1959 (12) TMI 18 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutional validity of Rule 16 of the Turnover and Assessment Rules under the Madras General Sales Tax Act, 1939.
2. Alleged discriminatory taxation under Article 304(a) of the Constitution.

Issue-wise Detailed Analysis:

1. Constitutional Validity of Rule 16 of the Turnover and Assessment Rules:
The petitioner-firm, a licensed dealer in hides and skins, challenged the legality of the assessment made by the Deputy Commercial Tax Officer, Gudiyatham, on the basis of the re-enacted Rule 16. The assessment was on a turnover of Rs. 8,23,513-14-0 for the year 1955-56. The petitioner impugned the constitutional validity of Rule 16, which prescribes the determination of turnover and the point of levy for single-point taxation on hides and skins. The court noted that Rule 16 had been revised to address defects identified in previous decisions, which had resulted in unlicensed dealers escaping taxation while licensed dealers had to pay. The new rule mandated that all dealers in hides and skins must obtain licenses, thus avoiding the previous anomaly. The court concluded that the new Rule 16 fixed the point of levy based on the circumstances of the sale within the state, without reference to the origin of the goods, and therefore did not contravene constitutional provisions.

2. Alleged Discriminatory Taxation under Article 304(a) of the Constitution:
The petitioner argued that Rule 16 resulted in discriminatory taxation between goods tanned within the state and those tanned outside the state, as well as between raw skins purchased inside and outside the state. The petitioner contended that this discrimination violated Article 304(a) of the Constitution, which prohibits states from imposing discriminatory taxes on goods imported from other states. The court examined the provisions of Article 304(a) and the relevant entries in the Seventh Schedule of the Constitution. It concluded that Article 304(a) is intended to prevent discriminatory taxation that would impede the free flow of inter-state trade and commerce. The court found that Rule 16 did not impose a discriminatory tax based on the origin of the goods but rather fixed the point of levy based on the sale circumstances within the state. The court held that the rule applied equally to both goods produced within the state and those imported from outside, thus not violating Article 304(a). The court also noted that the rule provided for exemptions where tax had already been paid on raw skins, ensuring that the tax was levied at a single point.

Conclusion:
The court upheld the validity of Rule 16 of the Turnover and Assessment Rules, finding that it did not contravene Article 304(a) of the Constitution. The petition was dismissed, and the rule nisi was discharged. The respondent was entitled to costs, with counsel's fees fixed at Rs. 250 as per the consolidated judgment in W.A. 40 of 1958.