TMI Blog1976 (11) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... HANNA, J.- These appeals by special leave are against the judgment of the Madras High Court whereby that court repelled the challenge to the validity of items 7(a) and 7(b) of the Second Schedule to the Madras General Sales Tax Act, 1959 (hereinafter referred to as the State Act). The appellants are dealers in hides and skins. The appellants purchase raw hides and skins locally as well as in the course of inter-State trade and commerce. The raw hides and skins are converted into dressed hides and skins and are sold either locally or in the course of export. The matter relates to the assessment year 1968-69 and the dispute between the parties arises because of the inclusion in the turnover of the sale and purchase price of some of the above goods. The appellants by means of writ petitions challenged the validity of items 7(a) and 7(b) of the Second Schedule to the State Act. The High Court, as already mentioned, repelled the attack on the validity of those items and dismissed the writ petitions. Before dealing with the contentions advanced, it may be appropriate to refer to the relevant provisions. Section 4 of the State Act is the charging section in respect of declared goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose on goods imported from other States or the Union territories any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced; and........" According to the learned counsel, there can be three types of sale transactions in respect of dressed hides and skins: (1) Dressed hides and skins imported from outside the State of Tamil Nadu and sold within that State; (2) Import of raw hides and skins from outside the State of Tamil Nadu. Tanning of the aforesaid raw hides and skins within the State of Tamil Nadu and the sale of the same within that State as dressed hides and skins; and (3) Purchase of raw hides and skins within the State of Tamil Nadu and sale of the same within that State as dressed hides and skins after tanning those hides and skins. It is urged that in respect of hides and skins covered by the third category, the local sales of dressed hides and skins will not be liable to tax under the State Act as the purchase of raw hides and skins has already been subjected to tax under item 7(a). Regarding hides and skins mentioned at (1) and (2) above, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tanned hides or skins; he pays on the purchase price only. If the dealer purchases raw hides or skins from outside the State and tans them within the State, he will be liable to pay sales tax on the sale price of the tanned hides or skins." In the case of Hajee Abdul Shukoor [1964] 15 S.T.C. 719 (S.C.)., this court held that sub-section (1) of section 2 of the Madras General Sales Tax (Special Provisions) Act, 1963, discriminated against imported hides and skins which were sold up to August 1, 1957. The rate of tax on the sale of tanned hides and skins as would appear from that judgment was "2 per cent 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 court in this context referred to Mehtab's case [1963] 14 S.T.C. 355 (S.C.)., and observed: "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the hides and skins which were imported from other States was upon the appellant. The appellant, we find, has failed to discharge such onus. Article 304(a) does not prevent levy of tax on goods: what it prohibits is such levy of tax on goods as would result in discrimination between goods imported from other States and similar goods manufactured or produced within the State. The object is to prevent discrimination against imported goods by imposing tax on such goods at a rate higher than that borne by local goods since the difference between the two rates would constitute a tariff wall or fiscal barrier and thus impede the free flow of inter- State trade and commerce. The question as to when the levy of tax would constitute discrimination would depend upon a variety of factors including the rate of tax and the item of goods in respect of the sale of which it is levied. The scheme of items 7(a) and 7(b) of the Second Schedule to the State Act is that in the case of raw hides and skins which are purchased locally in the State, the levy of tax would be at the rate of 3 per cent at the point of last purchase in the State. When those locally purchased raw hides and skins are tann ..... X X X X Extracts X X X X X X X X Extracts X X X X
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