had a licensed warehouse in which he stored tobacco was never in issue. Rule 19 may also be referred to. 'The duty shall become chargeable as soon as products have been cured and are in a fit state for sale or where the manufacture precedes sale, for manufacture....' In this case the duty was charged and paid at the stage when the tobacco was fit for manufacture, that is, it was taken out of the warehouse for the purpose of manufacture. Rule 29 provides :
Where the curer sells manufactured products without payment of duty as provided in Rule 24, both the purchaser of the products and the person into whose possession the products pass after purchase shall become liable for the payment of the duty due thereon ; but the curer shall not be absolved from the liability laid upon him by Rule 19 until the transfer of ownership has been reported to, and acknowledged by, the proper officer.
25. Thus under the rules there was a liability imposed upon the assessee to pay the excise duty before he removed the tobacco from his licensed warehouse for manufacturing chewing tobacco. The requirements of Rule 5(1 )(i) of the Turnover and Assessment Rules were satisfied. We reverse the finding of the Tribunal on this point, and we direct that the excise duty paid by each of the assessees be excluded from the computed taxable turnover of that assessee. He is entitled to the rebate under Rule 5(1 )(i) of the Turnover and Assessment Rules.
26. T. C. Nos. 62 to 65 of 1959 and T. C. Nos. 32 to 34 of 1960 will stand allowed to the extent indicated above, and the assessments will be revised accordingly to give relief to the assessees with reference to the excise duty paid by them. T. C. Nos. 49 and 50 of 1960 and T. C. Nos. 79 and 80 of 1960 will stand dismissed, as the only question raised there was the liability to tax of the sales of chewing tobacco in packets effected by the assessees, already dealt with in disposing of T.C, Nos. 62 to 65 of 1959. No order as to costs in any of these petitions.
27. T. C. Nos. 51 to 53 of 1960 and T. C. Nos. 66 and 67 of 1960 will be posted separately for orders as to admission.