The concession of single point taxation under the Madras General Sales Tax Act and the Madras General Sales Tax Rules applied only to transactions inter se between licensed dealers.

( 1 ) THESE five revisions raise the question of the right of the state to levy tax on the turnover of a licenced tannef or a licensed dealer who purchases untanned hides and skins from an unlicensed dealer either for tanning or for export as the case may be. The answer depends upon the interpretation of the relevant provisions of the Madras General Sales Tax Act and the Madras General sales Tax Rules made thereunder, particularly rules 4, 15 and 16.

( 2 ) A Division Bench of the Madras High Court consisting of Rajamannar, C. J. , and Venkatarama Ayyar, J. , in Syed Mohammad and Co. v. State of Madras, (1953) 2 M. L. J. 598. considered the relevant provisions and expressed their opinion thus at page 612:"in broad outline the scheme of taxation adopted by the rules is to levy the tax at the stage when the articles are tanned in the State or exported to foreign countries for tanning. Thus, under rule 4 (a) (c) when a licensed tanner purchases untanned hides and skins for tanning, the amount for which he purchases the goods is to be included in his turnover and he is taxed thereon; and under rule 4 (a) (d) when a licensed dealer purchases untanned hides and skins for export, the amount for which he purchases would be included in his turnover and he would be taxed thereon. Then comes rule 16 which has come in for considerable criticism. Rule 16 (2) fixes in accordance with Rule 4 the points of taxation at the stage of tanning and at the stage of export. But then, it limits the operation of this rule to sales by licensed dealers. It is this limitation that furnishes the grourd for attack on the rules. To understand the objection, it will be useful to analyse the possible cases which might arise on the application of rule 16 (2 ). Taking first the case of hides and skins which are tanned within the State, four possible situations might arise. There might be a sale by a licensed dealer either to a licensed tanner or to an unlicensed tanner; or there might be a sale by an unlicensed dealer either to a licensed tanner or to an unlicensed tanner. When the sale is by a licensed dealer, rule 16 (2) (i) provides for a tax being levied on the tanner whether he is licensed or unlicensed. But where the sale is by an unlicensed dealer, there is a difference in the incidence of taxation. If the sale is to a licensed tanner, then under rule 4 (2) (c) the purchaser has to pay the tax. But where the sale is to an unlicensed tanner, rule 4 (1) will apply and the tax will fall on the seller. Rule 16 (5) provides that sale by dealers other than licensed dealers will be liable to taxation on each occasion of sale . Under this sub-clause, when there are successive sales by unlicensed dealers. the tax will be leviable on such occasion of sale and that will be inconsistent with section 5 (vi) which provides for taxation at a single point. Likewise when untanned hides and skins are exported, the last purchaser will be liable under rule 16 (2) (ii) whether he is a licensed dealer or unlicensed dealer, if he purchases from a licensed dealer. But if he purchases from an unlicensed dealer, but is himself a licensed dealer, he will be liable to pay the tax under rule 4 (2) (d ). If there is a sale by an unlicensed dealer to an unlicensed dealer who exports the goods, on whom does the tax fall. Under rule 4 (1), it is to be borne by the seller. Such a case will fall within the mischief of rule 16 (5) if there are successive sales".

( 3 ) THIS passage, therefore, lays down that a licensed tanner purchasing raw hides and skins from an unlicensed dealer is liable to tax on his purchase turnover under rule 4 (2) (c) of the Madras General Sales Tax Rules and that in the case of purchases by licensed dealer, for export of the said commodities from unlicensed dealer, tax is payable on the purchase turnover of the dealer. This, being a judgment of a division Bench delivered before 5th July, 1954, is binding on us. If so, both the aforesaid questions sho