9911796707
TMI Blog1969 (4) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... nned state, have been declared to be goods of special importance under section 14 of the Central Sales Tax Act. Article 286(3) of the Constitution of India envisages that any law of a State in so far as it imposes or authorises the imposition of tax on the sale or purchase of declared goods shall be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify. Section 15, while enumerating such condition or restriction referred to in Article 286(3) of the Constitution, authorises the State to levy such tax provided it shall not exceed two per cent. of the sale or purchase price thereof, and such tax shall not be levied at more than one stage. In the present situation, however, it is three per cent. Following up the embargo imposed both under the Constitution and by the specific provisions referred to above under the Central Sales Tax Act, 1956, the Madras General Sales Tax Act, 1959, in section 4 thereto, provides: "Notwithstanding anything contained in section 3, the tax under this Act shall be payable by a dealer on the sale or purchase inside the State of declared goods at the rate and only a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of such goods is by itself a classification without substance and savours of arbitrariness. It is also urged that the difference between the value of the raw commodity and the tanned commodity is only about 30 per cent. and hence the rate of taxation is disproportionate and hence discriminatory and void. Expatiating this contention it is stated that a higher amount of tax is imposed in the case of raw hides at 2 per cent. or 3 per cent., as the case may be, as compared to the lesser amount of tax imposed in the dressed state at 1 per cent. or 1 per cent., as the case may be. This is said to be violative of Article 301 of the Constitution. Article 14 of the Constitution is also invoked to sustain the contention that dealers in raw hides and skins and dressed hides and skins being alike, any imposition resulting in an unequal burden is violative of the said article. The petitioner submits that such unjustified and discriminatory taxation offends the right of the petitioner to purchase and sell tanned skins processed by him from raw skins purchased within the State and carry on his trade in the said commodity within the State on his paying tax which is not imposed on similar tan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of dressed hides and skins is double that involved in the case of raw hides and skins. Answering the contention that the levy and the rates imposed violate either Article 301 or Article 304, the revenue's case is that Article 304 has no reference to sales tax legislation and no question of violation of Article 301 arises in the instant cases. Tanned hides and skins, once they are tanned and visibly available in the taxing State, there would be no limitation on the powers of the State to tax a sale of such goods found within its jurisdiction. The tax imposed not being a tax on the movement of goods and not even reflective of any intention to impose a restriction on freedom of trade in the territory of India, no question of violation of Article 304 or Article 301 would arise. The State Legislature derives the power to levy tax on the sale of goods of whatever kind under Article 246 of the Constitution of India read with entry 54, List II, of the State List to the Seventh Schedule, and not by virtue of either section 14 or section 15 of the Central Sales Tax Act which obviously lay down only certain restrictions and conditions in the exercise of that power. Lastly it is stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and skins are sold by him. In another clause under the same rule and dealing with the sale of tanned hides and skins which have been tanned within the State, the tax was levied from the person who is the first dealer in such hides and skins and was levied on the amount for which they are sold. The proviso to the rule, however, was to the effect that if the dealer of hides and skins which had been tanned within the State proves that tax had already been levied on those hides and skins in their raw condition, he will not be liable to tax under one or the other of the clauses referred to above. In those circumstances, the Supreme Court, while upholding the contention of the petitioner that the rule offended Article 304(a) of the Constitution, observed: "If the dealer has purchased the raw hide or skin in the State, he does not pay on the sale price of the tanned hides or skins; he pays on the purchase price only. If the dealer purchases raw hides or skins from outside the State and tans them within the State, he will be liable to pay sales tax 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the amount for which the corresponding untanned goods were last purchased outside the State or in the course of inter-State trade, commerce and intercourse." It is in the background of this course of litigation that the present writ petitions have been filed. We may at once dispose of the contentions of the petitioners that the scheme as envisaged in the Second Schedule to the Madras Act in so far as it relates to item 7 thereto offends either Article 301 or Article 304 of the Constitution. In our view, Article 304 cannot be invoked. There is no inhibition in the matter of inter-State movement of the goods which are the subject-matter of sales tax under the relevant items as above. Article 