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TMI Blog1993 (4) TMI 288X X X X Extracts X X X X X X X X Extracts X X X X ..... arned counsel appearing for the various petitioners refrained from referring to any factual details relating to an individual assessee or the nature of transactions that are sought to be subjected to tax in individual cases by invoking the impugned provisions of the State Act, though in some of the affidavits we find claims having been made about the character and identity of the goods, hides and skins at raw and dressed stage. 2.. To appreciate the points raised as well as to understand the changes brought about by the impugned provisions of the Act, a bird's eye view of the salient features of the scheme underlying the provisions prior to, on account of and after the impugned Act, may be usefully referred to. Even under the provisions of the Tamil Nadu General Sales Tax Act, 1939 and the Rules made thereunder the commodity "hides and skins" had been classified as "raw hides and skins" and "dressed hides and skins" and were subjected to levy alternatively in that levying tax primarily at the raw stage and resorting to levy of tax at the dressed stage only in cases where the hides and skins concerned were not subjected to tax as raw hides and skins. Volume of case law has grown o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the tax as Parliament may by law specify." 4.. Section 14 of the Central Act, in so far as it is relevant for the purpose of these cases, is as hereunder: "14. Certain goods to be of special importance in inter-State trade or commerce.-It is hereby declared that the following goods are of special importance in inter-State trade or commerce: ........................ (iii) hides and skins, whether in a raw or dressed state." Section 15, which is relevant for considering the challenge before us, reads as follows: "Section 15. Restrictions and conditions in regard to tax on sale or purchase of declared goods within a State.-Every sales tax law of a State shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely: (a) the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed four per cent of the sale or purchase price thereof, and such tax shall not be levied at more than one stage; (b) where a tax has been levied under that law in respect of the sale or purchase inside the State of any declared go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, it may also be stated that item No. 7 of the Second Schedule was once again substituted by new entries by G.O.P. No. 390 C.T. R.E. dated September 4, 1901, with effect from September 5, 1991, which was replaced by Tamil Nadu Act 34 of 1991. After such amendment and substitution the item read as hereunder: "7(a) Raw hides and skins At the point of last 4 purchase in the State (b) Dressed hises and skins (which At the point of first 4" were not subjected to tax under sale in the State. this Act as raw hides and skins) 6.. Mr. C. Natarajan, learned counsel who made the leading arguments, with the other learned counsel following and adopting his submissions with some elaborations and additions, contended that: (a) When the Parliament in furtherance of the constitutional mandate, while declaring certain goods as of special importance in inter-State trade and commerce adopted a specific and particular form or method of description of hides and skins so as to constitute it as one goods, it is not open to the State Legislature to adopt a different description by bifurcating the item of goods into more than one for purposes of levy under the State Act and thereby rob the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Schedule to the State Act, as substituted by the impugned Act 31 of 1987 runs counter to the provisions of article 286(3) of the Constitution of India and sections 14 and 15 of the Central Act and that by the impugned provisions of the Act, the object of the Parliament in fixing a ceiling limit on the rate of tax to be levied by the States itself stood defeated. It was also contended that the impact of the impugned provisions puts the dealers in hides and skins to serious difficulties on account of the escalation in the cost of hides and skins, which serve as raw materials for other industries. Mr. Sivanandam, one of the learned counsel appearing while adopting the submissions of the other learned counsel, submitted that once the State levied tax on hides and skins at the raw stage, it ceased to have any further power or authority to levy tax again on the dressed hides and skins also which were earlier subjected to tax at the raw stage. 8.. Mrs. Chitra Venkataraman, learned Additional Government Pleader, countered the various claims of the learned counsel for the petitioners by inviting our attention to the counter-affidavits filed in some of the writ petitions and contended tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R.E. dated March 20, 1987 and the Tamil Nadu General Sales Tax (Third Amendment) Act, 1987, which held the field and was in force only during the period between March 23, 1987 and September 4, 1991. The challenges before us in these writ petitions are confined to the levy during the said period and that too in respect of subjecting to levy of sales tax dressed hides and skins, which were subjected to tax earlier at the raw stage as raw hides and skins. 