1997 (11) TMI 489 - SC - VAT and Sales Tax

Whether the turn-over in respect of hides and skins which has once been subjected to tax under the Tamil Nadu General Sales Tax Act, on its purchase at the raw stage, could be taxed again on inter-state sales as tanned or dressed hides and skins? Held that - Appeal dismissed. Raw hides and skins and dressed hides and skins are two types of commodities, it must flow therefrom that when the appellants purchased raw hiides and skins on payment of tax they would be liable to pay sales tax in respect of dressed hides and skins and such levy will not fall foul of Section 15 as the two goods are different taxable commodities. In other words the same goods would not have been taxed more than once. In our opinion, therefore the High Court was right in coming to the conclusion which it did, namely, that the sales tax authorities could levy sales tax on the sale of dressed hides and skins and that the provisions of Section 3 of the Tamil Nadu General Sales Tax (3rd Amendment) Act, 1987 are not ultra vires.

Issues Involved:
1. Whether the turnover in respect of hides and skins taxed under the Tamil Nadu General Sales Tax Act at the raw stage can be taxed again on inter-state sales as tanned or dressed hides and skins.
2. Whether raw hides and skins and dressed hides and skins are considered the same commodity under Section 14(iii) of the Central Sales Tax Act.
3. Whether the provisions of Section 3 of the Tamil Nadu General Sales Tax (3rd Amendment) Act, 1987, are constitutionally valid.

Issue-wise Detailed Analysis:

1. Taxation on Inter-State Sales of Hides and Skins:
The appellants argued that hides and skins, whether raw or dressed, are declared goods under Section 14(iii) of the Central Sales Tax Act and should be treated as a single commodity. Section 15 of the Central Sales Tax Act stipulates that goods taxed once cannot be taxed again on inter-state sales. The assessing authority, however, contended that raw hides and skins are different commodities from dressed hides and skins, thus allowing for separate taxation. The High Court upheld this view, stating that the State had the legislative competence to tax dressed hides and skins even if raw hides and skins had already been taxed.

2. Classification of Raw and Dressed Hides and Skins:
The appellants maintained that raw hides and skins and dressed hides and skins are the same commodity, merely in different forms, and thus should not be taxed twice. They relied on various decisions, including State of Tamil Nadu Vs. Mahi Traders, which suggested that different forms of the same commodity should not be taxed multiple times. However, the Supreme Court referred to the Constitution Bench decision in Hajee Abdul Shakoor and Company Vs. State of Madras, which concluded that raw hides and skins and dressed hides and skins are distinct commodities. The Court held that the process of tanning transforms raw hides and skins into a different commodity, thus allowing for separate taxation.

3. Constitutional Validity of Tamil Nadu General Sales Tax (3rd Amendment) Act, 1987:
The appellants also challenged the constitutional validity of Section 3 of the Tamil Nadu General Sales Tax (3rd Amendment) Act, 1987. The High Court found no merit in this challenge, ruling that the State had the legislative competence to enact the provisions. The Supreme Court agreed, stating that the provisions of Section 3 of the Amendment Act are not ultra vires. The Court emphasized that the legislative intent was clear in treating raw and dressed hides and skins as separate commodities, and the statutory provisions were consistent with this interpretation.

Conclusion:
The Supreme Court upheld the High Court's decision, affirming that raw hides and skins and dressed hides and skins are distinct commodities and can be taxed separately. The provisions of the Tamil Nadu General Sales Tax (3rd Amendment) Act, 1987, were deemed constitutionally valid. The appeals were dismissed with no order as to costs.

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