In Brief
The Supreme Court settled a multi-state tax dispute over whether pan masala and gutkha (a betel-nut-based preparation with tobacco and spices) constitute "tobacco" and are therefore exempt from state sales tax. The Court held that pan masala and gutkha are distinct commodities from tobacco, properly classified under Chapter 21 of the Central Excise Tariff Act rather than Chapter 24 (tobacco). Although gutkha contains tobacco (7-15%), it is identified primarily as pan masala by its essential character. States validly imposed sales tax by adding these products to taxable schedules without amending exemption entries. As these products were not listed as "declared goods" under the Central Sales Tax Act, the rate-restriction limits do not apply. The appeals of tax dealers challenging state tax levies were dismissed, and revenue appeals were allowed.
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