10.. The decision in Firm A.T.B. Mehtab Majid Co. v. State of Madras [1963] 14 STC 355 is that of a Constitution Bench of the Supreme Court dealing with the constitutional validity of the provisions of rule 16(2) of the then Madras General Sales Tax (Turnover and Assessment) Rules, 1939, as substituted with effect from April 1, 1955, which related to the levy of tax on the tanned hides or skins. The Supreme Court sustained the grievance of the assessee before the court in view of the amount of tax levied being different on account of the existence of a substantial disparity in the price of raw hides or skins and those hides or skins after they had been dressed or tanned notwithstanding the fact that the rate of tax is the same u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e be treated as different goods for the purposes of the Act. ................. The series of sales referred to in this provision, to our mind, meant the series of sales of each kind of hides and skins, namely, the series of sales of raw hides and skins and the series of sales of dressed hides and skins and do not mean a single series of sales which includes successive sales in the first instance of raw hides and skins and after tanning successive sales of tanned hides and skins. The real question is whether these provisions treat raw hides and skins and dressed or tanned hides and skins as one class of goods for the purpose of taxation or as two different classes of goods. If they treat them as one class of goods, the contention for the petitioner loses force as taxing of hides and skins at the time of their sale in a raw condition meets the requirements of law as hides and skins could be taxed only at a single point. If the dressed or tanned hides and skins are not taxed at the time of their sale that does not offend against the statutory provisions. No question of discrimination arises as a sale of raw hides and skins of whatever origin, i.e., whether produced in the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challenge to the validity of item 7 of the Second Schedule to the State Act. In repelling the plea of the assessees and affirming the decision of this Court in [1971] 28 STC 610 (Anwaraulla AM. Ghouse and Company v. State of Tamil Nadu) referred to supra, the court held as hereunder: "The question as to when the levy of tax would constitute discrimination would depend upon a variety of factors including the rate of tax and the item of goods in respect of the sale of which it is levied. The scheme of items 7(a) and 7(b) of the Second Schedule to the State Act is that in the case of raw hides and skins which are purchased locally in the State, the levy of tax would be at the rate of 3 per cent at the point of last purchase in the State. When those locally purchased raw hides and skins are tanned and are sold locally as dressed hides and skins, no levy would be made on such sales as those hides and skins have already been subjected to local tax at the rate of 3 per cent when they were purchased in raw form. As against that, in the case of hides and skins which have been imported from other States in raw form and are thereafter tanned and then sold inside the State as dressed hides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into account the levy of tax in respect of the purchase of raw hides and skins. " 14.. In Gordon Woodroffe Co. (Madras) P. Ltd. v. State of Tamil Nadu [1977] 40 STC 130 a Division Bench of this Court while construing item 7 of the Second Schedule in the State Act with reference to the provisions in the Central Act, has held as follows: "We are of the opinion that this claim of the petitioner was not tenable and was rightly rejected by the Tribunal. It is clear that the notification issued by the Governor of Tamil Nadu contemplates the identity of the goods with reference to which tax has been levied under the State Act and tax is payable under the Central Sales Tax Act. It is not in dispute that commercially raw hides and skins are different from tanned hides and skins. Even though both of them have been grouped together as item (iii) of section 14 of the Central Sales Tax Act, they have been put in two separate entries as 7(a) and 7(b) in the Second Schedule of the Tamil Nadu General Sales Tax Act, 1959, and the rate of tax as well as the point at which the tax is leviable have been shown separately. Therefore, simply because the petitioner purchased raw hides and skins loca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State of any declared goods and such goods are sold in the course of inter-State trade or commerce and tax has been paid under the Central Act in respect of the sale of goods the tax levied under the local law shall be reimbursed to the person making such sale in the course of inter-State trade or commerce in such manner and subject to such conditions as may be provided in any law in force in that State. In this case, the local law, that is, the Tamil Nadu General Sales Tax Act makes a clear-cut distinction between raw hides and skins and dressed hides and skins, and raw hides and skins are treated commercially as a different