P HAJEE ABDUL WAHAB Vs. GOVERNMENT OF MADRAS

JUDGEMENT

(1.) T.C. No. 90 of 1963 arises out of the sales tax assessment for the year 1953-54. The petitioners are dealers in hides and skins carrying on their dealings as agents of both resident and non-resident principals. A turnover of Rs. 7, 54, 421 covered by sales on behalf of non-resident principals and non-licensees and partly not covered by license, was taxed at 3 pies in the rupee. In respect of a turnover of Rs. 18, 94, 000 and odd, covered by licence for part of the period, a licence fee alone was levied. This assessment was taken up in appeal. Ultimately, before the Sales Tax Appellate Tribunal, the petitioners contended that as no licence was issued under section 5 of the Act, the entire turnover was not assessable according to a decision of this Court in W.P. No. 13 of 1954. This decision was later reversed by the Supreme Court, and following upon that, 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 been struck down as invalid by the Supreme Court, and it is claimed that an assessment made under rule 16 as it stood even prior to the amendment is equally invalid. It is further alleged that the petitioners should in fact be regarded as operating under cover of a licence issued under section 5 for their applications had been duly made and the benefit arising from such licence should have been extended to them.T.C. Nos. 48 of 1963 and 89 of 1963 relate to the assessment year 1954-55. Though the petitioners are different, the points raised are identical. In T.C. No. 48 of 1963, the petitioner had no licence of any kind, whether under section 5 or under section 8 of the Madras Sales Tax Act. In T.C. No. 89 of 1963, the petitioner had under section 8 licence for the whole year. The contentions in these petitions are more or less similar to those advanced in the other petition. In the course of the arguments, however, the contentions took a somewhat different form. They raised the invalidity of the taxing provision in the light of Article 304 of the Constitution that is to say, in general, it was the reliance upon the discriminatory treatment in the matter of taxation of sales of goods brought from outside the State that formed the burden of the arguments by the learned counsel.

(2.) UNDER the Madras General Sales Tax Act, every dealer in goods is liable to pay tax on his turnover for the year. The definition of turnover need not detain us. During the relevant years under section 5 of the Act, the sales of hides and skins were made liable to tax only at such single point in the series of sales by successive dealers as may be prescribed. The rules relating to turnover and assessment provided that in the case of untanned hides and skins bought by a licensed dealer in the State, the gross turnover shall be the amount for which the goods were bought by the dealer, and in the case of untanned hides and skins exported outside the State by a licensed dealer in hides and skins, it shall also be the amount for which the goods were bought by the dealer. These were the rules as they stood during the years of assessment. Rule 16(1) provided that in the case of hides and skins the tax payable under section 3(1) shall be levied in accordance with the provisions of that rule. UNDER sub-rule (2), no tax was leviable on the sale of untanned hides and skins by a licensed 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 that while sales of untanned hides and skins were liable to tax on their purchase value, when the skins were tanned within the State, the tannery being made liable to pay the tax on such purchase value, in the case of hides and skins which were not so tanned inside the State, the tax could not be levied from the tannery, and accordingly the relevant rule provided that the tax shall be on the sale value of the tanned hides and skins by the first dealer in the State not exempt by reason of the upper limit of the turnover. This rule was amended with effect from 1st April, 1955, but substantially the same result, that is to say, the liability to tax on the sale value of the tanned hides and skins in the case of hides and skins which had been tanned outside the State, was maintained by the amended rule.

(3.) IT is common ground that the relevant rule of the Madras General Sales Tax Rules made it compulsory on all dealers in hides and skins to take out licences with effect from 1st April, 1955. But that rule will not apply for the assessment years in question which are prior to the amendment of that rule. The question, therefore, is whether the liability to tax on the sale value of the tanned hides and skins when the hides and skins are not tanned within the State is repugnant to Article 304.