TMI Blog1988 (7) TMI 397X X X X Extracts X X X X X X X X Extracts X X X X ..... as the said purchase is a purchase in the course of export within the meaning of sub-section (3) of section 5 of the Central Sales Tax Act read with section 38 of the Andhra Pradesh General Sales Tax Act. This plea was accepted by the Commercial Tax Officer, but his order was set aside by the revisional authority under section 20 of the Andhra Pradesh General Sales Tax Act who was of the opinion that the respondent is not entitled to any exemption under section 5(3) of the Central Sales Tax Act for the reason that untanned hides and skins and tanned hides and skins are different goods. The matter was then carried to the Tribunal. The Tribunal held that they are not different goods or commodities and, therefore, section 5(3) applies and the turnover in the said goods is exempt. The Tribunal's view is questioned in this revision. Hides and skins are declared goods. Section 14(iii) of the Central Sales Tax Act declares "hides and skins, whether in a raw or dressed state" as goods which are of special importance in inter-State trade or commerce. Entry 9 in the Third Schedule to the Andhra Pradesh General Sales Tax Act levies tax on hides and skins at the purchase point. It would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o have taken place in the course of export of the goods; while sub-section (2) of section 5 sets out when a sale or purchase of goods shall be deemed to have taken place in the course of import of the goods. Sub-section (3) of section 5 was inserted by the Central Amendment Act 103 of 1976 with retrospective effect from 1st April, 1976. The object behind sub-section (3) is to exempt-in addition to the sale or purchase which occasions the export of goods-the immediately preceding sale or purchase as well. In other words, even the sale or purchase antecedent to export sale is also treated as a purchase/sale in the course of export. Section 5 of the Central Sales Tax Act reads as follows: "5. When is a sale or purchase of goods said to take place in the course of import or export.-(1) A sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. (2) A sale or purchase of goods shall be deemed to take place in the course of the import o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . v. State of Madras [1964] 15 STC 719 wherein untanned hides and skins and tanned hides and skins were held to be different goods. The Tribunal was however of the opinion that the said decision was rendered before section 15 of the Central Sales Tax Act was brought into force, and that it has no application after the coming into force of the restriction contained in section 15(a). The Tribunal then referred to the several decisions of this Court and the Madras High Court holding that untanned hides and skins and tanned hides and skins are the same goods for the purpose of section 5(3) and section 15(a) of the Central Sales Tax Act, and accordingly held that the dealers are entitled to the benefit of section 5(3) of the Central Sales Tax Act. The question whether untanned hides and skins and tanned hides and skins are the same goods or different goods, appears to have been first considered by a Bench of this Court in T.R.C. No. 11 of 1969 dated 10th February, 1971. Of course, it was not a case arising under section 5(3) of the Central Sales Tax Act. The question there was whether the dealer is entitled to reimbursement of sales tax paid on purchase of raw hides and skins when, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of sections 14 and 15 of the Central Sales Tax Act read with the proviso to section 6 of the Andhra Pradesh General Sales Tax Act." This decision was followed by another Bench of this Court in State of Andhra Pradesh v. Associated Tanners [1975] 36 STC 32. In this case, the dealer purchased raw hides and skins within the State, paid tax thereon, tanned them and sold them in the course of inter-State trade or commerce. The question was whether the inter-State sale is exempt from tax by virtue of sub-section (2A) of section 8 of the Central Sales Tax Act which provides that where a transaction of sale is exempt from tax under the State enactment or is taxed at a rate lower than 4 per cent, the Central sales tax shall also be either exempt or be levied at such lower rate, as the case may be. The contention of the dealer was that, inasmuch as tanned hides and skins were exempt from levy of sales tax under item 9(b) of the Third Schedule in case they had suffered tax at the raw stage, the tanned hides and skins are exempt from Central sales tax under section 8(2A) of the Central Sales Tax Act. This argument was rejected holding that though raw and tanned hides and skins formed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same goods which are exported out of the territory of India. But then it considered the question whether, by reason of any processing to which the goods may be subjected after purchase, they changed their identity so that, commercially speaking, they can no longer be regarded as the original goods inasmuch as they become a new and different kind of goods. What happened in that case was that a dealer was purchasing raw shrimps, prawns and lobsters and after subjecting them to the process of cutting heads and tails, peeling, de-veining, cleaning and freezing, was exporting the same. It was held that merely because they are processed or frozen, shrimps, prawns and lobsters do not become different goods but remain the same. The reasoning adopted by the Supreme Court in coming to the said conclusion is relevant for our purpose. Under the Karnataka Sales Tax Act as amended in 1982, shrimps, prawns and lobsters, other than frozen shrimps, prawns and lobsters, were liable to purchase tax at the last point of purchase within the State. The Karnataka High Court took the view that, inasmuch as the Karnataka Act made a distinction between raw shrimps, prawns and lobsters and processed or fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prawns