1961 (9) TMI 54 - HC - VAT and Sales Tax

Issues Involved:
1. Liability of petitioners to be taxed on the sales turnover of tanned hides and skins.
2. Applicability of single point taxation scheme.
3. Taxation of purchases from unlicensed dealers.
4. Taxation of purchases made outside the State.
5. Taxation of sales of raw hides and skins in the context of export transactions.

Detailed Analysis:

1. Liability of Petitioners to be Taxed on the Sales Turnover of Tanned Hides and Skins:
The petitioners, licensed dealers in hides and skins, were assessed on the turnover including the sale value of tanned hides and skins for the assessment year 1955-56. The dispute centered around whether the petitioners should be taxed on the sales turnover of tanned hides and skins, as they argued it contravenes the scheme of single point taxation. The court examined if the taxation should occur at the purchase point of raw hides and skins or at the sale point of the tanned product.

2. Applicability of Single Point Taxation Scheme:
The court analyzed the Turnover and Assessment Rules, specifically Rule 16(2)(ii), which the department and Tribunal relied upon to tax the sale price of the tanned product. The petitioners contended that the taxation should be at the purchase point of raw hides and skins, adhering to the single point taxation scheme. The court clarified that the rules provide for taxation either on the raw hides and skins by the last purchaser in the State or on the tanned hides and skins by the first dealer if the raw hides and skins were not taxed.

3. Taxation of Purchases from Unlicensed Dealers:
The court addressed the issue of purchases from unlicensed dealers within the State. It was highlighted that during the previous assessment year (1954-55), purchases from unlicensed dealers were not subjected to a fixed point of taxation under Rule 16(2)(1). Consequently, the petitioners could not be taxed on the purchase value of raw hides and skins from unlicensed dealers. The rules did not provide a stage for taxation in such instances, and thus, the sale value of the tanned hides and skins was taxable.

4. Taxation of Purchases Made Outside the State:
The court examined whether the levy of tax on tanned hides and skins produced from raw hides and skins purchased outside the State was justified. Rule 16(2)(ii) indicated that if raw hides and skins had not been taxed, the dealer would be liable to tax on the sale value of the tanned hides and skins. The rule was clear that the purchase of untanned hides and skins outside the State did not attract taxation at the purchase stage. Therefore, the taxation on the tanned hides and skins was correct and lawful.

5. Taxation of Sales of Raw Hides and Skins in the Context of Export Transactions:
In T.C. No. 16 of 1959, the petitioners argued that sales to foreign buyers, facilitated through local banks, should not be taxed as the local banks acted as agents for the foreign buyers. The court determined that the sale to foreign buyers was in the course of export and exempt from tax under Article 286 of the Constitution. The court rejected the claim that the local banks were the last purchasers in the State. Instead, the petitioners were deemed the last purchasers, and the tax was levied on the amount for which the goods were bought by them, as per Rule 16(1).

Conclusion:
The court dismissed the petitions, affirming that the taxation on the sale value of tanned hides and skins was lawful under the given rules. The single point taxation scheme was upheld, and the petitioners' contentions regarding purchases from unlicensed dealers and transactions outside the State were rejected. The court also clarified the taxation in the context of export transactions, concluding that the petitioners were the last purchasers in the State. The petitions were dismissed with costs, and counsel's fee was set at Rs. 50 in each case.

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