1988 (7) TMI 397 - HC - VAT and Sales Tax

Issues Involved:
1. Whether tanned hides and skins and untanned hides and skins are the same goods.
2. Applicability of Section 5(3) of the Central Sales Tax Act.
3. Interpretation of Section 14(iii) of the Central Sales Tax Act.
4. Relevance of Section 38 of the Andhra Pradesh General Sales Tax Act.
5. Application of commercial parlance test.
6. Validity and relevance of previous judgments.

Issue-wise Detailed Analysis:

1. Whether tanned hides and skins and untanned hides and skins are the same goods:
The primary question was whether tanned hides and skins and untanned hides and skins are the same goods for the purposes of taxation. The Tribunal held that they are not different goods or commodities, thereby making Section 5(3) applicable and exempting the turnover in said goods from tax. The Court supported this view, stating that hides and skins, whether raw or dressed, must be treated as the same goods under Section 14(iii) of the Central Sales Tax Act due to the identical wording of the clause for both raw and dressed states. This conclusion was reinforced by the fact that hides and skins are not taxed simultaneously but alternatively under Entry 9 of the Third Schedule to the Andhra Pradesh General Sales Tax Act.

2. Applicability of Section 5(3) of the Central Sales Tax Act:
Section 5(3) exempts the last sale or purchase preceding the export of goods from sales tax if it was made for the purpose of complying with an export agreement. The Court concluded that since the dealers purchased raw hides and skins to comply with export orders, tanned them, and then exported them, the purchase of raw hides and skins is exempt from sales tax under Section 5(3). The Court emphasized that the goods involved in the antecedent purchase and the export sale must be the same for the exemption to apply.

3. Interpretation of Section 14(iii) of the Central Sales Tax Act:
Section 14(iii) declares "hides and skins, whether in a raw or dressed state" as goods of special importance in inter-State trade or commerce. The Court interpreted this to mean that raw and tanned hides and skins are the same goods for the purpose of the Central Sales Tax Act. The Court noted that the process of tanning is a manufacturing process aimed at preserving hides and skins, but this does not change their fundamental identity as hides and skins.

4. Relevance of Section 38 of the Andhra Pradesh General Sales Tax Act:
Section 38 exempts sales or purchases that take place in the course of import or export. The explanation to Section 38 imports Section 5 of the Central Sales Tax Act for determining when a sale or purchase occurs in the course of import or export. The Court held that since raw and tanned hides and skins are the same goods under the Central Sales Tax Act, they must also be treated as the same goods under the Andhra Pradesh General Sales Tax Act by virtue of Section 38.

5. Application of commercial parlance test:
The Court applied the commercial parlance test to determine whether raw and tanned hides and skins are considered the same goods. It concluded that in commercial parlance, hides and skins, whether raw or tanned, are understood as the same goods. This conclusion was supported by previous judgments, such as Sterling Foods v. State of Karnataka, where the Supreme Court held that processed or frozen shrimps, prawns, and lobsters remain the same goods as raw shrimps, prawns, and lobsters.

6. Validity and relevance of previous judgments:
The Court reviewed several previous judgments, including Hajee Abdul Shukoor and Co. v. State of Madras, where untanned hides and skins and tanned hides and skins were held to be different goods. However, the Court distinguished these cases based on the context and the specific provisions of the Central Sales Tax Act and the Andhra Pradesh General Sales Tax Act. The Court concluded that the decision in Hajee Abdul Shukoor and Co. does not apply to the present case as it was based on the specific provisions of the Madras Act, which treated raw and tanned hides and skins as different goods.

Conclusion:
The Court dismissed the tax revision cases, holding that the dealers are not liable to pay sales tax on the turnover relating to the purchase of raw/untanned hides and skins. The Tribunal's conclusion that raw and tanned hides and skins are the same goods for the purpose of Section 5(3) of the Central Sales Tax Act was upheld. The petitions were dismissed with no order as to costs.

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