and lobsters. The question whether raw shrimps, prawns and lobsters after suffering processing retain their original character or identity or become a new commodity has to be determined not on the basis of a distinction made by the State Legislature for the purpose of exigibility to State sales tax because even where the commodity is the same in the eyes of the persons dealing in it the State Legislature may make a classification for determining liability to sales tax. This question, for the purpose of the Central Sales Tax Act, has to be determined on the basis of what is commonly known or recognised in commercial parlance. If in commercial parlance and according to what is understood in the trade by the dealer and the consumer, processed or frozen shrimps, prawns and lobsters retain their original character and identity as shrimps, prawns and lobsters and do not become a new distinct commodity and are as much 'shrimps, prawns and lobsters', as raw shrimps, prawns and Lobsters, sub-section (3) of section 5 of the Central Sales Tax Act would be attracted and if with a view to fulfilling the existing contracts for export, the assessee purchases raw shrimps, prawns and lobst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of the Andhra Pradesh General Sales Tax Act by virtue of the explanation to section 38. Even otherwise, looking at the language of entry 9 of the Third Schedule to the Andhra Pradesh General Sales Tax Act, we are of the opinion that the same conclusion should follow. As noted hereinbefore, though raw hides and skins and tanned hides and skins are mentioned under two different sub-heads in entry 9 of the Third Schedule to the Andhra Pradesh General Sales Tax Act, they are not taxable simultaneously but only alternatively. If the hides and skins are taxed at the time of their sale in their raw (untanned) form, they are not again liable to tax when they are purchased in their tanned/ dressed state. This circumstance, in our opinion, goes to reinforce the conclusion arrived at by us. It must be remembered that the process of tanning is a process of preservation. According to Encyclopaedia Britannica, Vol. 13, at page 845, "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." In o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him: Provided that, if he proves that the tax has already been levied under sub-rule (1) on the untanned hides and skins out of which the tanned hides and skins had been produced, he shall not be so liable. (3) The burden of proving that a transaction is not liable to taxation under this rule shall be on the dealer." The validity of sub-rule (2) of rule 16 was challenged before the Supreme Court in Firm A.T.B. Mehtab Majid and Co. v. State of Madras [1963] 14 STC 355; AIR 1963 SC 928. The said sub-rule was struck down on the ground of its being violative of article 304 of the Constitution of India. After the said judgment of the Supreme Court, the Governor of Madras issued an Ordinance, being Madras Ordinance 3 of 1963, purporting to remove the mischief in the sub-rule which led to its declaration of invalidity. The said Ordinance was subsequently enacted into the Madras General Sales Tax (Special Provisions) Act, 1963. Section 2(1) of the said Act was challenged again by the dealers on the ground that section 2(1) suffers from the very same vice as was pointed out in the case of subrule (2) of rule 16. The Supreme Court agreed with the said submission and held that sub-sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the court a decision of the Madras High Court in P. Abdul Subhan Co. v. State of Madras [1960] 11 STC 173 and another decision of the Punjab and Haryana High Court in Raghbir Chand Som Chand v. Excise and Taxation Officer, Bhatinda [1960] 11 STC 149, in support of their contention. In P. Abdul Subhan Co. [1960] 11 STC 173, the Madras High Court held that by virtue of section 14(iii) of the Central Sales Tax Act, 1956, tanned and untanned hides and skins fall in one class and can be taxed only at single point. With respect to this decision, the Supreme Court observed that no reasons were given as to why two kinds of hides and skins are treated as same commodity. So far as the Punjab and Haryana decision in Raghbir Chand Som Chand [1960] 11 STC 149 is concerned, it did not deal with hides and skins but with ginned cotton and unginned cotton, which was held to be one commodity. The Supreme Court distinguished the same on the ground that it deals with another commodity. It is evident from a perusal of the decision that the court laid great stress upon how the State Act treated the said goods, which is evident from the following extract: "The real question is whether these pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hides and skins as different goods from tanned hides and skins and on that basis, held that sub-rule (1) did not become invalid or unenforceable when sub-rule (2) of rule 16 was struck down by the Supreme Court. We are, therefore, of the opinion that the decision of the Supreme Court in [1964] 15 STC 719 (Hajee Abdul Shukoor and Co. v. State of Madras) does not conclude the issue arising before us. The said decision must be understood in the context of the provisions of the Act considered therein and having regard to the contentions urged before and considered by the court. The learned Government Pleader then relied upon a Bench decision of this Court in Rafeeq Ahmed and Co. v. State of Andhra Pradesh [1969] 24 STC 430. In this case, the validity of G.O. Ms. No. 1094, Revenue, dated 14th July, 1964 was questioned by the dealers on the ground that it is opposed to section 15(b) of the Central Sales Tax Act. The said G.O. provided that sales of all declared goods in the course of inter-State trade and commerce be exempted from the tax payable by any dealer under the Central Act where tax had been levied and collected in respect of sale or purchase of such declared goods under the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
