1969 (4) TMI 91 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of serial No. 7(b) in the Second Schedule to the Madras General Sales Tax Act, 1959.
2. Classification and differential treatment of raw hides and skins versus dressed hides and skins.
3. Alleged violation of Articles 14, 286(3), 301, and 304 of the Constitution of India.
4. Discrimination and unequal burden due to differential tax rates.
5. Jurisdiction of the State Legislature under Article 246(3) and List II of the Seventh Schedule of the Constitution.

Issue-wise Detailed Analysis:

1. Validity of Serial No. 7(b) in the Second Schedule to the Madras General Sales Tax Act, 1959:
The primary contention raised by the petitioner was that the classification under item 7(b) of the Second Schedule, which imposes a tax on dressed hides and skins at the point of first sale in the State, is void, ultra vires, and illegal. The petitioner argued that raw and tanned hides and skins should be treated as a single commodity and subjected to a single point levy of tax. The court, however, concluded that raw hides and skins and dressed hides and skins are distinct commodities, which justifies different points of taxation and rates.

2. Classification and Differential Treatment of Raw Hides and Skins versus Dressed Hides and Skins:
The petitioner contended that the differential treatment of raw hides and skins and dressed hides and skins under items 7(a) and 7(b) leads to an unhealthy classification without any basis. The court referred to the Supreme Court's decision in Hajee Abdul Shukoor & Co. v. State of Madras, which held that raw hides and skins and dressed hides and skins are different commodities. The court reaffirmed this distinction, stating that the Legislature is justified in treating them as separate commodities for the purpose of taxation.

3. Alleged Violation of Articles 14, 286(3), 301, and 304 of the Constitution of India:
- Article 14: The petitioner argued that the differential tax rates violate Article 14 by imposing an unequal burden on dealers in raw hides and skins versus dressed hides and skins. The court dismissed this contention, stating that since the commodities are different, the differential treatment does not constitute discrimination.
- Article 286(3): The petitioner claimed that the Madras General Sales Tax Act violated the restrictions and conditions imposed by Article 286(3) and Section 15 of the Central Sales Tax Act. The court found that the State Legislature has the power to levy tax on the sale of goods within its territory and that the provisions of the Madras Act do not violate these constitutional provisions.
- Article 301 and 304: The petitioner argued that the tax scheme impedes the freedom of trade and commerce guaranteed by Article 301 and violates Article 304. The court held that there is no restriction on the inter-State movement of goods and that the State Legislature has plenary powers under Article 246(3) to levy sales tax on goods within its territory. Therefore, the provisions do not violate Articles 301 or 304.

4. Discrimination and Unequal Burden Due to Differential Tax Rates:
The petitioner argued that the differential tax rates on raw hides and skins (2% or 3%) and dressed hides and skins (1% or 1.5%) are discriminatory and impose an unequal burden. The court examined the factual basis for the differential rates and found that the rates were justified based on the recommendations of an expert committee and representations from the Chambers of Commerce. The court concluded that the differential rates do not result in discrimination or an unequal burden on the dealers.

5. Jurisdiction of the State Legislature under Article 246(3) and List II of the Seventh Schedule of the Constitution:
The State argued that it has the power to levy sales tax on goods under Article 246(3) read with List II of the Seventh Schedule of the Constitution. The court agreed, stating that the State Legislature has the authority to tax the sale of goods within its territory and that the provisions of the Madras Act are within its legislative competence.

Conclusion:
The court dismissed the writ petitions, holding that the differential treatment and tax rates on raw hides and skins and dressed hides and skins are justified and do not violate any constitutional provisions. The court also directed the assessing authority to bear in mind the principles laid out in the judgment while disposing of the proceedings and to reassess at the instance of the assessee if necessary. There was no order as to costs.

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