TMI Blog2000 (3) TMI 1058X X X X Extracts X X X X X X X X Extracts X X X X ..... es and skins under section 5(3) of the CST Act. (C) Penalty levied under section 12(3)(b) of the Act for the difference of tax between tax payable and tax paid. 2.. The findings of the Appellate Tribunal in respect of the disputed items are as follows: At the time of inspection on August 12, 1993 by the Enforcement Wing Officers, the assessee admitted the excess stock of 313 pieces of leather before the inspecting authorities. It was contended before the Appellate Tribunal that the excess stock related to goods received for colour dyeing for reference. In the absence of any record to show that the goods were received for reference purpose and in the absence of any entry in the records maintained in the business, the Appellate Tribunal disallowed the plea and upheld the suppression with reference to excess stock of 313 pieces admitted during inspection. Similarly, at the time of inspection, the officers also found excess stock of 1,946 pieces of finished leather. The plea of the assessee that the goods related to job-work was not accepted by the Tribunal as such a plea was not supported by relevant records. Considering the fact that the assessee was maintaining a job-work regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty. She vehemently contended that the disallowance of export exemption by the Appellate Tribunal is contrary to the law laid down by the High Court and Supreme Court. Referring to the decision of the Madras High Court in T. Azeezur Rahman and Company v. State of Tamil Nadu [1991] 82 STC 355, it was contended that for purpose of determining a claim under section 5(3) of the CST Act, the fact that raw and dressed hides and skins are commercially treated as distinguished commodities or that the entry 7 of the Second Schedule to the Act deal with them as two different and distinct commodities has no relevance at all. Subject to the limitation of the entry as contained in section 14(iii) read with section 15 of the Central Sales Tax Act, 1956 and the lack of commercial identity of the goods has no relevance and what is relevant is whether the sale or purchase in question is the "penultimate sale or purchase" that satisfies the two conditions specified in section 5(3) of the Act. The words "those goods" found in section 5(3) of the CST Act do not mean and refer to the goods sold or purchased preceding the sale or purchase occasioning the export, in the same condition as they were so pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . v. State of Madras). Similarly, the Madras High Court in M.S. Mohamed Siddique and Company v. State of Tamil Nadu reported in [1993] 91 STC 336 held as follows: "Hides and skins purchased and exported after tanning cannot be treated as a different commodity and exemption under sub-section (3) of section 5 of the Central Sales Tax Act, 1956, is allowable, provided the other conditions set out in section 5(3) of the Central Sales Tax Act are satisfied." 6.. When this matter was taken to the Supreme Court, the Appeal No. C.A. 2046 of 1996 came up for hearing along with the batch of cases relating to K.A.K. Anwar Co. reported in [1998] 108 STC 258 (SC) and the honourable Judges who heard the case reserved judgment except C.A. No. 2046/96 and this case was delinked from other batch cases and it was observed that as the High Court remanded the matter to the Appellate Assistant Commissioner for fresh disposal, the case would go back to the Appellate Assistant Commissioner for disposal in accordance with law. Therefore, this clearly indicates that Supreme Court itself felt that the decision in the Main Bench of K.A.K. Anwar Co. [1998] 108 STC 258 (SC) would not apply to the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as the content of section 5(3) of the Central Act. The observations in paragraph 16 of the said judgment have to be considered and viewed in the context of the views expressed in paragraphs 12 to 15 of the same decision." 8.. Thus the decision of the Supreme Court in K.A.K. Anwar Co. v. State of Tamil Nadu [1998] 108 STC 258 would not apply to the case reported in [1991] 82 STC 355 (Mad.) in the case of Azeezur Rahman. In fact the Commissioner of Commercial Taxes also clarified in circular dated July 18, 1994 in letter No. Acts Cell/III/129820/93 that if the raw hides and skins purchased locally converted into finished leather and exported against a specific order from the foreign buyer for export of such finished goods of dressed hides and skins such raw hides and skins and dressed hides and skins are treated as one and the same commodity and eligible for exemption under section 5(3) of the CST Act. In short while raw hides and skins and tanned hides and skins could be treated as different commodities under the local Act in so far as the CST Act is concerned both the commodities namely raw hides and skins and tanned hides and skins should be treated as single commodity on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at commercially they can no longer be regarded as the original goods, but instead become a new and different kind of goods and then they are exported, the purchases of original goods made by the assessee cannot be said to be purchases in the course of export." 