1969 (1) TMI 55 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of Entry 9 of Schedule III of the State Act vis-`a-vis Section 15(a) of the Central Act
2. Discriminatory Classification of Dealers under Article 14 and Article 304 of the Constitution
3. Validity of G.O. Ms. No. 1094 and Rule 27-A under Section 15(b) of the Central Act

Detailed Analysis:

1. Validity of Entry 9 of Schedule III of the State Act vis-`a-vis Section 15(a) of the Central Act:
The petitioners contended that Entry 9 of Schedule III, which classifies hides and skins into untanned and tanned categories, contravenes Section 15(a) of the Central Act. They argued that the Central Act treats "hides and skins, whether in a raw or dressed state" as one category, and the State Act's classification leads to multiple taxation points, which is ultra vires.

The Court rejected this contention, stating that the classification into tanned and untanned hides and skins is rational and reasonable. The Supreme Court's decision in Hajee Abdul Shukoor & Co. v. State of Madras was cited, where it was held that raw and dressed hides and skins are different commodities. Thus, the State Act's classification does not contravene Section 15(a) of the Central Act.

The Court also addressed the precision of the taxable point in Entry 9(a) and (b). It held that the terms "when purchased by a tanner" and "when purchased by a manufacturer" are not vague and refer to the first purchase by a tanner or manufacturer in the State. The rules under the State Act provide a clear procedure for determining whether goods have already suffered tax, thus ensuring no ambiguity in the point of levy.

2. Discriminatory Classification of Dealers under Article 14 and Article 304 of the Constitution:
The petitioners argued that the classification of dealers into tanners, manufacturers, and last dealers is discriminatory and offends Article 14 of the Constitution. They claimed that this classification leads to an uneven tax burden, as tanned goods are more expensive than untanned goods, resulting in higher taxes for dealers in tanned goods.

The Court dismissed this argument, stating that tanned and untanned hides and skins are different commodities and can be treated differently for tax purposes. The classification is based on reasonable grounds, considering the different types of dealers and the varying values of the goods. The Court held that the classification does not violate Article 14, as it is based on a reasonable relation to the statutory objective of levying and collecting sales tax.

The Court also addressed the contention that Entry 9(b) violates Article 304 of the Constitution. It found this argument irrelevant as none of the petitioners were taxed under Entry 9(b), and they were not manufacturers importing tanned goods into the State.

3. Validity of G.O. Ms. No. 1094 and Rule 27-A under Section 15(b) of the Central Act:
The petitioners challenged the validity of G.O. Ms. No. 1094 and Rule 27-A, arguing that they are ultra vires the powers of the State Government and conflict with Section 15(b) of the Central Act. They contended that the G.O. and Rule 27-A impose unreasonable conditions on their right to claim refunds.

The Court upheld this contention, stating that Section 15(b) of the Central Act grants an unconditional right to a refund when goods are sold in the course of inter-State trade. The G.O. and Rule 27-A, which impose additional conditions, are invalid. The Court noted that the petitioners, being last purchasers in the State who sold goods in inter-State trade, are entitled to refunds without being subject to the conditions imposed by the G.O. and Rule 27-A.

The Court directed the respondents to entertain the petitioners' applications for refunds and dispose of them according to the provisions of Section 15(b) of the Central Act and the proviso to Section 6 of the State Act, without reference to G.O. Ms. No. 1094.

Conclusion:
The Court allowed the writ petitions, directing the respondents to process the refund applications as per the Central and State Acts, and declared the impugned G.O. and Rule 27-A invalid to the extent they imposed additional conditions on the right to refunds. No costs were awarded.