TMI Blog1964 (5) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... t section become unenforceable. - W.P.(C) 201 OF 1963 - - - Dated:- 7-5-1964 - SUBBA RAO K., HIDAYATULLAH M., SHAH J.C., RAGHUBAR DAYAL AND MUDHOLKAR J.R. JJ. -------------------------------------------------- The judgment of the Court was delivered by RAGHUBAR DAYAL, J.- These are three petitions under Article 32 by the petitioners, which is a partnership firm, praying for a declaration that section 2 of the Madras General Sales Tax (Special Provisions) Act, 1963 (Act No. 11 of 1963), hereinafter called the Act, is ultra vires the Constitution and of no effect and for a writ of mandamus directing the State of Madras to refrain from enforcing any of the provisions of that section. Each of the petitions relates to a particular assessment year. The petitioners are dealers in skin, carrying on business at Shenbakkam, Vellore, North Arcot District, in the State of Madras. They purchase raw skins from places both within and outside the State of Madras, tan the same and sell them through their agents in Madras. They were assessed to a certain amount of sales tax, in accordance with the provisions of the Madras General Sales Tax Act, 1939 (Madras Act IX of 1939), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins in the untanned condition." The relevant provisions of the Ordinance read "2. Special provisions in respect of tax on sale of hides and skins in certain cases.- (1) Notwithstanding anything contained in the Madras General Sales Tax Act, 1939 (Madras Act IX of 1939) (hereinafter referred to as the said Act), or in the Rules made thereunder (herein- after referred to as the said rules), the following provisions shall apply in respect of tax on sale of hides and skins during the period commencing on the 1st April, 1955, and ending on the 31st March, 1959: (i) In the case of raw hides and skins, the tax under the said Act shall be levied from the dealer who is the last purchaser in the State and not exempt from taxation under sub-section (3) of section 3 of the said Act at the rate of two per cent. of the amount for which they are bought by him. (ii) In the case of dressed hides and skins (which were not subjected to tax under the said Act as raw hides and skins), the tax under the said Act shall be levied from the dealer who in the State is the first seller in such hides and skins not exempt from taxation under sub-section (3) of section 3 of the said Act at the rate of tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section (2) of section 1 provided that the Act would be deemed to have come into force on June 10, 1963. Sub-section (1) of section 2 of the Act reads: "(1) Notwithstanding anything contained in the Madras General Sales Tax Act, 1939 (Madras Act IX of 1939) (hereinafter referred to as the said Act), or in the Rules made thereunder (hereinafter referred to as the said rules), during the period commencing on the 1st April, 1955, and ending on the 31st March, 1959, in respect of sale of dressed hides and skins (which were not subjected to tax under the said Act as raw hides and skins), the tax under the said Act shall be levied from the dealer who in the State is the first seller in such hides and skins not exempt from taxation under sub-section (3) of section 3 of the said Act at the rate of two per cent. of the amount for which such hides and skins were last purchased in the untanned condition. Explanation I.- The burden of proving that a transaction is not liable to taxation under this sub-section shall be on the dealer. Explanation II.- For the removal of doubts it is hereby declared that in respect of sales to which sub-section (1) applies, nothing in rule 16(2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... life of the community. The Act provided for taxation on the sale of hides and skins during the period such declaration was in force, i.e., between April 1, 1955, and September 11, 1956, and therefore required the assent of the President, in view of Article 286(3) of the Constitution as it stood prior to its repeal in September, 1956. As no such assent had been received, the Act cannot affect the sales prior to September 11, 1956, and so no tax can be levied in respect of those sales. 4.. Rule 16(1) became invalid when this Court held rule 16(2) invalid. Rule 16(1) has not been revived by the new Act. It follows that no tax on sale of raw hides and skins during the period 1955-57 is valid and that therefore the imposition of a tax under sub-section (1) of section 2 of the impugned Act (sic) imposes a tax on the imported hides and skins when sold in the State in the tanned condition while no tax is to be levied on the sale of the hides and skins purchased in the State in the raw condition, then tanned and sold. These contentions are sought to be met for the respondent-State on the following grounds: 1.. It is open to the Legislature to treat dressed hides and skins as a separa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present rule therefore is discriminatory and invalid for the same reasons which led this Court to hold sub- rule (2) of rule 16 invalid in Mehtab's case A.I.R. 1963 S.C. 928; 14 S.T.C. 355. There is no escape from this conclusion. In the earlier case, discrimination was brought about on account of sale price of tanned hides and skins to be higher than the sale price of untanned hides and skins, though the rate of tax was the same, while in the present case, the discrimination does not arise on account of difference of the price