TMI Blog1957 (1) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... the validity of the entire assessments, mainly on the ground that the provision, under which the petitioners applied for and obtained licences to deal in untanned hides and skins, was itself invalid. This attitude was adopted to obtain advantage from the decision of this Court in Noor Mohamed v. State of Madras[1956] 7 S.T.C. 792., which ruled that unlicensed dealers could not be assessed under rule 16 of the Turnover and Assessment Rules, under which alone a single point for levying a tax on the sale of hides and skins had been fixed. This contention was negatived by the Tribunal, and in general the correctness of this contention was the only point which was urged before us in these several cases. It would be necessary to set out some of the provisions of the Madras General Sales Tax Act and the Rules made thereunder in relation to the taxation of hides and skins and the decisions which have been rendered on the interpretation of these provisions in order to understand the arguments urged by learned counsel for the petitioners in support of his submission, that the sales tax levied upon licensed dealers is ultra vires and void. Section 3 of the Madras General Sales Tax Act, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of rule 16 shall apply to licensed tanners and licensed dealers in hides and skins in respect of their dealings in hides and skins. Rule 16(1), therefore, which is thus pointed out as the rule governing the taxation of dealings in hides and skins, provides: "16(1). In the case of hides and skins the tax payable under section 3(1) shall be levied in accordance with the provisions of this rule. (2) No tax shall be levied on the sale of untanned hides or skins by a licensed dealer in hides or skins except at the stage at which such hides or skins are sold to a tanner in the State or are sold for export outside the State(i) in the case of all untanned hides or skins sold to a tanner in the State, the tax shall be levied from the tanner on the amount for which the hides or skins are bought by him. (ii) in the case of all untanned hides or skins which are not sold to a tanner in the State but are exported outside the State, the tax shall be levied from the dealer who was the last dealer not exempt from taxation under section 3(3) who buys them in the State on the amount for which they were bought by him. (3) Sales by licensed dealers of hides or skins which have been tanned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of Madras[1955] 6 S.T.C. 352. The judgment was pronounced on 14th March, 1955. The point involved related to the computation of the turnover of a licensed hides and skins dealer who was liable to tax on his purchase turnover under rule 16(2)(i). The conclusions reached by the Full Bench would be seen from the following extract (at page 364): "The conclusion we have reached as a result of the above discussion is that (1) the charging provision, section 3, is subject, in the case of transactions in hides and skins, to the terms of section 5(vi) under which a single point of taxation in a series of sales has to be fixed by the rules; (2) rule 4(2) is not the fixation of a single point within section 5(vi) but is merely designed to determine whether it is the buyer or the seller that shall be liable to be taxed; (3) the single point is fixed and the liability to tax is established only under rule 16; and (4) that under rule 16(2)(i) it is only the sale of untanned hides and skins by a licensed dealer to a licensed tanner who tans the same that gives rise to a tax liability and that purchases of untanned hides and skins by tanners from persons other than licensed dealers are not w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell founded. In none of the earlier decisions, dealing with the construction of rule 16, was it held that rule 5 of the General Sales Tax Rules was invalid in so far as it enabled licensees to obtain the benefit of single point taxation. The ruling in Noor Mohamed's case[1956] 7 S.T.C. 792. really turned on the interpretation of section 6-A, in the light of the optional licensing provided for by the General Sales Tax Rules (rule 5). If a dealer opted not to apply for or obtain a licence, the legal consequence, on the language employed in rule 5, was to be found in rule 16(5) of the Turnover and Assessment Rules, viz., multi-point taxation. On this very ground, however, rule 16(5) was held to be ultra vires the rulemaking power. We therefore held in Noor Mohamed's case(1) that rule 5 which, in its then form, could not, in the context of the governing sections of the enactment, deprive an unlicensed dealer of the benefit of a single point tax, could not either alone or in conjunction with rule 16(2) be read as fixing any single point for their taxation. From this however it does not follow that the licensing provision itself is illegal or ultra vires. On the other hand, every one of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asses of dealers, those who have to pay the tax and those who have not to, except the taking of a licence, and the law instead of conferring a benefit on those who agree to subject themselves to regulation under the licence and pay for it, discriminates against them by taxing their purchases and favours unlicensed by not taxing them similarly. There is no intelligible criterion for this classification between the licence-holders who are taxed and the others on whom no tax is levied. The provision therefore is obnoxious to Article 14 as denying equal protection of the laws to the licensed dealers and in fact unfairly discriminating against them. Such were the contentions. Though at first sight the argument as summarised above appears to have considerable force, we have after careful consideration decided to reject it and for two reasons: (1) No objection could be taken to the rules as framed drawing a distinction between licensed and unlicensed dealers as violative of Article 14. In Syed Mohamed and Co. v. State of Madras(1), Venkatarama Aiyar, J., observed: "Lastly, it was argued that the rules make a distinction between licensed dealers and unlicensed dealers and that is an arbi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... majority held that taxes on income derived from real estate and from invested personal property were direct taxes, whose imposition without apportionment was unconstitutional. The Act of Congress included in the total income on which the tax was levied, other items which partook of the nature of a tax on privilege or excise duties, which Congress could impose inter-apportionment. The question that immediately arose was whether the taxing enactment could be sustained at least as regards this valid portion. The Court however ruled against it on the ground of inseparability, Fuller, C.J., saying, "It is elementary that the same statute may be in part constitutional and in part unconstitutional, and if the parts are wholly independent of each other that which is constitutional may stand while that which is unconstitutional will be rejected. And in the case before us, there is no question as to the validity of this Act, except sections twenty seven to thirty-seven inclusive, which relate to the subject which has been under discussion; and as to them we think the rule laid down by Chief Justice Shaw in Warren v. Charleston(2) is applicable, that if the different parts 'are so mutually co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... connection with the taxation considered as an entirety, we are constrained to conclude that sections twenty-seven to thirty-seven, inclusive, of the Act, which became a law without the signature of the President on August 28, 1894, are wholly inoperative and void." This approach is not possible in the present case and indeed was not even suggested by learned counsel for the petitioner. Dealing then with the matter on principle, it appears to us that the essence of the freedom guaranteed by Article 14 and the evil which the Article seeks to guard against is the avoidance of designed and intentional hostile treatment or discrimination on the part of the law-making authorities or of those entrusted with administering them. Notwithstanding patient search, we have been unable to discover any decision of the American Courts where a law has been declared unconstitutional as violative of the Fourteenth Amendment, merely because of its partial operation where this was unintended or was due to fortuitous circumstances. For instance, it is no constitutional objection to the validity of a penal statute that every offender against it, known or unknown, is not prosecuted. Similarly, if a taxin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. Holmes, J., who spoke for an unanimous Court said: "It is suggested that there is an arbitrary classification because the tax is confined to sleeping and parlor car companies, and does not fall upon railroads operating their own sleeping and parlor cars. If otherwise this were a valid objection, as to which we need express no opinion, it is enough to say that a tax is not to be upset upon hypothetical and unreal possibilities, if it would be good upon the facts as they are...... It does not appear that any railroad in Florida does operate its own sleeping or parlor cars, and the Attorney-General of the State denies that such a case exists." The facts of the present case though not identical are only slightly different. The learned Advocate-General has placed before us an analysis of the total number of licensed tanners and dealers and the number of them who dealt without a licence in the State during the years 1947-48 to 1954-55 (the year of assessment of petitioners in the several Tax Revision Cases being 1951-52, and all of them being dealers in the North Arcot District) which is set down below. T-Tanner D-Dealer Year Licensed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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