1991 (2) TMI 389 - HC - VAT and Sales Tax

Issues Involved:

1. Whether dressed hides and skins and raw hides and skins are different commodities for the purposes of item (iii) of section 14 of the Central Sales Tax Act, 1956.
2. Applicability of section 5(3) of the Central Sales Tax Act to the petitioners' purchase of raw hides and skins.
3. Interpretation of section 14(iii) of the Central Sales Tax Act in light of previous Supreme Court decisions.
4. Validity of the provisions of the Karnataka Sales Tax Act, 1957, in relation to the Central Sales Tax Act.

Issue-wise Detailed Analysis:

1. Whether dressed hides and skins and raw hides and skins are different commodities for the purposes of item (iii) of section 14 of the Central Sales Tax Act, 1956:

The court examined whether raw hides and skins and dressed hides and skins are considered different commodities under item (iii) of section 14 of the Central Sales Tax Act, 1956. The petitioners argued that they are the same commodity, while the State contended they are commercially different. The court referred to the Supreme Court's decision in *State of Tamil Nadu v. Mahi Traders* [1989] 73 STC 228, where it was held that hides and skins, whether raw or dressed, fall under the same entry and are not different commodities. The court also noted that the Supreme Court's earlier decision in *Hajee Abdul Shukoor and Co. v. State of Madras* [1964] 15 STC 719, which treated raw and dressed hides and skins as different commodities, was in the context of State legislation and not applicable to the Central Act.

2. Applicability of section 5(3) of the Central Sales Tax Act to the petitioners' purchase of raw hides and skins:

The petitioners relied on section 5(3) of the Central Sales Tax Act, which extends benefits to two sales: the sale that occasions the export and a preceding sale made for complying with an export agreement. The petitioners argued that their purchase of raw hides and skins, which are processed into dressed hides and skins for export, should benefit from section 5(3). The court agreed, stating that the processes applied to raw hides and skins do not change their essential quality as hides and skins, thus making them eligible for the benefits under section 5(3).

3. Interpretation of section 14(iii) of the Central Sales Tax Act in light of previous Supreme Court decisions:

The court analyzed the interpretation of section 14(iii) of the Central Sales Tax Act, considering the Supreme Court's decisions in *Mahi Traders* and *Hajee Abdul Shukoor*. The court concluded that the phrase "hides and skins, whether in a raw or dressed state" in section 14(iii) is comprehensive and includes hides and skins in all states. The court emphasized that the processes undergone by hides and skins to become dressed do not change their classification under section 14(iii).

4. Validity of the provisions of the Karnataka Sales Tax Act, 1957, in relation to the Central Sales Tax Act:

The court declared that the provisions of the Karnataka Sales Tax Act, 1957, should yield to the Central Sales Tax Act on the questions involved. The court did not find it necessary to examine the validity of the State Act's provisions, as the Central Act takes precedence.

Conclusion:

The court declared that for the purposes of the Central Sales Tax Act, raw hides and skins and dressed hides and skins are the same goods. The provisions of the State Act should yield to the Central Act. The court allowed the writ petitions, set aside the impugned penalty orders, and directed the assessing authorities to reconsider the petitioners' cases in light of this decision. The court made no order as to costs.

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