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SUPREME COURT OF INDIA
H.R. KHANNA AND V.R. KRISHNA IYER, JJ.
M/s. V. Guraviah Naidu & Sons etc., Appellants
Versus
State of T.N. and another etc., Respondents.
Civil Appeals Nos. 1577 and 1579 of 1971,
D/- 2-11-1976.
Advocates appeared
Mr. K. Srinivasan, Sr. Advocate (Mr. I. Subramanian and Mrs. S. Gopalakrishnan, Advocate with him), for Appellants; Mr. K. Parasaran, Advocate General for the State of Tamil Nadu (Mr. A. V. Rangam & Miss A. Subhashini, Advocate with him), for Respondents.
Central Sales Tax Act, 1956 - Section 14 (iii) - Second Schedule to Madras General Sales Tax Act, 1959 - Madras General Sales Tax Rules, 1939 - Rule 16 – Constitution of India, 1950 - Article 304 (a) - Description of goods Point of levy Rate of tax - Discriminate between hides and skins - Whether in a raw or dressed state - Appellants are dealers in hides and skins - Appellants purchase raw hides and skins locally as well as in course of inter-State trade and commerce - Raw hides and skins are converted into dressed hides and skins and are sold either locally or in course of export - Matter relates to the assessment year and dispute between the parties arises because of the inclusion in the turnover of the sale and purchase price of some of the above goods - Appellants by means of writ petitions challenged the validity of Items 7 (A) and 7 (b) of the Second Schedule to the State Act - High Court as already mentioned repelled attack on the validity of those items and dismissed the writ petitions - Before dealing with the contentions advanced it may be appropriate to refer to the relevant provisions - Section 4 of the State Act is charging section in respect of declared goods - Tax in respect of declared goods.- Notwithstanding anything contained in S. 3 tax under this Act shall be payable by a dealer on the sale or purchase inside State of declared goods at the rate and only at point specified against each in second schedule of the turnover in such goods in each year whatever the quantum of turnover in that year – Held, This levy cannot be considered to be discriminatory as it takes into account the higher price of dressed hides and skins compared to the price of raw hides and skins - It also further takes note of the fact that no tax under the State Act has been paid in respect of those hides and skins – Legislature it seems calculated the price of hides and skins in dressed condition to be double the price of such hides and skins in raw state - To obviate and prevent any discrimination or differential treatment in the matter of levy of tax Legislature therefore prescribed a rate of tax for sale of dressed hides and skins which was half of that levied under Item in respect of raw hides and skins - It has been argued that dressed hides and skins are a commodity distinct and separate from raw hides and skins and that Item 7 (b) of the Second Schedule makes a discrimination between the sales of locally processed dressed hides and skins and those imported from other States - In this respect we find that it is not the case of the appellants that they import dressed hides and skins from other States and sell them us such in Tamil Nadu - On the contrary case of the appellants is that what they import from other States are only raw hides and skins which are thereafter tanned and sold as dressed hides and skins - In the circumstances it is not clear as to what grievance the appellants can have on score that there is discrimination between imported dressed hides and skins and the dressed hides and skins produced and manufactured within the State - Apart from that it seems to us that even though dressed hides and skins have been treated as separate commodity there is a clear nexus between hides and skins in raw form and those in dressed form - So far as Central Act is concerned both raw as well as the dressed hides and skins are specified together in clause (iii) of Section 14 - It has to be borne in mind that it is raw hides and skins which after being subjected to processing or tanning take the shape of dressed hides and skins - Dressed hides and skins cannot therefore be considered in isolation and court find no infirmity in a legislative provision which while levying tax on sale of dressed hides and skins takes into account levy of tax in respect of purchase of raw hides and skins - Looked at in this light there appears to be no warrant for proposition that preferential treatment has been shown to dressed hides and skins prepared from locally purchased raw hides and skins compared to treatment accorded to imported hides and skins - Appeals dismissed
Judgment
KHANNA, J.:- These appeals by special leave are against the judgment of Madras High Court whereby that Court repelled the challenge to the validity of Items 7 (a) and 7 (b) of the Second Schedule to the Madras General Sales Tax Act, 1959 (hereinafter referred to as the State Act).
2. The appellants are dealers in hides and skins. The appellants purchase raw hides and skins locally as well as in the course of inter-State trade and commerce. The raw hides and skins are converted into dressed hides and skins and are sold either locally or in the course of export. The matter relates to the assessment year 1968-69 and the dispute between the parties arises because of the inclusion in the turnover of the sale and purchase price of some of the above goods. The appellants by means of writ petitions challenged the validity of Items 7 (A) and 7 (b) of the Second Schedule to the State Act. The High Court, as already mentioned, repelled the attack on the validity of those items and dismissed the writ petitions.
Before dealing with the contentions advanced, it may be appropriate to refer to the relevant provisions. Section 4 of the State Act is the charging section in respect of declared goods and reads thus :
"Tax in respect of declared goods.- Notwithstanding anything contained in S. 3, the tax under this Act shall be payable by a dealer on the sale or purchase inside the State of declared goods at the rate and only at the point specified against each in the second schedule of the turnover in such goods in each year whatever the quantum of turnover in that year."
It may be mentioned that raw hides and skins as well as dressed hides and skins are declared goods under Section 14 (iii) of the Central Sales Tax Act, 1956 (hereinafter referred to as the Central Act). Section 14 (iii) of the Central Act reads as under :
"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."
Items 7 (a) and 7 (b) of the Second Schedule to the State Act read as under :
S.No. Description of goods Point of levy Rate of tax.
7(a) Raw hides and skins. At the point of last purchase in the State. 3
7(b) Dressed hides and skins (which were not subjected to tax under this Act as raw hides and skins). At the point of 1st sale in the State 14
3. So far as the validity of Item 7 (a) of the Second Schedule is concerned, the argument of the learned counsel for the appellant is that this would cover also inter-State sales and as such is beyond the competence of the State legislature. We are unable to accede to this contention as we are of the view that, Item 7 (a) relates only to intra-State sales and not to inter-State sales. This is clear from the language used in the item, especially the words "purchase in the State". Assuming that the language of Item 7 (a) is ambiguous, it should be so construed as would sustain the constitutional validity of the said item. Considered in this light the occasion for the levy of tax under the above item would arise only when there is intra-State sale and not inter-State sale.
4. Regarding Item 7 (b) the learned counsel for the appellants has contended that it is violative of clause (a) of Article 304 of the Constitution. The said clause reads as under:
"304. Notwithstanding anything in Article 301 or Article 303, the Legislature of a State may by law-
(a) impose on goods imported from other States or the Union territories any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced; and
(b) ... ... ... ...
According to the learned counsel, there can be three types of sale transactions in respect of dressed hides and skins:
(1) Dressed hides and skins imported from outside the State of Tamil Nadu and sold within that State;
(2) Import of raw hides and skins from outside the State of Tamil Nad
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