11. This view of the Supreme Court is reiterated in Vijayalaxmi Cashew Company v. Deputy Commercial Tax Officer reported in [1996] 100 STC 571. Wherein the following observations were made: "In order to resist imposition of sales tax by the State, the assessee will have to establish the identity of the goods purchased with the goods to be exported out of the territory of India. In order to fulfil an export obligation, if an exporter purchases goods and as a result of some processing, the identity and character of the goods change, then it will not be a case of export of the same goods." 12.. Therefore the crucial question in the present case for allowing exemption under section 5(3) of the CST Act is whether raw hides and skins and dressed hides and skins are different commodities or a single commodity. The Appellate Tribunal relied on the decision of the Supreme Court in K.A.K. Anwar Co. v. State of Tamil Nadu repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in Hajee Abdul Shukoor and Company v. State of Madras [1964] 15 STC 719; [1964] 8 SCR 217. The appellant therein had contended that tanned and untanned hides and skins did not form different commodities and, therefore, tax could not be levied on the sales of hides and skins in the raw condition when no tax is levied on the sale of hides and skins in the tanned condition. On the other hand, the State had contended that they were two different commodities and constituted two separate commodities for the purpose of taxation. The court at page 727 of STC (page 227 of SCR) observed that hides and skins in the untanned condition are undoubtedly different as articles of merchandise than tanned hides and skins . It then dealt with the contention that tanning was only a preservative process which makes no change in the nature of the article itself, a submission which has also been raised in the present case on behalf of the appellant. The court, however, did not accept this submission and in this connection it approved the observations in Government of Andhra v. Nagendrappa [1956] 7 STC 568 (AP) and State of Andhra Pradesh v. Mohammad Azam Abdul Bari and Co. [1958] 9 STC 231 (AP) to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade or commerce, it is section 15 which imposes the restrictions and conditions in regard to tax on sale or purchase of declared goods within a State. Section 14, in other words, is not a taxing provision but it merely classifies different commodities under the same species under one entry. Merely because different goods or commodities are listed together in the same sub-heading or sub-item in section 14 cannot mean that they are regarded as one and the same item. Whenever the Legislature wanted different goods placed in the same entry to be regarded as a single commodity it expressly provided for the same. By Act 103 of 1976, sub-sections (c) and (d) were inserted in section 15 of the Central Sales Tax Act. With the introduction of section 15(d) 'each of the pulses referred to in clause (vi-a) of section 14, whether whole or separated, and whether with or without husk, were to be treated as a single commodity for the purposes of levy of tax under that law'. If the intention of the Legislature had been that the various commodities mentioned in the same clauses in section 14 were to be regarded as a single commodity it would have specifically provided as such. The Legislature, howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Sterling Foods v. State of Karnataka) and [1996] 100 STC 571 (Vijayalaxmi Cashew Company v. Deputy Commercial Tax Officer). It has been categorically held that if the goods purchased and the goods exported are different commercial commodities, then naturally an assessee is not entitled to exemption in respect of the purchases under section 5(3) of the CST Act. Thus, in the present case also, we find that the assessee exported dressed hides and skins in pursuance of foreign export order for dressed hides and skins. However, the assessee purchased raw hides and skins which is totally a different commercial commodity as held in the decision reported in K.A.K. Anwar's case [1998] 108 STC 258 (SC), and therefore the purchase of raw hides and skins cannot be considered as "those goods" as contemplated under section 5(3) of the Act. Thus, we find the conclusion reached by the Appellate Tribunal in disallowing the exemption under section 5(3) of the CST Act is quite in order. 16.. Briefly we shall refer to the decisions relied on by the learned Senior Counsel for the petitioner to show how these decisions are not relevant in the light of the decision of the Supreme Court in K.A.K. Anwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n an examination of the relevant provisions, it came to the conclusion that the Madras Act deals with untanned hides and skins as different goods from tanned hides and skins and on that basis, held that sub-rule (1) did not become invalid or unenforceable when subrule (2) of rule 16 was struck down by the Supreme Court. We are, therefore, of the opinion that the decision of the Supreme Court in [1964] 15 STC 719 (Hajee Abdul Shukoor and Co. v. State of Madras) does not conclude the issue arising before us. The said decision must be understood in the context of the provisions of the Act considered therein and having regard to the contentions urged before and considered by the court. " 19.. Finally, the Andhra Pradesh High Court observed that the decision reported in [1964] 15 STC 719 (SC) (A. Hajee Abdul Shukoor and Co. v. State