commodity from tanned hides and skins. Item 7(a) of the Second Schedule provides that raw hides and skins are taxable at the point of last purchase in the State at three per cent. Under item 7(b) of the Second Schedule, dressed hides and skins which were not subjected to tax under this Act as raw hides and skins are taxable at the point of first sale in the State at two per cent. Thus, under the local law, the point at which and the rate at which the tax is to be levied are entirely different for raw hides and skins and for dressed hides and skins. A close re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the declared goods are concerned, the context and setting as well as the description of the commodity also becomes vitally relevant. Having regard to the wording of section 14(iii) of the Central Act, raw hides and skins and dressed hides and skins are to be treated as one and the same. The fact that raw hides and skins are subjected to certain process of preservation does not render them any the less hides and skins. In our view, the description of the entry as contained in section 14(iii) of the Central Act has reference and relates to 'hides and skins' and the specification of the goods as 'hides and skins' constitutes the genus and the further description following the same, i.e., 'whether in a raw or dressed state' not only is inclusive in nature, but is meant to be comprehensive enough to include all its species or products emerging from hides and skins until the process of dressing or finishing is done. The entry as it is found in section 14(iii), in a sense, indicates the legislative intent and in our view constitutes legislative recognition of the fact of the position that simply because manufacturing process of preservative nature is undergone by raw hides a different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 969] 24 STC 468 (Mad.) must be deemed to have been overruled by the decision of the Supreme Court in Guruviah Naidu and Sons v. State of Tamil Nadu [1976] 38 STC 565. The Division Bench also held that the decision of the Supreme Court in [1976] 38 STC 565 (Guruviah Naidu and Sons v. State of Tamil Nadu) constituted a complete code on the scope of entries 7(a) and 7(b) of the Second Schedule to the Act. The decision in State of Punjab v. Chandu Lal Kishori Lal [1970] 25 STC 52 (SC) dealt with a claim for deduction in respect of the goods on which purchase tax was paid by a dealer. The claim was in respect of sale of cotton seeds obtained after ginning unginned cotton over which the purchase tax has been earlier paid. The Supreme Court held that though the cotton in an unginned state contained cotton seeds, the cotton and the seeds were separated by the manufacturing process of ginning and the seeds so separated could not be said to be cotton itself or part of the cotton and consequently the assessee was not entitled to deduct the sale price of cotton seeds from the purchase turnover. 20.. The decision in Adam v. State of Madras [1973] 31 STC 349 is that of a Division Bench of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age' in section 15 refers to the stages of successive sales and purchases. In my view, the word 'stage' in section 15 means that tax on internal sale of declared goods should be single point and not multi-point, and the said expression is not at all referable to stages which raw materials may undergo resulting in the manufacture of different commercial commodities. The prohibition in section 15 is against imposition of sales tax on internal sale of the same commodity which is declared as goods of special importance. In this case, the averments made in the petition and the affidavit-in-reply on behalf of the petitioner themselves show that the goods manufactured in the petitioner's mill out of jute fibre are different commodities having special traits and attributes not possessed by raw jute. Such attributes and traits are imparted to raw jute so as to produce a new commodity or material." 23.. In State of Madras v. Narayanaswami Naidu [1965] 16 STC 29 a Division Bench of this Court while considering the claim in respect of a single point levy with reference to cotton, adverted to section 15 of the Central Act and opined that in respect of declared goods, the State law shall make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench of the Supreme Court in one such case is found expressed in AIR 1976 SC 1207 (Additional District Magistrate v. Shivakant Shukla) in the following terms: "Moreover, it must be remembered that when we are considering the observations of a high judicial authority like this Court, the greatest possible care must be taken to relate the observations of a Judge to the precise issues before him and to confine such observations, even though expressed in broad terms, in the general compass of the question before him, unless he makes it clear that he intended his remarks to have a wider ambit. It is not possible for judges always to express their judgments so as to exclude entirely the risk that in some subsequent case their language may be misapplied and any attempt at such perfection of expression can only lead to the opposite result of uncertainty and even obscurity as regards, the case in hand." A