1979 (11) TMI 251 - HC - VAT and Sales Tax

Issues Involved:
1. Interpretation of Section 15 of the Central Sales Tax Act, 1956.
2. Application of Section 4 and Entry 7 of the Second Schedule of the Tamil Nadu General Sales Tax Act, 1959.
3. Method of assessment for tax on raw and dressed hides and skins.
4. Relevance of previous court decisions on the assessment method.
5. Impact of the Supreme Court's decision in V. Guruviah Naidu and Sons v. State of Tamil Nadu on the assessment method.

Detailed Analysis:

1. Interpretation of Section 15 of the Central Sales Tax Act, 1956:
The judgment begins by referencing the Central Sales Tax Act, 1956, which formulates principles for determining the sale or purchase of goods in inter-State trade or commerce. Section 15 imposes restrictions on state laws taxing declared goods, stipulating that the tax should not exceed 4% and should not be levied at more than one stage. Additionally, if goods taxed within a state are sold in inter-State trade, the tax paid should be reimbursed.

2. Application of Section 4 and Entry 7 of the Second Schedule of the Tamil Nadu General Sales Tax Act, 1959:
Section 4 of the Tamil Nadu General Sales Tax Act, 1959, aligns with Section 15 of the Central Sales Tax Act, specifying that tax on declared goods within the state shall be at the rate and point specified in the Second Schedule. Entry 7 of the Second Schedule deals with hides and skins, imposing a 3% tax on raw hides and skins at the point of last purchase and a 1.5% tax on dressed hides and skins at the point of first sale, provided the raw hides were not previously taxed.

3. Method of Assessment for Tax on Raw and Dressed Hides and Skins:
The core issue is the method of assessment for dealers who purchase raw hides and skins, tan them, and sell them as dressed hides and skins within the state. The question is whether they should be taxed on the purchase turnover of raw hides and skins and again on the sales turnover of dressed hides and skins, or solely on the sales turnover of dressed hides and skins, with untanned raw hides taxed on the purchase turnover.

4. Relevance of Previous Court Decisions on the Assessment Method:
The assessees relied on a previous decision of the Madras High Court in L.M.S. Sadak Thamby & Co., which held that if raw hides and skins purchased during the year were dressed and sold within the same year, only the dressed hides and skins should be taxed on the sales turnover. The decision suggested that the assessing officer should revise the assessment at the end of the year, taxing raw hides and skins still in stock under entry 7(a) and dressed hides and skins sold during the year under entry 7(b).

5. Impact of the Supreme Court's Decision in V. Guruviah Naidu and Sons v. State of Tamil Nadu on the Assessment Method:
The Tribunal and the High Court held that the Supreme Court's decision in V. Guruviah Naidu and Sons v. State of Tamil Nadu overruled the Madras High Court's previous decision. The Supreme Court clarified that the scheme of items 7(a) and 7(b) of the Second Schedule to the State Act was not discriminatory. It stated that raw hides and skins purchased locally should be taxed at 3%, and if tanned and sold as dressed hides and skins, they would not be taxed again. However, hides and skins imported from other states and sold as dressed hides and skins would be taxed at 1.5% of the first sale in the state. This decision constituted a complete code on the scope of entries 7(a) and 7(b).

Conclusion:
The High Court concluded that the Tribunal correctly held that the Supreme Court's decision in V. Guruviah Naidu and Sons v. State of Tamil Nadu overruled the Madras High Court's earlier decision in L.M.S. Sadak Thamby & Co. Consequently, the method of assessment should follow the Supreme Court's interpretation, taxing raw hides and skins on the purchase turnover and dressed hides and skins on the sales turnover, provided the raw hides and skins were not taxed earlier. The tax revision petitions were dismissed, with no order as to costs.

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