Well, once you have the azidoamide of benzoic acid you do the Curtius rearrangement. In the mechanism you lose a molecule of nitrogen and get a nitrene (like a carbene, but with N). Then the aryl group migrates and you can push the electrons to make an isocyanate intermediate (so, Ar-N=C=O). The isocyanate is then hydrolyzed upon work-up and you lose the carbon from the methyl group of the toluene as CO2.
You can also draw a polar mechanism where the aryl group migrates and displaces molecular nitrogen, but I like the nitrene mechanism better.
BTW, this is almost exactly like an Arndt-Eistert homologation, but with nitrogen instead of carbon.