Case: State of Madras &amp; Another Vs. M/s. M.A. Noor Mohammed &amp; Company &amp; Others

2. The respondent was a partnership firm carrying on tannery business at Chromepet near the city of Madras. Before the year of assessment i.e. 1952-53, it was taking out licenses under the relevant provisions of the Act but it did not renew the licence for the assessment year. When called upon to make a return it did not do so nor did it raise any objection to the notice served on it on February 28, 1954. It was assessed to sales tax of Rs. 10,584 on a turnover of Rs. 6,77,374-4-4. It filed a petition under Art. 226 to quash the assessment order on the ground that the order was illegal and not supported by the authority of law. This contention was accepted by the High Court and the petition was allowed with costs. The consequence of the judgment is that the respondent firm which is not a licensed dealer under the Act is not liable to any sales tax in respect of its dealings in hides and skins. Against this judgment and order the appellants have come to this Court by special leave3. The contention of the respondent firm in the High Court was that under S. 5, cl. (vi) of the Act, the liability to pay sales tax in respect of hides and skins could only be at a single point; that the rule limiting the operation of this mode of taxation to licensed dealers was ultra vires and therefore R. 16 (5) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, hereinafter called the Turnover and Assessment Rules, was void and inoperative and had been so held by the Supreme Court in V. M. Syed Mohammed and Co. v. State of Andhra 1954 SCR 1117   : (AIR 1954 SC 314  ) that accepting this interpretation the State of Madras had deleted Cl. (5) of R. 16 by G. O. 450, Revenue, dated February 26, 1954, i.e. two days before the making of the assessment order under dispute; that R. 16(5) of the Turnover and Assessment Rules was the only provision imposing a multiple tax in respect of sales of hides and skins by unlicensed dealers and that the imposition of the sales tax after the repeal of that rule was illegal and the tax was without the authority of law. It was also contended that in the taxation scheme under the Act, hides and skins, because of their importance in the international market were excluded from the direct operation of S. 3(1) of the Act which was the general charging section and were given special protection of the single point taxation under S. 5(vi). The argument therefore, was that in the case of sales of hides and skins the general provision was inapplicable and a special rule for taxation was laid down by S. 5(vi) of the Act4. The High Court held that in the case of hides and skins "the charge levied by S. 3 is subject to the provisions of S. 5 and in the case of licensed dealers in hides and skins, the charging provision is R. 16 of the Turnover and Assessment Rules"5. The High Court further held that R. 16(5) of the Turnover and Assessment Rules which restricted the benefit of single point taxation to licensed dealers was ultra vires as it contravened S. 5(vi) of the Act and S. 6-A was not applicable to the case of a dealer who did not take out a licence for dealing in hides and skins and further that if R. 16(5) was ultra vires as being in contravention of S. 5(vi), R. 5 of the Madras General Sales Tax Rules (hereinafter called the Sales Tax Rules) which requires the taking out of the licence in order to be able to get the benefit of single point taxation would also be ultra vires. Thus on a true construction of S. 3(1) and S. 5(vi) it was of the opinion that R. 5 of the Sales Tax Rules and R. 16(5) of the Turnover and Assessment Rules were ultra vires and S. 6-A was inapplicable to a person who had not taken out a licence. As a consequence it quashed the order of assessment of the respondent firm.

Reasoning:
10. The argument of inconsistency between R. 16(5) of the Turnover and Assessment Rules and S. 5(vi) of the Act which was accepted in the High Court receives no support from the language of that section which is a concessional provisions for making the sales of hides and skins liable to taxation at a single point; but that, as the opening words of the section show, is subject to restrictions and conditions prescribed in the rules and one of these conditions is the taking of a licence.All that R. 16(5) does is to emphasise the consequences of non-observance of the conditions which Ss. 5(vi) and 6-A have in clear terms prescribed.We find no inconsistency between the section and the Act. But it was submitted that this Court on appeal from a judgment of the Madras High Court had held R. 16(5) to be ultra vires the Act. That contention is based on the judgment of the Madras High Court in V. M. Syed Mohammed and Co. v. State of Madras, 1952-3 STC 367 : (AIR 1953 Mad 105  ), which on appeal was affirmed by this Court in 1954 SCR 1117   : (AIR 1954 SC 314  ). This contention is not well-founded12. This judgment does not show that the repugnancy of the rule was in controversy or the court pronounced its opinion upon the merits or it was necessary to do soBut that will not carry the matter any further, because on a construction of the provisions of the Act this argument of repugnancy is not sustainableBut we did not allow this point to be taken because it was not raised in the High Court and was raised for the first time in this Court.