(1.)The Order of the Court was delivered by the Hon'ble The Chief Justice.
This is an appeal against the order of our learned brother Satyanarayana
Raju J. in Writ Petition No. 314 of 1954.
(2.)The relevant facts are stated in the judgment under appeal and they
may be briefly re-stated. The appellants are a firm carrying on tannery
business at Guntur. Though they had taken out a licence under Section 5(vi)
of the Madras General Sales Tax Act (hereinafter referred to as the Act) for
the year 1951-52, they did not get it renewed for the subsequent years. Nor.
did they submit a return of their turn-over for the year 1952-53. The Commercial
Tax Officer, on a scrutiny of the accounts, found that their turnover
of sales of tanned hides and skins amounted to Rs. 5, 36,001-14-2. To a notice
given to them to show cause against assessment on the said turnover, they
contended that, as they did not take out a licence, there was no provision
under the Act to tax them. Rejecting the plea, the Commercial Tax Officer
made the assessment on the basis of the aforesaid turnover and called upon
them to pay a tax of Rs 8,375-0-6. The appellants filed a petition under Art.
226 of the Constitution of India for quashing the said order levying sales tax
on the appellants for the year 1952-53. Rejecting their plea that they were
not liable to be taxed, Satyanarayana Raju J. dismissed the application.
The contention f Mr. K. V. Venkatasubrahmanya Ayer, learned Counsel
for the appellants may be stated thus: In the case of hides and skins, section
5 (vi) of the Act supersedes the charging section 3 of the Act and under section 5 (vi)
the said commodity is taxable only at such single point in the
series of sales by successive dealers as may be prescribed. Section 16 (5) of
the Turnover and Assessment Rules prescribing the point of taxation on the
turnover of unlicenced dealers has been held to be ultra vires by the Supreme
Court. As there is no rule prescribing the single point in the case of unlicenced
dealers, there is no charging provision at all under the Act or the rules
framed thereunder in their case and therefore the tax imposed upon the
appellants was invalid. The Government Pleader, on the other hand,
argues that S. 5(vi) gives a concession to dealers in hides and skins only
on condition they take out a licence and, as the appellants have not taken a
licence for the period in question, by operation of section 6-A, they are liable
to be assessed to tax under S. 3 as if the provisions of Sec. 5 do not apply to
such sales. He further contends that Rule 16(5) is not ultra vires of the
powers of the Government and is consistent with the Scheme of the Act.
To appreciate the rival contentions, it is necessary and convenient at
this stage to read the relevant provisions of the Act and the two sets of rules
viz., the Madras General Sales Tax (Turnover and Assessment) Rules and the
Madras General Sales Tax Rules, framed thereunder.
Section 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 :
Section 3 (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 sub-section (i) or sub-section (2).
(4) For the purposes of this section and the other provisions of this Act, turnover shall
be determined in accordance with such rules as may be prescribed.
Provided that no such rules shall come into force unless they are approved by a
resolution of the legislative Assembly.
(5) The taxes under sub-section (1) & (2) shall be assessed, levied and collected in such
manner and in such instalments, if any, as may be prescribed.
(i) In respect of the same transaction of sale, the buyer or the seller, but not both, as
determined by such rules as may be prescribed, shall be taxed,
(ii) Where a dealer has been taxed in respect of the purchase of any goods in accordance
with the rules referred to in clause (i) of this proviso, he shall not be taxed again in
respect of any sale of such goods effected by him.
Subject to such restrictions and conditions as may be prescribed, including conditions
as to licences and licence fees
(vi) the sale of hides and skins, whether tanned or untanned shall be liable to tax under
section 3 Sub-section (i) only at such single point in the series of sales by succeessive
dealers, as may be prescribed.