301 guarantees in general freedom of trade and commerce throughout the territory of India. A fair reading of the provisions of the Madras Act with particular reference to item 7 of the Second Schedule cannot lead to the inference that trade, commerce and intercourse which ought to be free throughout the territory of India is in any way impeded by working the taxing provisions as above and in relation to hides and skins. We are not impressed with the argument that the scheme of taxation as ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des and skins, whether dressed or raw, as a single commodity......................................................Since skins, tanned or untanned, constitute only one class of goods, and the sale of that class of goods can be taxed only at a single point, obviously there can be no tax on a sale of tanned goods, if tax has already been paid on an earlier transaction when those skins were untanned." Said the Supreme Court while considering the above observation of this court: "No reason is given why the two kinds of hides and skins are treated as a single commodity." The Supreme Court proceeded to observe as follows: "The fact that certain articles are mentioned under the same heading in a statute or the Constitution does not mean that they all constitute one commodity. The inclusion of several articles under the same heading may be for a reason other than that the articles constitute one and the same thing. In this connection we may refer to the Madras General Sales Tax Act, 1959. Section 4 of this Act provides that the sales tax on the sale or purchase of declared goods will be payable at the rate and only at the point specified against each article in the Second Schedule. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the local Legislatures is to treat both the commodities as one and similar. Our conclusion is that raw hides and skins and dressed hides and skins are distinct and dissimilar commodities. If therefore raw hides and skins are different from dressed hides and skins, and in consequence they are distinct commodities, then ordinarily no question of discrimination can arise, while such goods are meted out with differential treatment by a fiscal law. It would therefore normally follow that the patent distinction so maintained by the Madras Act in item 7 of the Second Schedule thereto, is quite justified. The argument however is that because of the differential rate of levy of sales tax on those commodities, though distinct, results in discrimination. Discrimination in the abstract is unknown and it always rests on proved facts and accepted details. Such details were called for in the course of the hearing, and statements were filed by both sides in support of their respective pleas. Whereas the petitioners would urge that the imbalance in rate is not commensurate with the proportion of the sale price of the two commodities, the revenue's case is that the differential rate is well fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho were consulted before the rate of tax was fixed under the Madras Act, become relevant and are instructive. Dr. P.S. Loganathan, the then Director-General, National Council of Applied Economics Research, New Delhi, was requested to submit a report on the simplification and improvement of the sales tax system in Madras. In his report, and dealing with declared goods, he recommended a rate of 2 per cent. on raw skins and a rate of 1 per cent. on the last sale of dressed skins. These recommendations were considered by the Select Committee which took up for consideration the Madras Sales Tax Bill, 1958, the forerunner to the present Act. Before the Select Committee, the Tamil Chamber of Commerce and the Southern India Chamber of Commerce made representations. The substance of the memorandum so submitted by the Chambers of Commerce was that a maximum levy of 1 per cent. on the purchase of raw hides and skins and per cent. in respect of sales of dressed hides and skins was apparently felt to be justified, adequate and satisfactory to the trade. It is after taking into consideration the expert report and the representations of the trade, that the Legislature after duly applying its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be taxed at the purchase stage and dressed hides and skins are to be taxed at the sale level. But in the latter case, if such goods have suffered tax in the State as raw hides and skins, then a relief is given in the matter of rate commensurate with the material placed before the Legislature and made available by the Chambers of Commerce and such other details. Such an analysis as above on the contentions raised leads on to a practical aspect. Dealers in hides and skins have, like others, the option to file monthly returns and such a method of self-assessment though acted upon is obviously an interim measure. The revenue ultimately is obliged and has indeed the right at the end of the accounting year to finally bring to tax the transactions of a particular dealer concerned in a manner known to law. If at that particular point of time the dealer establishes that the raw hides and skins purchased by him during the accounting year were dressed and sold by him before the end of the accounting year, then the officer has no option except to tax the dressed skins on the sale point. Undue reliance cannot be placed upon the monthly returns, though they are operative as self-assessments ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
