1971 (3) TMI 91 - HC - VAT and Sales Tax

Summary

Issues:
Validity of item 7(a) and (b) in the Second Schedule to the Madras General Sales Tax Act, 1959.

Analysis:
The judgment concerns the validity of item 7(a) and (b) in the Second Schedule to the Madras General Sales Tax Act, 1959. The petitioners, dealers in hides and skins, challenged the assessment of their turnover for the year 1968-69, focusing on local and inter-State purchases of raw hides and skins, and sales of tanned hides and skins. The assessing authority estimated the value of raw goods used in exported tanned hides and skins due to lack of specific accounts. The petitioners argued that sections charging inter-State sales were invalid and that item 7(b) violated the Constitution's Article 304(a), rendering clause (a) of item 7 inseverable. The court rejected the contention that inter-State sales were equated to inside sales, emphasizing that the Act did not charge inter-State sales.

The petitioners contended that the taxation scheme discriminated against sales of dressed hides and skins made from imported raw materials compared to those made from locally purchased raw materials. They argued that this discrimination contravened Article 304(a) by imposing differential taxes on similar goods. The court analyzed the restrictions imposed by Article 304(a) on State legislatures regarding taxation of imported goods compared to locally produced goods. The court highlighted the limitations on State taxation of declared goods, emphasizing that tax could be levied at only one stage in a series of transactions.

The court further examined whether the taxation scheme resulted in discrimination as alleged by the petitioners. Referring to previous judgments, the court emphasized that hides and skins, whether raw or dressed, could only be taxed at one stage due to the restrictions under the Central Sales Tax Act. The court concluded that the taxation scheme did not discriminate between imported and locally produced goods in violation of Article 304(a).

Additionally, the court addressed the petitioners' argument regarding the assessing authority's estimation of turnover for raw hides used in tanned hides and skins. The court held that if the assessee failed to establish the specific raw hides used, the authority could use its judgment to estimate the turnover. The court dismissed the petitions, directing the petitioners to raise remaining points before the appellate authority rather than seeking remedies directly under Article 226 of the Constitution.

In summary, the court upheld the validity of item 7(a) and (b) in the Second Schedule to the Madras General Sales Tax Act, 1959, rejecting the petitioners' arguments of discrimination and invalidity based on constitutional provisions and previous judgments. The court emphasized the restrictions on State taxation of declared goods and the limitations on levying tax at multiple stages in a series of transactions. The court also addressed the assessing authority's estimation of turnover for raw hides and skins, emphasizing the requirement for the assessee to establish specific details and allowing the authority to use its judgment in the absence of such evidence.