2008 (10) TMI 603 - HC - VAT and Sales Tax

Raw hides and skins - entitlement to exemption - Held that - The law is that raw hides and skins and dressed hides and skins are different taxable commodities, notwithstanding the fact that they figure in section 14(iii) under one entry as hides and skins whether in a raw or dressed state . The mere fact that they figure in one entry cannot be taken advantage of by the assessee. The 1999 letter shows that the Deputy Commissioners have been requested to instruct the assessing officer not to take coercive action on the demands already raised in cases of purchase of raw hides and skins against specific orders of export until final orders are received from Government for waiver to the period up to November 30, 1997. The present case is one which arose before November 30, 1997 and if the assessing officers have been instructed to comply with these instructions and they have been doing so, they may consider extending the same indulgence to the appellant herein, if they so apply.

Issues Involved:
1. Eligibility for exemption under section 5(3) of the Central Sales Tax Act.
2. Distinction between raw hides and skins and dressed hides and skins as taxable commodities.
3. Applicability of circulars and their binding nature on the Revenue.
4. Judicial precedents and their applicability to the case.

Detailed Analysis:

1. Eligibility for Exemption under Section 5(3) of the Central Sales Tax Act:
The assessee claimed exemption for their turnover based on the precedent set in T. Azeezur Rahman and Company v. State of Tamil Nadu [1991] 82 STC 355 (Mad). The appellate authority initially accepted this claim, but the Sales Tax Tribunal later rejected it, citing K.A.K. Anwar & Co. v. State of Tamil Nadu [1998] 108 STC 258. The Tribunal held that "dressed hides and skins are goods different from raw hides and skins," thus disqualifying the claim under section 5(3). The appellant argued that their case should be considered under section 5(1) of the Central Sales Tax Act, as they only purchase raw hides and export finished goods. However, the court reaffirmed that the exemption could only be claimed under section 5(3), as the goods undergo transformation from raw hides to dressed hides before export.

2. Distinction Between Raw Hides and Skins and Dressed Hides and Skins as Taxable Commodities:
The court examined various judgments to determine whether raw hides and skins and dressed hides and skins should be treated as the same commodity for tax purposes. In A. Hajee Abdul Shukoor and Co. v. State of Madras [1964] 15 STC 719 (SC), the Supreme Court held that raw hides and skins and dressed hides and skins are distinct commodities. This distinction was further upheld in K.A.K. Anwar & Co. v. State of Tamil Nadu [1998] 108 STC 258 (SC) and Shafeeq Shameel and Company v. Asst. Commissioner, Commercial Taxes [2003] 129 STC 1 (SC). The court concluded that the two are different taxable commodities, thus rejecting the appellant's claim for exemption.

3. Applicability of Circulars and Their Binding Nature on the Revenue:
The appellant referred to specific circulars (D. Dis/Acts Cell III/129820/98 dated July 18, 1994, and K. Dis. Acts. Cell V/102966/91 dated June 19, 1992) which suggested that raw hides and skins and dressed hides and skins should be treated as the same commodity. However, the court noted that these circulars were issued before the Supreme Court's ruling in K.A.K. Anwar & Co. and thus could not override the judicial precedent. The court also cited several judgments (e.g., Commissioner of Customs v. Indian Oil Corporation Ltd. [2006] 144 STC 146) affirming that while circulars are binding on the Revenue, they do not bind the court or the assessee.

4. Judicial Precedents and Their Applicability to the Case:
The court reviewed multiple judgments to address the appellant's arguments. In T. Azeezur Rahman and Company v. State of Tamil Nadu [1991] 82 STC 355 (Mad), the court initially supported the exemption under section 5(3). However, subsequent judgments, including K.A.K. Anwar & Co. v. State of Tamil Nadu [1998] 108 STC 258 (SC) and Shafeeq Shameel and Company v. Asst. Commissioner, Commercial Taxes [2003] 129 STC 1 (SC), clarified that raw hides and skins and dressed hides and skins are different commodities. The court emphasized that the latest judgment of the Supreme Court on the issue would apply, thus dismissing the appellant's case.

Conclusion:
The court dismissed the tax appeal, holding that raw hides and skins and dressed hides and skins are distinct taxable commodities. The appellant's claim for exemption under section 5(3) of the Central Sales Tax Act was rejected based on the judicial precedents set by the Supreme Court. The circulars cited by the appellant were deemed non-binding in light of the authoritative judicial rulings.

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