The High Court
Case Details
IN THE HIGH COURT OF ORISSA AT CUTTACK W.P.(C) No. 449 of 2013 M/s. Town Bidi Co. …. Petitioner Mr. Jagabandhu Sahoo, Senior Advocate Ms. Kajal Sahoo, Advocate -versus- State of Odisha and Others Opposite Parties Mr. Sunil Mishra, Addl. Standing Counsel … CORAM: THE CHIEF JUSTICE JUSTICE R.K. PATTANAIK ORDER 10.08.2022 Order No. Dr. S. Muralidhar, CJ 06. 1. An order of assessment passed by the Sales Tax Officer (STO) Cuttack-1 West Circle, Cuttack on 30th November, 2011 under Section 10 of the Orissa Entry Tax Act, 1999 (OET Act) for the year 2004-05 raising a demand of Rs.6,71,362.35 is under challenge in the present petition.
Legal Reasoning
2. The background facts are that the Petitioner is a registered firm and registered as a dealer under the Orissa Entry Tax, 1999 (OET Act) as well as Odisha Value Added Tax Act, 2004 (OVAT Act). The Petitioners deals with raw bidi. Originally, the STO assessed the Petitioner under the OET Act by an assessment order dated 7th November, 2007 raising a demand of Rs.729/- which is duly paid Page 1 of 6 by the Petitioner. In the original assessment order, the STO did not levy entry tax on raw bidi, since he considered it not to be a tobacco product and therefore not a schedule goods under the OET Act. Although the A.G. (Audit) raised an objection that raw bidi would qualify as tobacco product, the STO did not accept that objection and sustained the original assessment order. 3. For the period 2004-05, the STO issued notice of reassessment under Section 10 of the OET Act and in Form E-32 under Rule- 15D of the OET Rules. The Petitioner then raised an objection dated 26th March, 2010. By a further application on 30th July, 2011 the Petitioner requested the STO to drop the reassessment proceedings submitting that the levy of entry tax on raw bidi was prima facie untenable in law. Further, it was contended that in view of the recitals and Entries 16, 31, 32 and 57 of Part-1 of the Schedule under the OET Act, raw bidi cannot be a subject matter of levy of entry tax since it was not a scheduled goods. It was also contended that in view of the decision of the Karnataka High Court in the case of Suvasini Beedis Pvt. Ltd. v. Additional Commercial Tax Officer, (1991) 83 STC, 209, raw bidi/rolled tobacco is not a tobacco product and cannot be the subject matter of entry tax under the OET Act. 4. However, the STO considered the submission of the Petitioner to be not satisfactory and concluded the assessment on the basis of the report of the A.G. (Audit). Accordingly, entry tax on the purchase of raw bidi was levied @ 1%. It is a penalty of 200% i.e. Page 2 of 6 twice the amount of tax and so also levied and in the aggregate the tax and penalty demanded amount to Rs.6,71,362.00/-.
Legal Reasoning
5. Mr. Jagabandhu Sahoo, learned Senior Counsel for the Petitioner inter alia contends that raw bidi is a phrase used for the sake of convenience to describe the article in a semi finished state, it comes out at a stage earlier to the final product after being appropriately heated. He adds that bidi is an article of common use, smoked mostly by the poorer section of the people, and that none would accept a “raw bidi” as a “Bidi”. Bidi is thus a product which comes out only after appropriate heating and each brand of bidis have their own taste and flavour because of the conditions in the temperature imparted while heating. 6. Mr. Sahoo drew attention to the various entries in Part-1 of the Schedule of the OET Act, viz., Entries 16, 31, 32, 57 which read as under” 1. 16 2. 31 3 32 4. 57 Schedule Part 1 Tobacco and tobacco products 1% Schedule Part 1 Schedule Part 1 Schedule Part 1 Cigarettes and lighter 1% PAN Masala and other Tobacco products including Zarada Gudakhu 1% 1% OET Act, 1999 OET Act, 1999 OET Act, 1999 OET Act, 1999 He also drew attention to Entries 15 and 123 in Part-II of the Schedule-B of the OVAT Act which reads ‘Beedi/Kendu leaves’ Page 3 of 6 and ‘unmanufactured tobacco, unbranded tobacco products, Cigars, cheroots, tobacco substitute cigarillos, Cut tobacco, Unbranded biris, paper biris, Biris without tobacco or with tobacco, biris manufactured without the aid of machines, gudakhu and tobacco and tobacco products not manufactured in India’. The rate of tax (VAT) of the above product is 5%. Interestingly, in Part-II of Schedule-B of the OVAT Act Entry-1 reads ‘unmanufactured tobacco, beedis and tobacco used in manufacture of beedis’ and Entry-2, in the same Schedule-B, reads ‘tobacco and its products other than unmanufactured tobacco, beedis and tobacco used in manufacture of beedis’ which is taxed at 25%. 7. The Court first takes up for discussion in the decision of the Karnataka High Court in Suvasini Bidis Pvt. Ltd. (supra). The High Court in the above decision proceeded on the basis that raw bidi is not marketable. It was concluded that for the purposes of the entry “all that contains tobacco, is not a tobacco product.” The Karnataka High Court appears to have followed the decision in Union Carbide India Ltd. v. Union of India (1987) 64 STC 444, where it was held that to attract excise duty the article manufactured must be capable of sale to a consumer and that it should be something which can ordinarily come to the market to be bought and sold. 8. This Court is unable to agree with the above reasoning of the Karnataka High Court in Suvasini Bidis Pvt. Ltd. (supra). In Union Carbide India Ltd. (supra) it was held that the aluminum Page 4 of 6 cans produced by the Appellant as an intermediary product could not be described as ‘goods’ for the purposes of excise duty “as they are not marketable and are prepared entirely by the Appellant for the flashlights manufactured by it.” However, in the present case, we are not dealing with the excise duty but the exigibility of entry tax on raw bidis. Secondly, it is obvious that the raw bidi is ‘marketable’ as it has been purchased by the Appellants from outside Odisha and that is why when the consignment crosses the border into Odisha, it is amenable to entry tax. Further, it is a recognizable commercial commodity as the Petitioner while purchasing such raw bidi will obviously not settle for any and every tobacco product but only an identified tobacco product that answers the description of ‘raw bidi’ which meets the requisite standard. 9. In its decision dated 5th July, 2022 in STREV 29 of 2012 (M/s Patel Brothers & Company, Sambalpur v. State of Orissa), this Court was dealing with bidi prepared from kendu leaves i.e. a handmade country cigarette comprising tobacco in rolled kendu leaves. It was held that the expression ‘tobacco products’ is wide enough to include such ‘bidi’. In the present case, Entry 16 reads of Part-I of the Schedule of OET Act ‘tobacco and tobacco products’, which as noticed in M/s Patel Brothers & Company (supra) is wide enough to include ‘bidi’. This is despite the fact that Entry-31 is specific to ‘cigarettes and lighter’; Entry 32 to “pan masala and other tobacco products including Zarda” and entry-57 deals with ‘gudakhu’. The Court has no hesitation in Page 5 of 6 concluding that raw bidis are distinct commercial products which are in fact marketable, and therefore, amenable to entry tax. 10. Consequently, this Court affirms the impugned orders of the
Decision
STO, the ACST and the Tribunal. The writ petition is accordingly dismissed. ( S. Muralidhar) Chief Justice Judge S.K. Jena/Secy. (R.K. Pattanaik) Page 6 of 6