Ranganathan, J. - (1.) All these civil appeals and special leave petitions raise a common question as to the interpretation of an expression used in the Central Sales-tax Act. Some of these matters arise out of judgments of the High Court in Tax Revision cases and some out of judgments in writ petitions but the point involved is the same. In view of the pendency of the appeals, we grant leave in the special leave petitions after condoning the delay in filing some of them and proceed to dispose of all the appeals by a common order.
(2.) The respondents are all dealers in hides and skins carrying on business in the State of Tamil Nadu. As is well known, raw hides and skins undergo various processes such as cutting, tanning, dyeing, dressing and finishing before they get converted into finished leather and assume a condition fit for the manufacture of various kinds of leather articles. The dispute in these appeals is in regard to two items of goods that are sold by these assessees viz. leather splits and coloured leather. The splits are the cut pieces, often small and irregular, obtained in the process of cutting raw or tanned hides and skins either with a view to reduce their thickness or with a view to give them a regular shape. Coloured leather is obtained when the tanned hides and skins are dyed with various colours. The assessees, inter alia, deal in these two items, their manner of such dealing varying from case to case. Some of them obtain the leather splits in the process of cutting and sell them while some purchase the cuttings and sell them as such. So also, the coloured leather is obtained by some of the assessees in the process of finishing and they sell them while others purchase the coloured leather and sell them as such. The assessees' claim is that these two items fall in the list of "goods of special importance in inter-State trade and commerce" set out in S. 14 of the Central Sales-Tax Act, 1956 (the 'CST Act') and that, therefore, the assessee is entitled, in respect of their sales, to the concessions available under S. 15 of the CST Act viz. the benefits of single point taxation and of a smaller rate of tax. The sole question in these appeals is whether the High Court was right in upholding this claim. The principal judgment of the High Court on this point has been reported as Mahi Traders v. State of Tamil Nadu, (1980) 45 STC 327.
(3.) The relevant entry in S. 14 of the CST Act reads: "14(1)(iii) hides and skins, whether in a raw or dressed state." The short case of the department is:(a) that leather splits or cuttings are 'scrap' and do not qualify any longer to be described as hides and skins; and (b) that coloured leather is a totally new and sophisticated product known as leather and can no longer be described merely as hides and skins. The department's case is best explained in a passage from the order of the Board of Revenue which accepted the department's contention. It observed: The contentions have been examined with reference to the connected records. The splits are only pieces of leather obtained in the process of getting leather of uniform thickness from dressed skins. Such splits cannot be treated as dressed hides and declared goods. The expression "raw or dressed skin" in section 14 of the Central Sales-tax Act has a distinct connotation and it cannot be extended to leather bits obtained in a process. These splits are of much lesser value and cannot be equated to dressed skins. In (1971) 27 STC 385 the Orissa High Court has held that if steel plates are cut to sizes, they cease to be the original product. What should be considered is whether those leather splits are commercially understood as dressed hides and skins. If they are understood only as just skins as claimed, there is no need to call them as splits in commercial parlance. The Courts have repeatedly ruled that the entries in the Act should be treated only as understood by the Trade. These splits were produced before the Board at the time of hearing. They were found to be thin pieces which can be utilised only for miscellaneous purposes. The contention that these leather splits continue to be dressed skins and are declared goods of inter-State importance, is untenable. The assessing officer was therefore right in treating these splits as scraps and taxing them at the multipoint rate, and in the absence of 'C' forms, at 10%. As regards the coloured skins, once the dressed skins bought are split and the upper layer of uniform size is coloured or dyed, such coloured skins become different products. They are finished leather sold as coloured skins and not as dressed skins. They are commercially different, and are treated and dealt with in trade circles as different products. The process of dyeing or colouring changes the commercial nature of the dressed skins. There are different patterns of dyeing and colouring. The complete piece may be dyed or coloured uniformly with a single colour or with a pattern of colours, depending upon the requirements of the prospective consumers in the market. As the dressed skins. are subjected to process, first by splitting and secondly by colouring they become different products. Pieces of coloured and dyed leather were produced before the Board at the time of hearing. Some pieces were coloured with a single colour on one side and dyed on the reverse. They can be used straightway for manufacturing leather goods. They were also in patterns. The contention that no change is involved has therefore no force. Both the Appellate Assistant Commissioner and the Assessing Officer were not therefore correct in allowing exemption.;