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TMI Blog1965 (3) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... t, there was a remand of the case to the Tribunal. Before the Tribunal, various contentions were advanced. It was urged that the assessment is wholly invalid as the petitioners, being non-licensees, had effected sales to licensed dealers, and that unless both the seller and the purchaser are licensed dealers, the relevant taxing provision will not apply. It was also contended that the petitioners had applied for licences both under section 5 and section 8, and having satisfied all the requisite conditions, they should not be taxed, though their applications had not been complied with. The third contention was that in so far as the resident principals are concerned they were all licensees who had paid the tax and, therefore, the petitioners, though non-licensees, could not be taxed once again in respect of the same transactions. These contentions failed before the Tribunal. The petitioners have now filed this revision petition challenging the order of the Tribunal. The contention advanced here in this regard is that rule 16 cannot be applied to this case. Reliance was principally placed upon the fact that rule 16(2)(ii) of the Turnover and Assessment Rules, as amended in 1955, had b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d dealer except at the stage where such hides and skins are sold to a tanner in the State, or are sold for export outside the State. The subsequent parts of the rule specified the person liable to tax in the case of either of those transactions and the amount on which the tax is to be levied. In the case of sales by licensed dealers of hides and skins which had been tanned within the State, their sales were made exempt from taxation provided the hides and skins had been tanned in a tannery which had paid the tax leviable under the Act, that is to say, on the amount for which they had been bought by the tanner. In the case of sales of hides and skins which had been tanned outside the State or had been tanned in a tannery which is exempt under section 3(3) such sales were exempt from tax except at the stage of sale by the dealer who is the first dealer who sells them within the State, and in such an event the tax was made leviable on the amount for which he sells such hides and skins. These goods were also governed by the general exemption, that is to say, no dealer whose turnover was not above a particular figure was liable to pay tax. It would be noticed from the above set of rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on the total turnover of a dealer, but in the case of certain specified articles, a departure has been made and tax at a single point is leviable, provided certain conditions and restrictions as to licences, which are envisaged in section 5 and laid down in the rules, are complied with, and that rule 16(5) of the Turnover and Assessment Rules is not ultra vires of the Act. But, before this sub-rule (5) was rehabilitated by this decision, the State of Madras had deleted that sub-rule by G.O. No. 450, Revenue, dated 26th February, 1954. The remaining sub-rules were also amended by G.O. No. 2733, Revenue, dated 3rd September, 1955, and these rules came into force on the 1st April, 1955. For the assessment years which we are concerned with in these cases, the effect of the relevant rule was that in the case of hides and skins which were not tanned within the State, the tax not being leviable from the tanner who purchased them, the sale of the tanned hides was made taxable by the first dealer in the State not exempt from taxation under section 3(3). 5.. It is common ground that the relevant rule of the Madras General Sales Tax Rules made it compulsory on all dealers in hides and skin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.T.B. Mehtab Majid & Co. v. The State of Madras[1963] 14 S.T.C. 355. Their Lordships considered the previous decisions bearing on the scope of Articles 301 and 304 and made particular reference to Atiabari Tea Company Limited v. State of Assam[1961] 1 S.C.R. 809. and Automobile Transport (Rajasthan) v. State of RajasthanA.I.R. 1962 S.C. 1406. They drew a distinction between regulatory measures and compensatory taxes which do not impede the freedom of trade, commerce and intercourse, on the one hand, and taxes which have the effect of discriminating between goods of one State and goods of another, on the other. They observe at page 360 (14 S.T.C. 355): "Article 304(a) enables the Legislature of a State to make laws affecting trade, commerce and intercourse. It enables the imposition of taxes on goods from other States if similar goods in the State are subjected to similar taxes, so as not to discriminate between the goods manufactured or produced in that State and the goods which are imported from other States. This means that if the effect of the sales tax on tanned hides or skins imported from outside is that the latter becomes subject to a higher tax by the application of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x on the sale price of the tanned hides or skins. He too will have to pay more for tax even though the hides and skins are tanned within the State, merely on account of his having imported the hides and skins from outside, and having not therefore paid any tax under sub-rule (1). It is true that dealers, though few, selling hides and skins which had been tanned within the State, will also have to pay similar tax if no tax had been paid previously, they having not purchased the raw hides and skins at all as they were from the carcasses of animals owned by them; but this does not affect the discriminatory nature of the tax as already indicated." It was accordingly held that such a provision as indicated above was discriminatory in its nature and contravened Article 304(a) of the Constitution. Their Lordships also repelled the further contention of the State that hides and skins which had been tanned within the State and on which tax had been paid earlier in their raw condition should be regarded as goods different from hides and skins which had been tanned outside the State. They point out that at the time of the sale of those hides and skins, there was no difference between them as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat contention. On appeal by the State, their Lordships of the Supreme Court pointed out that though the tax was laid on the incidence of sale in Madhya Bharat and not on the import itself, imported tobacco was subjected to a tax while the local tobacco was free of it; the trade and commerce between Madhya Bharat and the other parts of India was directly impeded by the tax and it was, therefore, in contravention of Article 304(a). It is not necessary to refer to the further details of that decision. 10. Mr. Ramanujam, for the department, argues that since the petitioners in these cases are unlicensed dealers, the taxation in their cases is not under the rule but is the direct result of section 3 of the Act read with rule 4 of the Turnover and Assessment Rules. Section 3 is the general charging section. It has already been pointed out that the liability to tax on an unlicensed dealer at more than one point even in respect of goods for which a single point has been specified is dependent upon the compliance with certain conditions, one of such conditions being the taking out of a licence under section 5 of the Act. The Supreme Court in the decision referred to earlier, State of Mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the taint of discrimination is not attracted in these cases. 11.. Mr. Ramanujam, for the State, refers to the State of Madhya Pradesh v. Abdeali[1962] 13 S.T.C. 931., and suggest that the Madhya Bharat decision referred to cannot be said to have been rightly decided, in the light of the observations of the Supreme Court in the above decision. In this case, a dealer who carried on the business of importing and selling defferent types of footwear in the State of Madhya Pradesh was assessed to sales tax. Under the relevant provisions of the State's tax law, the State granted an exemption in respect of certain sales of footwear, that is to say, in the case of sale by the manufacturer or any member of his family, the sale being of shoes, chappals, country shoes and footwear which were hand-made and which were not manufactured on power machine and whose sale price did not exceed Rs. 12-8-0. It would be noticed that the notification made no distinction between locally manufactured goods or goods imported from outside the State and the dealer relied upon this notification in exemption of his sales. The High Court quashed the assessment on the ground that the notification had to be read i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tanned hides and skins at the rates which were prevalent during the three assessment years in question, 1955-56, 1956-57 and 1958-59. In that case also, the validity of rule 16 in so far as it contravened Article 304 of the Constitution was challenged. It would appear that following the decision of the Supreme Court in Firm A.T.B. Mehtab Majid and Company v. State of Madras[1963] 14 S.T.C. 355., the Government of Madras promulgated an Ordinance, No. III of 1963. In due course, this Ordinance was followed by Act XI of 1963. Section 2(1) of the Act laid down that in respect of the sale of dressed hides and skins during the period 1st April, 1955, and 31st March, 1959, which were not subjected to tax as raw hides and skins, the tax shall be levied from the dealer, who in the State is the first dealer in such hides and skins at the rate of 2 per cent. on the amount for which such skins were last purchased in the untanned condition. The contention was that persons who had purchased raw hides and skins in 1955-56 Since reported at [1964] 15 S.T.C. 719. and 1956-57 paid tax at 3 pies per rupee and paid no further tax when those hides and skins after being tanned were sold. Those who purc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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