In Civil Appeal No(S). 8486 Of 2011-SC- Supreme Court rules that ‘Gutkha’ and ‘Pan Masala’ are not ‘Declared Goods’ Under Central Sales Tax Act
Justice S. Ravindra Bhat & Justice Dipankar Datta [04-05-2023]

Read Order: M/s Trimurthi Fragrances (p) Ltd. Through Its Director Shri Pradeep Kumar Agrawal v. Govt. of N.c.t Of Delhi Through Its Principal Secretary (finance) & Ors

Chahat Varma

New Delhi, May 6, 2023: The Top Court has clarified that in view of the restrictions under section 15 of the Central Sales Tax Act (CST Act), ‘gutkha’ and ‘pan masala’ are not considered as declared goods under Section 14 of the CST Act.

The division bench of Justice S. Ravindra Bhat & Justice Dipankar Datta held that ‘gutkha’ and ‘pan masala’ do not fall under the sub-heading 2404.40 of the Central Excise Tariff Act (CET Act) and therefore the arguments of the assessee that the rate of local tax cannot exceed the limit under the Central Sales Tax Act (CST Act), was deemed unmerited and rejected by the court.

The bench examined the case of Pioneer Land & Urban Infrastructure v. Union of India [LQ/SC/2019/1229] and observed that the inclusion of pan masala with tobacco in Chapter 24 and its exclusion from Chapter 21, along with the imposition of Additional Duty of Excise (ADE) from 2001, resulted in the product (pan masala without tobacco) falling outside the purview of state sales tax for the first time. Prior to 2001, both pan masala and gutkha were subject to local or sales tax levies, as they were classified under Chapter 21.

The bench examined the General Rules of Interpretation (of the CET Act) and held that, “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.”