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TMI Blog1968 (3) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... specified the single point at which purchases and sales of raw hides or dressed hides as the case may be, were chargeable to tax under section 3 read with section 5-A(iv) of the Madras General Sales Tax Act, 1939. Under sub-rule (1) raw hides and skins were taxable at the point of the last purchase in the State on the amount for which the said purchases were made. Hides and skins dressed outside the State were by sub-rule (2)(i) charged at the point of first sale in the State on the sale amount. The point of charge was the same for sale of hides and skins dressed in the State but there would be no liability on the first dealer if he proved that the raw hides and skins before they were dressed had suffered tax at the point of the last purchase. The liability to tax in any of these cases was of course subject to the exemption under section 3(3). The assessees were all charged to tax under sub-rule (2)(ii) for the relevant years. On 22nd November, 1962, the Supreme Court in Firm A.T.B. Mehtab Majid Co. v. State of Madras[1963] 14 S.T.C. 355. struck down sub-rule (2) as invalid on the ground that it discriminated between hides and skins imported from outside the State and those manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essed hides and skins not subject to tax at their raw stage at the rate of two per cent. of the amount for which such hides and skins were last purchased in the untanned condition. This section again was the subject-matter of attack in Hajee Abdul Shukoor Co. v. State of Madras[1964] 15 S.T.C. 719.The Supreme Court held that the sub-section was invalid as violating Article 304(a), this time on the ground that the rate of tax on the sale of tanned hides and skins was higher than that on the sale of untanned hides and skins. Persons who had purchased raw hides and skins during the period in the Madras State were subjected to tax at three pies per rupee but persons who had purchased raw hides and skins from outside the State and were liable to tax on the first sales of dressed hides and skins paid a higher rate of two per cent. on their purchase turnover of the corresponding raw hides. The difference in rate was thus held to be discriminatory and violative of Article 304 of the Constitution. To rectify the position, the State Legislature enacted the Madras General Sales Tax (Special Provisions) Act, 1964. By section 2(1) of this Act, the rate for the period between 1st April, 1957 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of the price or consideration for the last outside or inter-State purchase of untanned hides and skins which after tanning in the State formed the subject-matter of the first local sale. The revenue urges that the effect is not to charge outside or inter-State purchase but the first local sale and that only the amount of tax payable on the first sale is computed on the basis of the turnover of the outside or inter-State purchase. We have no hesitation in rejecting this view. It is not the form but the substance and effect of the incidence of tax that should be regarded in judging the validity of the provision in the context of the bans imposed by Article 286. Obviously the Legislature cannot do indirectly what it is forbidden to do directly. In our opinion, notwithstanding the apparent levy of tax on the first local sale, it is in substance and effect a tax on the outside or inter-State purchase and the aggregation of its consideration is not merely a measure. The last outside or inter-State purchase is normally a separate and different transaction and the amount of the consideration therefore is as much an integral part of it and not that of the first sale in the State by any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance of rebate of tax proportionate to the difference in rates to equalise the inter and intra-State burden of tax. Section 2(1) of the 1964 Act as it stands ostensibly applies the rate to sale turnover but factually and in substance brings to charge the turnover of outside or inter-State purchase. To our minds, it is impossible to deny such an impost directly impinges on the outside or inter-State sale which the State is inhibited from taxing. On this view it is needless to approach the question from the standpoint of entry 54 of the Legislative List as to whether the incidence of tax on one transaction of sale or purchase while the legislative intent is to lay it on another transaction is authorised by the entry, whatever be the scope of entry 54 on that matter, after the Sixth Amendment of the power to tax inter-State sales has been shifted from the State to the Centre by entry 92-A in the Union List; and here the transaction of purchase of untanned hides and skins was either an inter-State purchase or an outside purchase. We hold, therefore, that section 2(1) of the Madras General Sales Tax (Special Provisions) Act, 1964, offends Article 286 of the Constitution and is void ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des and skins. That again is not correct, because rule 16 does charge the purchase turnover and that is also indicated by the first part of subsection (1) of section 2 of the 1964 Act. We, however, agree with the contention that this Act is not a validation Act in the sense that it regularises the orders which are illegal when they were passed. What the Act is intended to achieve is to authorise reassessment under its provisions read with the main Act of dealers who had been assessed but under an invalid provision. The last contention is urged in a different form and it is said that the 1964 Act discriminates between raw hides and skins purchased locally, tanned and sold on the one hand and raw hides and skins purchased outside the State, imported into the State, tanned and sold locally on the other. This is on the assumption that under this Act, the raw hides and skins had not suffered any tax. The point is developed thus. On 10th June, 1963, the Governor promulgated the Madras General Sales Tax (Special Provisions) Ordinance, 1963, which was replaced by Madras Act No. 11 of 1963. Section 2(1) of the Ordinance made special provisions in respect of tax on sale of hides and skins. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in sub-section (1)", and authority had been given to the concerned officers to assess or reassess in the Ordinance and the 1963 Act and to reassess in the 1964 Act. In our opinion, the scope and effect of the 1964 Act is to revive sub-rule (1) of rule 16, for, it says that subject to sub-section (1), the 1939 Act and the Rules made thereunder shall be deemed to be in force. But the submission for the assessees is that it is not open to the Legislature to revive or keep in force in that manner sub-rule (1) of rule 16 without re-enactment. It is said that subrule (1) of rule 16 was not alive by reason of the Ordinance and if that be so, it could not be taken to be in force by reason of section 2 of Madras Act No. 37 of 1964. No direct authority has been cited in support of the proposition and we do not think Haji J.A. Kareem Sait v. Deputy Commercial Tax Officer[1966] 18 S.T.C. 370., Venkatachalam v. Bombay Dyeing and Manufacturing Co., Ltd.[1958] 34 I.T.R. 143., Emperor v. DantesA.I.R. 1940 Bom. 307. and Krishnaraju Reddiar v. Authorised Officer, Land Reforms, Vellore(1967) 1 M.L.J. 179., are of much assistance in deciding the point. In our opinion, it is too broad and general a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reassess in view of rule 17(3-A) of the Madras General Sales Tax Rules, 1939. That rule says that the powers of reopening an order in relation to escaped assessment can be exercised by the appellate authority within a period of five years from the end of the accounting year. Where the appellate authority has passed an order under section 11 or 12 of the 1939 Act, the assessing authority should report to such authority as the case may be which shall deal with the escaped assessment in accordance with the prescribed procedure. So far as limitation is concerned, subsection (2) of section 2 of the 1964 Act clearly lifts it. On the other aspect in the context of rule 17(1-A) and (3-A), we think that in view of the non obstante clause with which sub-section (1) of section 2 of the 1964 Act opens, the provisions of this Act are overriding. It is, therefore, competent for the assessing authority to proceed with reassessment. This is also indicated by sub-section (2) of section 2 and the requirement of subsection (3) of that section that every dealer within a specified time should submit a return relating to his turnover to the authority or officer concerned for reassessment under. the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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