1965 (3) TMI 65 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of sales tax assessment on non-licensee dealers.
2. Application and validity of Rule 16 of the Turnover and Assessment Rules.
3. Discriminatory taxation under Article 304 of the Constitution.
4. Impact of Supreme Court decisions on the assessment.

Issue-wise Detailed Analysis:

1. Validity of Sales Tax Assessment on Non-Licensee Dealers
The petitioners, dealers in hides and skins, were assessed sales tax for the year 1953-54 on a turnover of Rs. 7,54,421 at 3 pies in the rupee, and on a turnover of Rs. 18,94,000 covered by a license for part of the period. They contended that as no license was issued under section 5 of the Act, the entire turnover should not be assessable. The Tribunal rejected their contentions, leading to the revision petition. The court examined whether the assessment was valid given the non-issuance of licenses.

2. Application and Validity of Rule 16 of the Turnover and Assessment Rules
The petitioners argued that Rule 16 could not be applied, especially since Rule 16(2)(ii) was struck down by the Supreme Court. The court considered the historical amendments and the application of Rule 16, which prescribed the manner of taxation for hides and skins. It was noted that while sales of untanned hides and skins were taxed on their purchase value, the tax on tanned hides and skins depended on whether they were tanned within the State or outside. The court found that Rule 16, as it stood before the amendment, was still valid and applicable.

3. Discriminatory Taxation under Article 304 of the Constitution
The petitioners argued that the taxing provision was discriminatory under Article 304, which prohibits discrimination against goods from other states. The court referenced several decisions, including Abdul Subhan and Company v. State of Madras and Firm A.T.B. Mehtab Majid & Co. v. The State of Madras, to analyze whether the tax on imported tanned hides and skins was discriminatory. The Supreme Court had held that such provisions were discriminatory as they imposed a higher tax on imported goods compared to locally tanned goods, violating Article 304(a).

4. Impact of Supreme Court Decisions on the Assessment
The court reviewed the impact of the Supreme Court's decisions, particularly Firm A.T.B. Mehtab Majid & Co. v. The State of Madras, which held that taxing imported tanned hides and skins at a higher rate was discriminatory. The court also considered the case of Haji Abdul Shukoor and Company v. State of Madras, where a similar discriminatory tax provision was struck down. The court concluded that the basis of taxation on the petitioners' sales of imported hides and skins was invalid due to its discriminatory nature.

Conclusion
The court allowed the revisions to the extent that the assessments on the sales of imported hides and skins were set aside due to their discriminatory nature under Article 304. The petitioners' contentions regarding licenses under sections 5 and 8 were not pressed. The petitions were allowed without any order as to costs.