E K MOHAMED IBRAHIM SAHIB AND SONS Vs. GOVERNMENT OF MADRAS

JUDGEMENT

(1.) THOUGH the petitioners in these three petitions are different, a common question arises. These petitions are accordingly disposed of together. The petitioners in all these cases are licensed dealers in hides and skins. The petitioner in T.C. No. 7 of 1959 was assessed on the turnover which included the sale value of hides and skins for the assessment year 1955-56. The dispute in this regard was in respect of a turnover of Rs. 2,76,914, which was the estimated sale value of the tanned product. It is common ground that the raw hides and skins from out of which these tanned hides and skins were prepared had been purchased by the petitioner, partly outside the Madras State, and partly from unlicensed dealers within the State. The department and the Tribunal relied upon rule 16(2)(ii) of the Turnover and Assessment Rules in bringing to tax the sale price of the tanned product. Precisely the same controversy arises in T.C. No. 16 of 1959 in respect of a turnover of Rs. 2,58,453 and Rs. 1,31,995 in T.C. No. 19 of 1959.

(2.) THE contention advanced against the assessment is shortly that the petitioners are not liable to be taxed on the sales turnover of the tanned hides and skins, as it offends against the scheme of single point taxation. THE argument is that in so far as hides and skins are concerned, the taxation is invariably at the purchase point, and if the taxing authorities have failed to assess the turnover at that point, it is not open to them to rely upon a transaction which is not at the point fixed, that is to say, there is no second point at which the goods in question can be brought to tax.

(3.) UNDER rule 16(1), the tax is leviable from the dealer who is the last purchaser in the State in the case of untanned hides and skins. Accepting the course of the transaction as stated on behalf of the petitioners to be correct (no records have been produced before us) would the foreign buyer come within the scope of the expression "last purchaser in the State of Madras ?" The course of the transaction, as stated above, unmistakably indicates that the sale by the petitioners to the foreign buyer is a sale in the course of export, a sale which is exempt from tax by virtue of the constitutional protection under Article 286. We are not prepared to accept the claim that the bank functioned as the agent of the foreign buyer for the purpose of taking possession of the goods in question. Had the bank purported to do so before the goods, covered by the transaction, entered the stream of the export trade, it might be contended with great plausibility that the bank was the last purchaser in the State. If the bank is not then the last purchaser, obviously the petitioners are the last purchasers in the State. It must be remembered that it is not the sale transaction by the petitioners to the foreign buyers that is brought to tax. Prior to 1st April, 1955, the rule as it stood stated, "in the case of 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 ..... who buys them in the State on the amount for which they were bought by him." UNDER that rule, as it stood, though the levy of the tax was on the occasion when the goods were exported, the actual transaction that was taxed in the hands of the dealer was his previous purchase. The present rule which governs the transaction in question dropped the distinction between raw hides and skins sold to a tanner and those exported outside the State and fixed the stage of levy as the dealer who is the last purchaser on the amount for which they are bought by him. If the foreign buyer is not the last purchaser before the export, it is only the petitioners who could be regarded as the last purchaser in the State and the levy of the tax on the amount for which the goods were bought by them is fully covered by rule 16(1).