on which the tax is levied as the tax on the tanned hides and skins is levied on the amount for which those hides and skins were last purchased in the untanned condition, but on ac- count of the fact that the rate of tax on the sale of tanned hides and skins is higher than that on the sale of untanned hides and skins. The rate of tax on the sale of tanned hides and skins is 2% on the purchase price of those hides and skins in the untanned condition while the rate of tax on the sale of raw hides and skins in the State during 1955 to 1957 is 3 pies per rupee. The difference in tax works out to 7/1600th of a rupee, i.e., a little less than naya paisa per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des has been considered by Courts a few times. In Government of Andhra v. Nagendrappa [1956] 7 S.T.C. 568, 573., is the observation: "The tanning of raw hides and skins is a manufacturing process as a result of which the product that emerges is different from the raw material." In State of Andhra Pradesh v. M. A. Abdul Bari and Co. [1958] 9 S.T.C. 231, 237. is also an observation to the same effect it being, "The stage of collection is also appropriate as, after the tanning, the hides and skins become different commodities....." In Encyclopaedia Brittannica, Vol. 13, p. 845, it is stated, in connection with "leather": "Leather is manufactured from the hides and skins of various animals...... The object of tanning (or the manufacture of leather) is the conversion of the putrescible skin into a material which under ordinary conditions of use does not putrefy, and which can be wetted and subsequently dried without becoming hard or horny." Reference may also be made to State of Travancore-Cochin v. Shanmugha Vilas Cashew-nut Factory [1954] S.C.R. 53; 4 S.T.C. 205. in which it was held that raw cashew-nuts become a different commodity commercially after the application of ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al No. 7. The rate of tax is different and so is the point at which the tax is to be levied. This will indicate that in 1959 the Legislature in Madras considered raw hides and skins a different commodity from dressed hides and skins. There is no good reason why the Legislature be not attributed the same intention when it enacted the 1939 Act especially when there are other reasons also to point to the same conclusion. We therefore hold that raw hides and skins and dressed hides and skins constitute different commodities or merchandise and they could therefore be treated as different goods for the purposes of the Act. The provision of the Act at the relevant time for the levy of tax on the sale of hides and skins was section 5, clause (vi), which reads: "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, sub-section (1) only at such single point in the series of sales by successive dealers as may be prescribed." In 1957 this provision was replaced by section 5-A(4) which read: "The sale of hides and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber 11, 1956, read: "No law made by the Legislature of a State imposing, or authoris- ing the imposition of, a tax on the sale or purchase of any such goods as have been declared by Parliament by law to be essential for the life of the community shall have effect unless it has been reserved for the consideration of the President and has received his assent." This provision, however, did not apply to the 1939 Act which had been enacted much earlier than the commencement of the Constitution. By August 28, 1963, when the Act was enacted by the Madras Legislature, Article 286(3) had been amended and Act LII of 1952 had also been repealed. Consequently there was no Constitutional requirement for the Act being reserved for the assent of the President before it could be enforced. It is contended for the petitioner that the Act really enacted for a period, when if passed, it had to receive the President's assent for its enforcement and that therefore the State Legislature could not even in 1963 enact this provision affecting the taxation law in respect of the sale or purchase of goods which were goods declared essential for the life of the community. We do not see why such a fetter be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act makes provision for a period subsequent to the commencement of the Constitution and there- fore is to be subject to the provisions of the Constitution. We therefore hold that sub-section (1) of section 2 of the Act discriminates against imported hides and skins which were sold up to the 1st of August, 1957, upto which date the tax on sale of raw hides and skins was at the rate of 3 pies per rupee or 19/16th per cent. This however does not mean that the sub-section is valid with respect to the sales which took place subsequent to August 1, 1957. The sub- section being void in its provisions with respect to a certain initial period, we cannot change the provision with respect to the period as enacted to the period for which it could be valid as that would be re- writing the enactment. We have therefore to hold sub-section (1) of section 2 void, and accordingly hold so. In view of the provisions of sub-section (1) of section 2 being invalid the other provisions of that section become unenforceable. We therefore allow the petitions with costs, one hearing fee, and hold section 2(1) of the Act invalid and order the issue of a writ of mandamus to the State of Madras and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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