of Madras) is distinguishable inasmuch as it dealt with a situation bearing no analogy the question at issue, namely, exemption under section 5(3) of the CST Act. Finally, the Andhra Pradesh High Court held that the dealers are not liable to pay sales tax on the turnover relating to purchase of raw/untanned hides and skins inasmuch as they purchased the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght together in one entry. Whether raw or dressed, the product falls under the same entry. We are of opinion that this represents the correct view of the scope of the entry in question." The High Court further observed as follows: ".......in our view, for purposes of entitling an assessee to the benefits of section 5(3) in respect of a commodity subject to the limitations contained in section 14(iii) read with section 15 of the Central Sales Tax Act, the socalled lack of commercial identity has no relevance and what is really relevant is whether the sale or purchase in question is the 'penultimate sale or purchase' that satisfies the two conditions specified in section 5(3), namely, (a) that such penultimate sale must take place (i.e., become complete) after the agreement or order under which the goods are to be exported; and (b) it must be for the purpose of complying with such agreement or order and it is only then that such penultimate sale or purchase is deemed to be in the course of export. We are also of the view that the words 'those goods' found in section 5(3) of the Act do not mean and refer to the goods sold or purchased preceding the sale or purchase occasioning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been fulfilled for granting exemption under section 5(3) of the Act in the light of the declaration of law, namely, raw hides and skins and tanned hides and skins are single commodity. Only this view of the Madras High Court in T. Azeezur Rahman and Company v. State of Tamil Nadu [1991] 82 STC 355 was followed in M.S. Mohamed Siddique and Company v. State of Tamil Nadu reported in [1993] 91 STC 336 (Mad.) while holding that for the purpose of exemption, under subsection (3) of section 5 of the CST Act, both raw hides and skins and tanned hides and skins cannot be treated as different commercial commodities. In that case, regarding assessability of first sales of dressed hides and skins under section 7(b) of the Act, the Tribunal had remanded the matter to the Appellate Assistant Commissioner. Further, though the Madras High Court held that raw hides and skins and tanned hides and skins are one and the same commodity, the matter was remanded so as to find out whether the other norms and conditions fixed to consider the claim of the assessee under section 5(3) of the CST Act have been satisfied. Therefore, when this matter was taken up before the Supreme Court while reserving the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 998] 108 STC Frsc, page 5 and [1998] 111 STC Frsc, page 4, the claim of exemption allowed on raw hides and skins under section 5(3) of the Act was upheld by the Supreme Court by dismissing the S.L.Ps., it cannot be said that the Supreme Court overruled the decision reported in [1998] 108 STC 258 (K.A.K. Anwar Co. v. State of Tamil Nadu) wherein it was held that raw hides and skins and tanned hides and skins are different commercial commodities. In fact, it is a case of the attention of the learned Judges not being drawn to the observations of the Supreme Court in K.A.K. Anwar's case [1998] 108 STC 258 and that of the Constitution Bench in A. Hajee Abdul Shukoor's case [1964] 15 STC 719. Similarly, the decision of the Karnataka High Court in [1992] 84 STC 133 (Farida Prime Tannery v. State of Karnataka), wherein the raw hides and skins and tanned hides and skins have been held as the same goods for the purpose of exemption under section 5(3) of the CST Act also is not relevant in the light of the decision of the Supreme Court in K.A.K. Anwar Co. v. State of Tamil Nadu [1998] 108 STC 258. As regards, the circular dated July 18, 1994 of the Commercial Tax Department relied on by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act, we find that the assessment was made to the best judgment for various suppression found in the accounts and for claiming exemption under section 5(3) of the Act when no such exemption is allowable. In such circumstances as rightly held by the Appellate Tribunal, the penalty is a corollary to the assessment made under section 12(2) of the Act and the quantum of penalty is in the slab with reference to difference in tax determined and tax paid by the dealer. Thus, the quantum of penalty fixed by the Appellate Tribunal having regard to the re-determination of the taxable turnover and tax payable by the dealer and tax paid by the dealer is in accordance with the law and no interference is called for. 25.. In fine, the Appellate Tribunal has neither decided erroneously nor failed to decide any question of law involved in this case and in such circumstances, we find that there is no case to interfere and accordingly the tax revision case is dismissed at the admission stage itself. And this Tribunal doth further order that order on being produced be punctually observed and carried into execution by all concerned. Issued under my hand and the seal of this Tribunal on th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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