Madras High Court
State Of Madras, Represented By The ... vs Rallis India Ltd., Dare House, G.T. ... on 12 March, 1954
Equivalent citations: AIR1954MAD984, AIR 1954 MADRAS 984, 1967 MADLW 451
JUDGMENT Satyanarayana Rao, J.
1. The question raised in this revision petition turns upon the interpretation of Rule 16 (2) and Rule 4 of the Madras General Sales-tax Turnover and Assessment Rules, 1939. The assessment with which we are now concerned relates to the assessment year 1949-50. The turnover in dispute is Rs. 24,239-7-0, which represents the purchase value of hides and skins, which the appellants exported to Marseilles, outside the Indian Union, after 26th January 1950. The purchases were, however, made before that date. The Tribunal upheld the claim of the assessee on the ground, that the amount is exempt from tax under Article 286(1) of the Constitution. The correctness of this is canvassed by the learned Government Pleader in this revision petition.
2. In the case of hides and skins, which are not tanned Section 5 (vi) of the General Sales-tax Act provides:
"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 (1) only at such single point in the series of sale by successive dealers, as may be prescribed."
They can be taxed, therefore, only at a single point in the series of sale by successive dealers. The power to determine the single point in the series of sales by successive dealers is left to the rule-making power to provide by a rule the stage at which the tax should be levied. Rule 16, which was promulgated by the Government under ite rule making power contained in Section 19 of the Act states:
"Rule 15 (1) "In the case of hides and skins the tax payable under Section 3 (1) shall be levied in accordance with the provisions of this rule.
(2) No tax shall be levied on the sale of untanned hides or skins by a licenced 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."
In the case of a tanner of untanned hides or skins sold to him, it is provided by Rule 16 (2) (1) that it shall be levied from the tanner on.
the amount for which the hides or skins are bought by him. In cases where the untanned hides and skins are sold for export outside the State, the tax is to be levied from the dealer, who was the last dealer not exempt from taxation under Section 3 (3), who buys them in the State, but the tax is on the amount for which they were bought by him. The mode of computing the turnover in the case of hides and skins exported outside the State by a licensed dealer in hides and skins is provided by Rule 4 and it states:
"(1) Save as provided in Sub-rule (2) the gross turnover of a dealer for the purposes of these rules shall be the amount for which goods are sold by the dealer.
(2) 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.
(d) untanned hides and skins exported outside the State by a licensed dealer in hides or skins."
Reading these relevant provisions bearing upon the question it would be seen that in the case of transactions in untanned hides and skins by a licenced dealer in hides or skins, there are only two taxable events at which the tax could be levied. The general rule enunciated in Rule 16 (2) is that no tax shall be levied on the sale of intanned hides or skins by a licenced dealer in hides or skins. The two exceptions are (1) in the case of a licenced dealer who sells untanned hides or skins to a tanner in the State and the tax is levied at the stage at which such hides and skins are sold to the tanner, and (2) in the case of untanned hides and skins sold by a licensed dealer for export outside the State, the stage and the event which attracts the tax is, when the goods are sold for export outside the State. The turnover, however, is to be calculated on the amount for which the goods were purchased by him, i.e., the licenced dealer. The taxable event in this case being the sale for export outside the State, the assessee could be taxed only when the goods were 5old for export outside the State. But as provided in Rule 4 (2) (d) when this event occurred and the sale was for export outside the State, the taxable turnover could be calculated only on the basis of the amount for which the goods were bought by the dealer. These rules were framed before the Constitution came into force. As the sale was after the Constitution, the sale is exempt from taxation under Article 286 of the Constitution.
It is not disputed that, if the transaction, which is to be subjected to tax, is the sale by the licensed dealer, as the sale was for export outside the State, it is exempt from taxation under the Constitution. But what is contended on behalf of the Government is that the taxable event is not the sale for export outside the State, but the purchase by the licensed dealer with a view to sell them for export outside the State; as the decision in --'State of Travancore-Cochin v. Shanmugha Vilas Cashewnut Factory', (A), held that such a purchase was not exempt under Article 286, the assessee could not claim the exemption. If the correct interpretation of the rules is, as contended by the Government Pleader, that the stage which, or the transaction which, attracts the tax is not the sale by the licensed dealer for export outside the State, but the purchase by him with a view to cell it for export outside the State, the stand taken by the Government Pleader will be tenable. But, in our opinion, the language of the rule does not admit of any serious doubt, as it is clear and established that it is the sale by the licensed dealer for export outside the State that attracts the tax and not the purchase by the licensed dealer with a view to export the goods outside the State. No doubt Rule 16 (2) is expressed not in a positive form, but as an exception to the general rule. But that does not prevent us from finding out what was really intended by the rule.
Rule 16 (2) really means no tax shall be levied on the sale of untanned hides or skins by a licensed dealer in hides or skins. Exceptions (1): In the case of sale of untanned hides or skins by a licensed dealer in hides or skins to a tanner. (2) In.the case of sale of untanned hides or skins by a licensed dealer in hides or skins, tax shall be levied at the stage at which such hides or skins are sold for export outside the State. In view, therefore, of the clear language of the rules, the only inference possible is that it is the sale for export outside the State that attracts the tax and not the purchase by the licensed dealer with a view to export outside the State. Though the transaction which attracts the tax is the sale the turnover, however, has to be computed on the amount for which the goods are bought by the dealer, and this is made clear by Rule 4 and also Rule 16 (2) (ii). But the fact that the turnover is computed on a different basis from that of the transaction, which is subjected to tax, is no ground for shifting the stage at which the tax is to be levied from one transaction to the other.
3. For these reasons we are clearly of opinion that the tribunal was right in holding that the assesses is exempt from tax in respect of the sum of RS. 24,239-7-0, which represents the purchase value of hides and skins which assessee purchased, before the coming into force of the Constitution, but which he exported after 26th January 1950. The decision of the Tribunal is confirmed and the revision petition is dismissed with costs--Rs. 250.