DEPUTY COMMISSIONER COMMERCIAL TAXES Vs. NAGENDRAPPA

JUDGEMENT

(1.) THE question that arises in these cases relates to the levy of sales tax in respect of transactions in untanned hides and skins under the Madras General Sales Tax Act and Turnover and Assessment Rules made thereunder, hereinafter referred to as "the Act" and "the Rules" respectively. Untanned hides and skins purchased by licensed dealers within the State were sent to commission agents outside and sold and exported by those agents to foreign buyers, THE State spught tp levy sales tax upon the dealers in the State on the amount for which they bought the unjanned hides and skins sold and exported out of India. THE dealers objected to the levy of the tax and their objection was upheld by the Sales Tax Appellate Tribunal 13 some cases but over-ruled in others. THE State and the assessees have preferred revision petitions in so far as the order of the Tribunal was adverse to them. It is common ground that the assessees are licensed dealers carrying on business in hides and skins in the State, and are not exempt from taxation under section 3(3) of the Act. THE tax is sought to be levied on them as the last dealers who bought untanned hides and skins in the State on the amounts for which they were bought, the said amounts being included in their total turnovers, Two questions arise for our decision: (1) Whethser the, levy of the tax is authorized by the Act and the Rules and (2) Whether even if so authorized, the Act and the Rules are not repugnant to Article 286(1) (b) of the Constitution. Mr. N. Rajeswara Rao, the learned Advocate for the assessees referred tothe title and preamble as well as to the definition of "sale" in section 2 clause (h) of the Act in support of his contention that the Act contempleated a tax only on sales and not on purchases and that lialaility was illegally sought to be imposed by the Rules on the purchasers of untanned hides and skins.This argument, however, was not further developed. Sales tax, as observed in Proaince of Madras v. Bodu Paidanna is a tax levied on the occasion of the sale of goods and is a tax on *,he proceeds thereof, whether taken individually or collectively. Whether the tax is levied on 'the seller or the purchaser, its ultimate incidence is on the consumer. Under normal conditions the tax is regarded by the dealer as an addition to cost and ia added to selling prices. Whether the tax is collected in the first instance from sellers or purchasers, it would normally be passed on to the consumers and the tax would be really a tax on sales. THE legislative competency of the Provincial Legislature to make the law relating to sales tax was derived from Entry No. 48 in List 2 of the VII schedule to the Government of India Act, 1935, which related to "taxes on the sale of goods." THE contention that the aforesaid provision did not authorize any law with respect to tax on the purchase of goods, was negatived by the Supreme Court in Syed Mohammad & Co. v. State of Andhra and it was held that on a proper construction, Entry N,o. 48 in List 2 of the VII Schedule to the Government of India Act, 1935 was wide enough to authorise a law imposing tax on purchasers as well as sellers of goods. It makes no difference therefore whether the tax is imposed on buyers or sellers. THE Provisions of the Act and the Rules relevant for our present purpose may briefly be referred to. I refrain from lengthening this judgment by quoting the provisions in extenso. Section 2 (b) of the Act defines a " dealer " as any person who carries on the business of buying and selling goods. Section 2 (h) defines " sale " as meaning, every transfer of property in goods by one person to another in the course of trade or business for a price. Section 2 (i) defines " turnover " as the aggregate amount for which goods are either bought by or sold by a dealer. THE identification of the subject-matter of the tax is found in what has been referred to as the charging section Sections which provides that, subject to the provisions of the Act, every dealer shall pay for each year a tax on his total turnover for such year, the turnover to be determined as prescribed by the Rules. Sec. 3 (5) further provides that in respect of the same transaction of sale, either the buyer or the seller, but not both, as might be determined by the Rules, shall be taxed and that a dealer taxed in respect of the purchase of any goods, shall not be taxed again in respect of the sale of such goods effected him. As a result of the aforesaid provisions, multipoint taxation or levy of tax on each occasion of sale of the goods is allowed. But Section 5 introduces exceptions to this rule, one of which relates to hides and skins. Section 5 Ql- (VJ) provides that " the sale of hides and skins, whether tanned or untanned, shall be liable to tax under section 3 (1) only at a single point in the series of sales by successive dealers as may be prescribed." Section 19 gives the power to the State Government to make rules. In these cases we are concerned with Rules 4 and 16. Rule 4 (2), so far as it is relevant, runs as follows: 4. (a) " In the case of the undermentioned goods the gross turnover of a dealer for the purposes of these rules shall be the amount for which the goods are bought by the dealer, (c) untanned hides and skins bought by a licensed tanner in the State, and (d) untanned hides and skins exported outside the State by a licensed dealer in hides and skins. " Rule 16 is the crucial rule fixing the points at which sales tax on hides and skins is leviable. THE relevant portion of Rule 16 is as follows :