1956 (3) TMI 26 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Levy of sales tax on transactions involving untanned hides and skins.
2. Authorization of the tax under the Madras General Sales Tax Act and the Turn-over and Assessment Rules.
3. Repugnance of the Act and Rules to Article 286(1)(b) of the Constitution.

Detailed Analysis:

1. Levy of Sales Tax on Transactions Involving Untanned Hides and Skins
The case revolves around the sales tax levied on untanned hides and skins purchased by licensed dealers within the State and subsequently exported by commission agents to foreign buyers. The State sought to levy sales tax on the amounts for which these untanned hides and skins were bought. The Sales Tax Appellate Tribunal had mixed rulings on this matter, leading to revision petitions by both the State and the assessees.

2. Authorization of the Tax under the Act and Rules
The primary question was whether the levy of the tax was authorized by the Madras General Sales Tax Act and the Turn-over and Assessment Rules. The court examined the definitions and provisions under the Act:
- Section 2(b) defines a "dealer" as any person who carries on the business of buying and selling goods.
- Section 2(h) defines "sale" as every transfer of property in goods by one person to another for a price.
- Section 2(i) defines "turnover" as the aggregate amount for which goods are either bought or sold by a dealer.
- Section 3(5) states that either the buyer or the seller, but not both, shall be taxed in respect of the same transaction.
- Section 5(vi) provides that the sale of hides and skins shall be liable to tax at a single point in the series of sales by successive dealers.

The court concluded that the Act and Rules did authorize the tax, as the tax was levied on the purchase of untanned hides and skins, not on the export sale itself. Rule 4(2)(d) and Rule 16(2)(ii) were interpreted to mean that the tax is levied on the last purchaser in the State before the export.

3. Repugnance to Article 286(1)(b) of the Constitution
The second question was whether the Act and Rules were repugnant to Article 286(1)(b) of the Constitution, which prohibits the imposition of tax on the sale or purchase of goods in the course of import or export. The court referred to several Supreme Court decisions:
- The court cited the decision in State of Travancore-Cochin v. The Bombay Co., Ltd., which held that sales and purchases that occasioned the export or import of goods fell within the exemption under Article 286(1)(b).
- In State of Travancore-Cochin v. Shanmuga Vilas Cashewnut Factory, the Supreme Court held that the last purchase by the exporter for the purpose of export did not fall within the protection of Article 286(1)(b).
- The court also referred to the decision in State of Madras v. Gurviah Naidu & Co., Ltd., which held that purchases made by dealers to implement orders from foreign buyers were liable to sales tax.

Based on these precedents, the court concluded that the exemption under Article 286(1)(b) did not apply to the assessees in these cases. The transactions sought to be taxed were the purchases preceding the export sale, not the export sales themselves. Therefore, the Act and Rules were not repugnant to Article 286(1)(b).

Conclusion:
The court allowed Tax Revision Cases Nos. 25, 41, and 44 of 1955 and dismissed Tax Revision Cases Nos. 26 of 1956 and 45 of 1955 with costs, concluding that the levy of sales tax on the purchase turnover of untanned hides and skins was authorized by the Act and Rules and was not repugnant to Article 286(1)(b) of the Constitution.