TMI Blog1991 (3) TMI 344X X X X Extracts X X X X X X X X Extracts X X X X ..... the said turnover was eligible for exemption having regard to section 5(3) of the Central Sales Tax Act, 1956. In respect of certain other items of turnover also, they opposed the proposals of the assessing authority which need not detain us further by going into the details. The assessing authority, by its order dated 30th August, 1980, came to the conclusion that the raw and tanned skins are commercially different commodities, that, therefore, what they had purchased is different from what they had exported and consequently, the exemption claimed as above was rejected. The total and taxable turnover were fixed at Rs. 50,66,419.58 and Rs. 38,47,256.55, respectively and assessed to tax of Rs. 99,078.85. So far as the raw hides and skins locally purchased by them are concerned, the same were subjected to tax at 3 per cent. 3.. Aggrieved, the assessee filed an appeal before the first appellate authority and contended that under the Central Sales Tax Act, hides and skins whether in a raw or dressed state, are classified as one category under section 14(iii) of the said Act. The first appellate authority also was of the view that raw hides and skins purchased by the assessee were not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and consequently in the light of the subsequent developments of the law as emanating from the Supreme Court, the conclusions of the Tribunal as well as that of the judgment in T.C. Nos. 824 to 827 of 1980 cannot be sustained and are liable to be set aside. In other words, learned counsel contended that lack of commercial identity, if any, in the raw hides and skins purchased and those subsequently tanned and exported outside the country is not a ground to deny the benefit of section 5(3) of the Central Sales Tax Act so long as the goods exported had the character, property and use of original goods. According to learned counsel, unless the change takes the new commodity to a point where commercially it can no longer be recognised as the original one and unless an essential difference on the identity between the original commodity and the one produced is shown to exist, after processing, it cannot be said that a new product had come into existence as a consequence of the manufacturing process. 5.. The learned Additional Government Pleader (Taxation) submitted that inasmuch as the petitioner has not exported what has been purchased by him, the authorities below were right in deny ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must be the same as 'those goods' referred to at the subsequent stage in section 5(3) itself. In this case, what was purchased by the petitioner was raw hides and skins and what was exported by the petitioner was dressed hides and skins and, therefore, the goods that were exported were not the same goods purchased by the petitioner. Consequently, simply as a matter of construction of the word occurring in the relevant statutory provisions it must follow that the petitioner cannot rely upon section 5(3) for the purpose of claiming that his purchase of raw hides and skins is exempt from liability to sales tax." The Division Bench was of the view that the decisions in [1957] 8 STC 358 (SC) (Kailash Nath v. State of U.P.) and [1979] 44 STC 392 (SC) (Commissioner of Sales Tax v. Bist) were of no application and ultimately came to the conclusion that on the admitted facts that the petitioner purchased raw hides and skins and converted them into dressed hides and skins and in the context of the language used in section 5(1) and 5(3) of the Central Sales Tax Act, 1956, the view taken by the Tribunal in that case does not suffer any error of law. On that view, the Division Bench seems t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hi Traders [1989] 73 STC 228 confirmed the decision of this Court in Mahi Traders' case [1980] 45 STC 327 holding thus: "The above definitions show that hides and skins acquire the name of 'leather', even if the hair or wool has not been removed therefrom, as soon as they receive some treatment which prevents them from putrefaction after treatment with water. Dressing is a stage much later than tanning. Indeed, from the definitions quoted above, it will be seen that it is practically the same as giving finishing touches to the leather and making it suitable for the manufacture of particular types of goods." Further, the Supreme Court quoted with approval, as laying down the correct position of law, the views expressed by the Tribunal in a connected case, but was not appealed against by the department as set out hereunder: "Leather from the stage of raw skins to the stage of dressed hides and skins may undergo various stages of changes. Under the classification for the purposes of section 14 of the Central Sales Tax Act, the various stages are irrelevant. For the purposes of the Tamil Nadu General Sales Tax Act, 1959, only two stages that are relevant are the skins at the ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the scope of section 14(iii), sections 15 and 5(1) and 5(3) were elaborately considered and ultimately the view of the Tribunal was confirmed. The ratio of the said decision finds expression thus: "A review of the above decisions yields the following principles (1) Merely because particular goods are treated as different commodities for the purposes of the State Act, it does not necessarily follow that for the purposes of the Central Act also they should be treated as different goods. (2) In determining whether the goods purchased and the goods exported are the same goods or not for