If any restrictions or conditions prescribed under section 5 or notified under Sec. 6 are
contravened or are not observed by a dealer or in case a condition so prescribed or
notified requires that a licence shall be taken out or renewed, if a licence is not taken
out or renewed by the dealer or if any of the conditions of a licence taken out or
renewed by him are contravened or are not observed, the sales of the dealer, with
effect from the commencement of the year in which -such contravention or
non-observance took place, may be assessed to tax or taxes under section 3 as if the
provisions of section 5 or of the notification under section 6 as the case may be, did
not apply to such sales and notwithstanding that a licence, if any, taken out or
renewed by the dealer continued or continues to be in force during the year.
THE MADRAS GENERAL SALES TAX RULES.
Rule 5 : Every person who
(e) deals in hides and or skins whether as a tanner or otherwise .
shall if he desires to avail himself of the exemption provided in section 5 and 8 or of
the concession of taxation only at a single point or of taxation at the rate specified in
section 5, submit an application in Form I for a licence in respect of each of his
places of business to the authority specified in sub rule 2 so as to reach him not later
than the 30th of April of the year for which the licence is applied for.
MADRAS GENERAL SALES TAX (TURNOVER AND ASSESSMENT) RULES
Save as provided in sub rule (2) the gross turn-over of a dealer for the purposes of
these rules shall be the amount for which goods are sold by the dealer.
(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 bidet
Rule 15 (1):
Rules 6 to 13 shall not apply to licensed tanners and other licensed dealers in hides or
skins in respect of their dealings in hides or skins ; but the provisions of this and the
following rule shall apply to them in respect of such dealings.
(i) In the case of hides and skins the tax payable under section 3 (i) shall be levied in
accordance with the provisions of this rule.
(a) No tax shall be levied on the sale of untanned hides or skins by a licensed dealer in
hides or skins except at the stage at which such hides or skins are sold to a tanner
in the State or are sold for export outside the State.
(i) In the case of all untanned hides or skins sold to a tanner in the State, the tax shall
be levied from the tanner on the amount for which the hides or skins are bought
(ii) In the case of all untanned hides and skins which are not sold to a tanner in the State
but are exported outside the State, the tax shall be levied from the dealer who was
the last dealer not exempt from taxation under section 3 (3) who buys them in the
State on the amount for which they were bought by him.
(5) Sales of hides or skins by dealers other than licensed dealers in hides or skins shall,
subject to the provisions of Sec. 3 be liable to taxation on each occasion of sale.
(3.)The scheme of taxation embodied in the aforesaid provisions may be
stated thus : Sec. 3 is the charging section. Under that section, tax is levied
in the manner prescribed on the total turnover of a dealer. If the total
turnover is less than Rs. 10,000/- the dealer is exempted from taxation. The
general scheme adopted is multiple-point taxation. In the case of specified
goods, they are made liable at a single point also in addition to the multiple
point tax. It also provides for a tax at a buyer's point or a seller's point
but prohibits taxation, in respect of the same transaction of both the buyer
and the seller or the same person in respect of the same goods both at the
purchase point and the sale point. Section 5 exempts certain commodities
from taxation under Section 3 (1) and gives some concession in regard to
other commodities by providing a single point taxation instead of multiple
point taxation under Sec. 3 (1). The said concession of single point taxation
is shown among others to sales of hides and skins. Rule 5 (e) of the Madras
General Sales Tax Rules prescribes that every person, who deals in hides
and skins, shall take out a licence, if he desires to avail himaelfof the concession
of taxation only at a single point as specified in Section 5. The turnover and
assessment rules provide for returns and assessment in respect of
the tu'rnover liable to tax under the Act including Hides and Skins. In
the case of hides and skins, under the rules, ordinarily they are made liable
at the purchase point. The procedure laid down ip Rules 6 to 13 apply to all
taxable transactions under the Act. Rules 15 and 16 enact a special procedure
applicable to licensed tanners and other licensed dealers in respect of
their dealings in hides and skins. Rule 16, in particular, specifies the single
point at which the turnover of the licensed dealer or tanner in respect of the
said dealings can be taxed. The tax can be levied only at the stage at which
such hides and skins are sold to a tanner in the State or sold for export outside
the State. Rule 16 (5) says that dealers other than licensed dealers will
be liable to taxation on each occasion of sale.