decision ordinarily is a decision on the case before the court while the principle underlying the decision would be binding as a precedent in a case coming for decision subsequently. While applying a decision to a later case the true principle laid down should be carefully examined si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the inception from the angle of section 14(iii) of the Central Act. On a careful consideration of the scope and scheme underlying section 14 of the Central Act as well as the pattern of description of the various goods adopted therein, we are of the view that there is nothing in the said provision itself, which per se supports the claim of the petitioners. No doubt, in respect of some of the goods declared to be of special importance, certain items have been also enumerated as falling under the main class or item of goods. But, the mere absence of such enumeration or specification separately of raw hides or dressed hides as different goods or the fact that the description in section 14(iii) is placed in a single category, by itself does not vouchsafe either logically or legally a claim that there is no scope for treating the raw and dressed hides and skins as different commodities even though there is no contravention of any of the restrictions in section 15(a) of the Central Act. The fact that certain articles are mentioned under the same heading in a statute or in the Constitution, does not mean that they all constitute one commodity and the inclusion of several articles under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re had every right and is not precluded from treating them as two or distinct goods for purposes of levy of sales tax under the State Act. No doubt, the provisions of article 286(3) of the Constitution, mandates that in so far as the imposition of a tax on the sale or purchase of goods declared by Parliament by law to be of special importance is concerned the sales tax law of a State 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. But the law made by the Parliament in the form of sections 14 and 15 contain the declaration and only certain specific restrictions. Section 15(a) is only to the effect that every sales tax law of a State in so far as it relates to the imposition of tax on the sale or purchase of declared goods would be subject to two limitations, namely, (i) that the tax payable under such law in respect of sale or purchase of goods inside the State shall not exceed four per cent (as on the date of the impugned State law) of the sale or purchase price of such declared goods, and (ii) such tax shall not be levied at more than one stage. Consequently, the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State law, it requires to be considered only whether the provision of section 15(a) contains such a restriction. 29.. Apart from the restrictions on the rate of tax as such, the only other restriction is that such tax under the State law shall not be levied at more than "one stage ". The fallacy, in our view, underlying the submissions for the petitioners is the assumption made that the expression "stage" has relevance to the stage of the goods. There is no warrant or justification whatsoever for such an assumption. The decisions referred to supra would themselves show that the "stage" specified is referable to the point of levy and meant to identify the taxable point in a series of sales of the very goods and not different goods. The stage, in our view, merely refers to the stage of successive sales or purchases of the same commodity and not to stages which the raw materials or a particular goods may undergo, resulting in the emergence of a different or a distinct commodity from out of the originally purchased declared goods. The decision of the Supreme Court in [1967] 20 STC 430 (Devi Dass Gopal Krishnan v. State of Punjab) would belie any claim to the contra of the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in paragraph 16 of the decision of the Division Bench, are not based upon the etymological consideration of the words hides and skins whether in a raw or dressed state or with reference to the legislative competency of the State Legislature to treat raw or dressed hides and skins as two different commodities for levy of sales tax under the State Act or from the angle of restrictions or extent of restrictions imposed under section 15(a) on the powers of the State Legislature in the matter of levy of sales tax on inside sales of such declared goods. To quote and bluntly rely upon some of the observations of the Division Bench therein, de hors the context and considerations involved therein would amount to doing violance not only to the language but also to the ratio of the decision itself. Therefore we are not persuaded to agree with the claims made for the petitioners. Consequently the provisions of the impugned Act as well as the Government order under challenge do not suffer from the vice of contravention of article 286(3) of the Constitution of India or sections 14 and 15 of the Central Act, 1956. 31.. A hue and cry has also been made on the impact of the levy upon the trade ..... X X X X Extracts X X X X X X X X Extracts X X X X
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