the purpose of section 5(3) of the-Central Sales Tax Act, the context and setting of the relevant description of the commodity in section 14 is relevant. For example, because section 14(ii) of the Central Sales Tax Act declares 'cotton, ginned or unginned', as goods of special importance in the course of inter-State trade or commerce, they are treated as same goods. (3) The question whether the goods purchased and the goods exported are the same or not, has to be decided applying the test of commercial parlance. In other words, the said question has to be determined keeping in view whether in co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation said to have resulted on account of raw hides and skins locally purchased being subjected to an higher rate than the tanned hides made out of raw hides brought from outside the State. The Apex Court repelled the plea of discrimination based upon article 304(a) of the Constitution of India since the criteria relevant in such context for consideration is wholly different. In Anwaraulla AM. Ghouse Co. v. State of Tamil Nadu [1971] 28 STC 610, a Division Bench of this Court held that since the State Legislature was unable to levy tax on first sales of dressed hides and skins made out of raw hides and skins which had suffered tax earlier because of the restrictions contained in section 15(a) of the Central Sales Tax Act, no discrimination by the State Legislature can be said to have been made having regard to the fact that the said consequence was the indirect result of sections 14 and 15 of the Central Sales Tax Act, 1956. That apart, having regard to the scheme of item 7(a) and (b) of the Second Schedule to the Tamil Nadu General Sales Tax Act, which treated raw hides and dressed hides to be different commodities commercially and for the purposes of the levy under the Tamil Na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssal by the Apex Court of the appeal filed by the State of Andhra Pradesh against the decision in [1989] 72 STC 185 (AP) (State of Andhra Pradesh v. Mohd. Basheer and Co.) by refusing to grant leave to appeal, thereby according its approval to the decision of the Andhra Pradesh High Court, directly undermine the correctness and legality of the principles laid down by the decision of the Division Bench of this Court in T.C. Nos. 824 to 827 of 1980 and the plea of the petitioner before us has to be sustained. That apart, in our view, for purposes of entitling an assessee to the benefits of section 5(3) in respect of a commodity subject to the limitations contained in section 14(iii) read with section 15 of the Central Sales Tax Act, the so-called lack of commercial identity has no relevance and what is really relevant is whether the sale or purchase in question is the "penultimate sale or purchase" that satisfies the two conditions specified in section 5(3), namely, (a) that such penultimate sale must take place (i.e., become complete) after the agreement or order under which the goods are to be exported; and (b) it must be for the purpose of complying with such agreement or order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do with the transformation by printing and designs on the cloth and although the colour of the cloth had changed by printing and processing, the cloth exported was the same as the cloth sold by the assessee and, therefore, sustained the claim of the assessee for exemption. A careful consideration of the principles laid down in the various decisions would also indicate that ultimately the extent of the manufacturing process and the nature of the resultant commodity after such processing, would also be a relevant criterion in adjudicating as to whether in a particular case the goods exported satisfy the test of "those goods" in relation to the goods purchased as found in section 5(3) of the Central Sales Tax Act. Thus this decision of the Constitutional Bench of the Supreme Court categorically lays down that if the sale is of the same goods even after some processing, then the sale would be exempt notwithstanding the processing unless the goods exported totally changed their character and property from the goods purchased for sale for purposes of considering a claim under section 5(3) of the Central Act. Unless, the processing of goods results in altogether a new commodity, to the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hides and skins". If even during or at either of these stages also the commodity continues to be "hides and skins" only, the criteria of "those goods" as found in section 5(3) of the Central Act must be held to have been satisfied. We are, therefore, of the view that the order of the Tribunal cannot be sustained and consequently the same is set aside in so far as the claim pertaining to exemption claimed under section 5(3) of the Central Act is concerned. 17.. Since the authorities rejected the claim at the threshold holding that the provisions of section 5(3) of the Central Act have no application to the item of turnover in question, there was no occasion for the authorities to consider the further question as to whether and to what extent the essential prerequisites stipulated in section 5(3) are fulfilled by the turnover and the transactions in question. These aspects require proper verification with reference to the relevant records and the counsel on either side are agreed that, if at all, the matter should be relegated to the assessing authority for such verification. Thus, while setting aside the order of the Tribunal, we direct the matter be remitted to the assessing auth ..... 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