1954 (3) TMI 40 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of rule 16(2) and rule 4 of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939 for the assessment year 1949-50.

Analysis:
The judgment of the Madras High Court dealt with the interpretation of rule 16(2) and rule 4 of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939. The turnover in question was related to the purchase value of hides and skins exported after 26th January, 1950, but purchased before that date. The Tribunal upheld the claim of the assessee that the amount is exempt from tax under Article 286(1) of the Constitution. The Government Pleader challenged this decision in a revision petition, arguing that the taxable event was not the sale for export outside the State but the purchase by the licensed dealer with the intention to export. The Court analyzed the relevant provisions, particularly rule 16(2) and rule 4, to determine the correct taxable event for untanned hides and skins sold by a licensed dealer.

The Court highlighted that rule 16(2) specifies that no tax shall be levied on the sale of untanned hides or skins by a licensed dealer, except in two scenarios: when sold to a tanner in the State or when sold for export outside the State. The taxable turnover for goods exported outside the State by a licensed dealer is to be calculated based on the amount for which the goods were bought by the dealer, as per rule 4(2)(d). The Court emphasized that the taxable event in this case was the sale for export outside the State, and the turnover calculation should be based on the purchase value by the dealer.

The Court rejected the argument put forth by the Government Pleader that the taxable event was the purchase by the licensed dealer, not the subsequent sale for export. It clarified that the language of the rules indicated that the tax is attracted by the sale for export outside the State, not the purchase with the intent to export. While the turnover is calculated based on the purchase value, this does not alter the taxable event. The Court concluded that the assessee was indeed exempt from tax for the hides and skins exported after 26th January, 1950, as the sale occurred after the Constitution came into force, falling under the exemption provided by Article 286(1)(b) of the Constitution.

In light of the above analysis, the Court affirmed the Tribunal's decision, dismissing the revision petition and confirming the exemption for the assessee in respect of the disputed amount. The revision petition was dismissed with costs imposed on the petitioner.