SYED MOHAMED AND CO Vs. STATE OF ANDHRA PRADESH
LAWS(APH)-1955-10-37
HIGH COURT OF ANDHRA PRADESH
Decided on October 13,1955

V.M.SYED MOHAMED AND CO. Appellant
VERSUS
STATE OF ANDHRA PRADESH REPRESENTED BY THE SECRETARY REVENUE DEPT.KURNOOL Respondents

JUDGEMENT

- (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. Provided that (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. Section 5: 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. Section 6-A: 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 Rule 4(1): 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 or skins. 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. Rule 16: (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 by him. (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.
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