UNION LEATHER COMPANY Vs. STATE OF MADRAS

JUDGEMENT

(1.) THIS is an appeal against the judgment of our learned brother, Veeraswami, J. , declining to issue a writ of prohibition as prayed for by the appellant herein. The appellant is a dealer in hides and skins. In the year 1960, the assessing authority called upon him to submit his account books for the purpose of assessing the income derived (sic) by him. After looking into the accounts, he found that the turnover consisting of sales of untanned skins and hides could not be assessed under the Madras General Sales Tax Act, as the dealer has not obtained any licence. THIS conclusion of his was based on a decision of this Court in M. A. Noor Mohamed & Co. v. The State of Madras which held that unlicensed dealers in hides and skins were not liable to be taxed. Incidentally, it may be mentioned here that, on an earlier occasion, this Court struck down rule 16 (5) of the Turnover and Assessment Rules as ultra vires in Syed Mohamed & Co. v. The State of Madras THIS impelled the government to omit sub-rule (5) of rule 16 from the Statute Book. Sometime later, i. e. , on 3rd September, 1955, the Government substituted a new rule with effect from 1st April, 1955, abolishing the distinction between licensed and unlicensed dealers.

(2.) WHILE matters stood thus, the Supreme Court rendered judgment in State of Madras v. Noor Mohamed & Co. reversing the decision of the Madras High Court in Noor Mohamed & Co. v. State of Madras and upholding the validity of rule 16 (5 ). Being himself upon this pronouncement of the Supreme Court, the Deputy Commissioner of Commercial Taxes sought to revise the assessment proceedings of the concerned Commercial Tax Officer. For this purpose, he issued a notice under section 32 to the assessee to show cause why the order of the assessing authority should not be revised. It is to prohibit the Deputy Commissioner of Commercial Taxes from proceeding further in this behalf that the writ petition giving rise to this appeal was presented. The argument advanced on behalf of the appellant that the ruling of the Supreme court left the non-liability of the unlicensed dealers to sales tax on their turnover untouched, did not commend itself to the learned Judge who dealt with this matter. He opined that the ruling of the Supreme Court lent support to the action proposed to be taken by the assessing authority. In the result, he declined to grant the relief asked for. Before we deal with the grounds of attack against the order under appeal, it is profitable to trace the legislative history of the relative statutory provisions and their contents. In the year 1939, the Madras legislature enacted what is called the Madras General Sales Tax Act. Section 3 of the Act, which is the charging section, provided : "3 (1) Subject to the provisions of this Act - (a) every dealer shall pay for each year a tax on his total turnover for such year; and (b) the tax shall be calculated at the rate of three pies for every rupee in such turnover. " (unnecessary provisions omitted ). " (3) A dealer whose total turnover in any year is less than ten thousand rupees shall not be liable to pay any tax for that year under sub-section (1) or sub-section (2 ). " " (4) For the purposes of this section and the other provisions of this Act, turnover shall be determined in accordance with such rules as may be prescribed. " " (5) The taxes under sub-sections (1) and (2) shall be assessed, levied and collected in such manner and in such instalments, if any, as may be prescribed. " Section 5, in so far as it is material for this enquiry, says : " Subject to such restrictions and conditions as may be prescribed, including conditions as to licenses and licence fees - (vi) the sale of hides and skins, whether tanned or untanned shall be liable to tax under section 3, sub-section (1), only at such single point in the series of sales by successive dealers as may be prescribed. "section 6-A enacts : " If any restrictions or conditions prescribed under section 5 or notified under section 6 are contravened or are not observed by a dealer, or in case a condition so prescribed or notified requires that a license shall be taken out or renewed, if a licence is not taken out or renewed by the dealer or if any of the conditions of a licence taken out or renewed by him are contravened or are not observed, the sales of the dealer, with effect from the commencement of the year in which such contravention or non-observance took place, may be assessed to tax or taxes under section 3, as if the provisions of section 5 or of the notification under section 6, as the case may be, did not apply to such sales and notwithstanding that a licence, if any, taken out or renewed by the dealer continued or continues to be in force during the year. " *