TMI Blog1962 (11) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... tion raises the question of the validity of rule 16 of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, hereinafter called the Rules. The impugned rule was published on September 7, 1955, and was substituted in the place of old rule 16. The new rule was to be effective from April 1, 1955. The petitioner is a dealer in hides and skins. He sells hides and skins tanned outside the State of Madras, as well as those tanned inside the State. The Deputy Commercial Tax Officer I, Moore Market Division, Madras, assessed the petitioner to sales tax for the year 1955-56 on a turnover of Rs. 29,89,624-15-11. Out of this a turnover of Rs. 28,10,625-2-0 represented sales of tanned hides and skins which had been obtained from outside the State of Madras. Sales tax was levied on hides and skins under the provisions of the Madras General Sales Tax Act, 1939, (Act IX of 1939), hereinafter called the Act. Section 3 is the charging section and its relevant portions read: - "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; and (b) the tax shall be calculated at the rate of three pies for e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es or skins imported from outside the State after purchase in their raw condition and then tanned inside the State are also subject to higher taxation than hides or skins purchased in the raw condition in the State and tanned within the State, as the tax on the former is on the sale price of the tanned hides or skins and on the latter is on the sale price of the raw hides or skins. Such a discriminatory taxation is said to offend the provisions of Article 304(a) of the Constitution. Similar are the contentions for the interveners in the case. The contentions for the respondents are: (1) Sales tax does not come within the purview of Article 304(a) as it is not a tax on the import of goods at the point of entry. (2) The impugned rule is not a law made by the State Legislature. (3) The impugned rule, by itself, does not impose the tax, but fixes the single point at which the tax imposed by sections 3 and 5 of the Act is to be levied. (4) The impugned rule was not made with an eye on the place of origin of the goods but as a matter of necessity, in view of the requirements of the statutory provisions to the effect that hides or skins, raw or tanned, came with- in one category ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equirements of Article 302 or Article 304 of Part XIII." In the majority judgment in the Automobile Transport case(2), it was said at page 1424: "The interpretation which was accepted by the majority in the Atiabari Tea Co. case [1961] 1 S.C.R. 809; A.I.R. 1961 S.C. 232. is correct, but subject to this clarification. Regulatory measures or measures imposing compensatory taxes for the use of trading facilities do not come within the purview of the restrictions contemplated by Article 301." Earlier in the judgment it was observed at page 1422: "Such regulatory measures as do not impede the freedom of trade, commerce and intercourse and compensatory taxes for the use of trading facilities are not hit by the freedom declared by Article 301. They are excluded from the purview of the provisions of Part XIII of the Constitution for the simple reason that they do not hamper trade, commerce and intercourse but rather facilitate them." Subba Rao, J, c oncurred in this view and said at page 1436: "(1) Article 301 declares a right of free movement of trade without any obstructions by way of barriers, inter-State, intra-State, or other impediments operating as such barriers. (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red on him under section 19 of the Act and would therefore have statutory force. In fact, sub-section (5) of section 19 provides that the rules shall have effect as if enacted in the Act. We therefore do not agree that rule 16 is not a law which would fall within a law made by the State Legislature. It is true that the impugned rule, by itself, does not impose the tax, but fixes the single point at which the tax imposed by sections 3 and 5 is to be levied. What the rule provides is a step necessary for the imposition of the tax in view of sections 3 and 5 and therefore the impugned rule is a part of the enactment which imposes the tax. The fact that the impugned rule was made in order to prescribe the single point in the series of sales by successive dealers at which the tax on sale of hides or skins was to be levied, in view of sections 3 and 5 of the Act, does not justify the making of such a rule which discriminates between the tax imposed on goods imported from outside the State and the goods produced or manufactured in the State. Now, the only question that remains for consideration is whether this rule discriminates between hides or skins imported from outside the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tans them within the State, he will be liable to pay sales tax on the sale price of the tanned hides or skins. He too will have to pay more for tax even though the hides and skins are tanned within the State, merely on account of his having imported the hides and skins from outside, and having not therefore paid any tax under sub-rule (1). It is true that dealers, though few, selling hides and skins which had been tanned within the State, will also have to pay similar tax if no tax had been paid previously, they having not purchased the raw hides and skins at all as they were from the carcasses of animals owned by them; but this does not affect the discriminatory nature of the tax as already indicated. It is urged for the respondent State that to consider discrimination between the imported goods and goods produced or manufactured in the State, circumstances and situations at the taxable point must be similar and that the circumstance of hides or skins tanned within the State and on which tax had been paid earlier at the time of their purchase in the raw condition is sufficient to consider such hides or skins to be different from the hides or skins which had been tanned outside ..... X X X X Extracts X X X X X X X X Extracts X X X X
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