Levy of tax on sale of hides and skins.

RAJAGOPALA AYYANGAR, J.

This revision by an assessee raises for consideration among others the scope and function of rules 4 and 16 framed under the Madras General Sales Tax Act in the scheme of taxation of untanned hides and skins. The assessee, which is a firm, was a dealer-tanner in hides and skins, and held a licence under section 5 of the Act and the rules framed thereunder. Under the rules the tax is levied on a purchaser, and that was the manner that the assessee's turnover was computed. Among the items included in this turnover, as it finally emerged from the Sales Tax Appellate Tribunal, was a turnover in respect of purchases in hides and skins from Bombay by the assessee to the value of Rs. 2, 72, 205-8-3. In regard to this, the contention of the assessee before us was that the amount was not liable to tax under rule 16(2) of the Turnover and Assessment Rules, since the provision was, it was contended, so framed as to impose a tax liability only when the purchase was from a dealer who was licensed under the Madras General Sales Tax Act, and that a purchase from an unlicensed dealer was not liable to the included in the turnover of a tanner-assessee. The argument was that rules 15 and 16 were the sole charging provisions as regards dealers in hides and skins, and that rule 4(2) was not a charging section, but merely determined whether it was the seller or the buyer that was liable to be taxed. Reliance was placed in this connection on a judgment in Mohd. Zackria and Co. v. Government of Madras which, though not a final decision on the point, appears to be inclined to consider favourably such a construction of the provisions. On the other hand, the learned Advocate-General drew our attention to a passage in the decision of this Court in Syed Mohamed and Co. v. State of Madras which appears to support the interpretation that rule 4(2) is a charging provision. These observations are really obiter, and though this judgment was affirmed by the Supreme Court, no reference is made to this passage in the affirming judgment. In view, however, of the conflicting views expressed in these two decisions and the general importance of this question, we consider that the matter should be decided by a Full Bench, and we accordingly directed the papers to be placed before the learned Chief Justice for the purpose of answering the following question :-

"Whether a licensed tanner, who purchases untanned hides and skins from an unlicensed dealer, is liable to be taxed on his turnover under rule 16(2) or under any other provision of the Madras General Sales Tax Act and the rules framed thereunder ?" *

The other questions can be decided after this reference is answered.

In pursuance of the aforesaid Order of Reference, this petition came up for hearing before the Full Bench and the Court delivered the following :-

RAJAGOPALA AYYANGAR, J. - The question of law which has been referred to the Full Bench is :-

"Whether a licensed tanner who purchases untanned hides and skins from an unlicensed dealer is liable to be taxed on his turnover under rule 16(2) or under any other provisions of the Madras General Sales Tax Act and the rules framed thereunder ?" *

The circumstances leading to this reference have been set out in the order of reference and need not be repeated.

It will be convenient to refer to the relevant provisions of the Madras General Sales Tax Act and the rules framed thereunder and examine the question in the light of these provisions before dealing with the observations in the two decisions adverted to in the order of reference.

Section 3 of the Act is what might be termed the principal charging provision. The relevant portion of this section is in these terms :-

"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

(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