1971 (11) TMI 156 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of turnover regarding purchases and sales of raw hides and skins for exemption claimed during three assessment years 1964-65, 1965-66, and 1966-67.

Detailed Analysis:
The case involved an assessee, a firm engaged in the business of raw hides and skins, bones, and horns, with a tannery where hides and skins are tanned and exported. The firm claimed exemption from tax as they were not the last dealers in the State based on the Andhra Pradesh Sales Tax Act. The Commercial Tax Officer initially granted the exemption, but the Deputy Commissioner, in revision, withdrew the exemption, considering the purchases liable for tax as they were made by a tanner. The Sales Tax Appellate Tribunal upheld this decision, rejecting the assessee's contention that they had closed the tannery and should not be treated as a tanner. The Tribunal subjected all exempted turnovers to tax, leading to the petitions before the High Court.

A previous Division Bench judgment highlighted that once untanned hides and skins are purchased by a tanner, they become taxable, regardless of subsequent sale as untanned products. The Supreme Court also affirmed a similar principle in a different case involving groundnuts. However, the assessee argued that they engaged in separate businesses of purchasing and selling raw hides and skins, distinct from tanning activities. They maintained separate accounts and registrations for these businesses, claiming that not all purchases were meant for tanning. The High Court emphasized that the assessment should consider the circumstances of each case to determine if purchases were solely for tanning or part of independent dealings in hides and skins sales.

Furthermore, the assessee contended that they ceased tanning operations on a specific date, implying that subsequent purchases were not as a tanner but as a dealer. The Tribunal, however, rejected this claim based on sales data and lack of tanning activities during the period. The High Court directed a fresh assessment by the Deputy Commissioner, instructing a thorough examination of the contentions raised by the assessee, including the cessation of tanning operations and the nature of purchases and sales of hides and skins. The Court set aside the Tribunal's orders subjecting turnovers to tax and remanded the case for further review, without imposing costs but specifying advocate fees.

In conclusion, the High Court's judgment focused on the distinction between purchases for tanning and independent sales activities, emphasizing the need for a case-specific assessment to determine tax liability on raw hides and skins transactions, considering the tanning operations and cessation of such activities by the assessee.