Case: A. Hajee Abdul Shakoor And Company Vs. State Of Madras

2. The petitioners are dealers in skin carrying on business at Shenbakkam, Vellore, North Arcot District, in the State of Madras. They purchase raw skins from places both within and outside the State of Madras, tan the same and sell them through their agents in Madras. They were assessed to a certain amount of sales-tax, in accordance with the provision of the Madras General Sales Tax Act 1939 (Madras Act IX 1939) and R. 16(2) (ii) of the rules framed thereunder viz. the Madras General Sales Tax (Turnover and Assessment) Rules, on the turnover of hides and skins purchased in the untanned condition outside the State, but tanned within the State, with respect to each of the assessment years 1955-56, 1956-57 and 1957-58. The tax was assessed at 3 pies per rupee on the price of tanned hides and skins for the years 1955-56 and 1956-57 and at the rate of 2 per cent on the turnover for the year 1957-58.3. The petitioners challenged earlier the validity of R. 16 on the ground that it contravened Art. 304 of the Constitution. Their contentions were negatived by the Sales Tax Authorities. The petitioners then filed writ petition No. 148 of 1959 in this Court against the assessment of tax for the year 1957-58. This Court allowed it as it had held on November 22, 1962 in Firm Mehatab Majid and Co. v. State of Madras, that R. 16 (2) of the rules was invalid as it discriminated against the imported hides and skins which had been purchased or tanned outside the State. Subsequently, the validity of R. 16(1) of the rules was challenged in this Court in writ petitions Nos. 43 and 44 of 1963 by M. J. Jamale Mohideen and Co. Those writs were filed on March 5, 1963 and it was contended that sub-rule (1) standing by itself was ultra vires the Constitution as it had the effect of selecting for discriminatory taxation only raw hides and skins and leaving untaxed sales of tanned hides and skins in Madras.4. On June 10, 1963, the Governor of Madras promulgated Madras Ordinance No. 3 of 1963. The explanatory statement attached to the Ordinance stateddecision of the Supreme Court (in W. P. 147 of 1959 Firm A. T. B .Mehtab Majid and Co. v. The State of Madras, (AIR 1963 SC 928  )) will result in claims for refund of tax being preferred by dealers in hides and skins already assessed under the impugned rule thereby resulting in huge loss of revenue and will also result in administrative complications. It is therefore considered necessary to avoid these difficulties by removing the discrimination in the matter of levy of tax on hides and skins pointed out by the Supreme Court and to provide for the assessment or reassessment and collection of the tax from the dealers in hides and skins without any discrimination by leaving the tax in all cases on the basis of the purchase price of the hides and skins in the untannedrelevant provisions of the OrdinanceSpecial provisions in respect of tax on sale of hides and skins in certain cases :1. Notwithstanding anything contained in the Madras General Sales Tax Act., 1939 (Madras Act IX of 1939) (hereinafter referred to as the said Act), or in the rules made thereunder (hereinafter referred to as the said rules), the following provisions shall apply in respect of tax on sale of hides and skins during the period commencing on the 1st April 1955 and ending on the 31st March 1959.(i) In the case of raw hides and skins, the tax under the said Act shall be levied from the dealer who is the last purchaser in the State and not exempt from taxation under sub-sec. (3) of S. 3 of the said Act at the rate of two percent of the amount for which they are bought by him.(ii) In the case of dressed hides and skins (which were not subjected to tax under the said Act as raw hides and skins), the tax under the said Act shall be levied from the dealer who in the State in the first seller in such hides and skins not exempt from taxation under sub-s. (3) of S. 3 of the said Act at the rate of two percent of the amount for which such hides and skins were last purchased in the untanned condition.x x x xExplanation II. For the removal of doubts it is hereby declared that in respect of sales to which sub-s. (1) applies, nothing in R. 16 of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, shall apply or shall be deemed ever to have applied.2. Any dealer in hides and skins who has been finally assessed under the provisions of the said Act and the said rules, may within a period of ninety days from the date of the commencement of this Ordinance apply to the authority or officer concerned for re-assessment under the provisions of this Ordinance along with the correct and complete return;x x x x3. Subject to the provisions of sub-s. (1), the provisions of the said Act and the said rules shall be deemed to be in force for the purpose of assessment or re-assessment and recovery of the tax on sale of hides and skins during the period mentioned in sub-s. (1) and, notwithstanding any provision regarding limitation in the said Act and the said rules, it shall be competent for the authority or officer concerned to assess or re-assess and recover the tax on sale of hides and skins during the period mentioned in sub-s. (1) as if this Ordinance had been in force at the relevant time.4. The amount of the tax on sale of hides and skins during the period mentioned in sub-sec. (1) already collected from any dealer shall be adjusted towards the tax due from him on such sale as a result of assessment or re-assessment in accordance with the provisions of this Ordinance and if the tax on such assessment or re-assessment-(i) is in excess of the amount of tax on such sale of hides and skins already collected from such dealer, such excess shall be recovered from him; or(ii) is less than the amount of tax on such sale of hides and skins already collected from such dealer, the difference shall be refunded to him.x x x xJuly 12, 1963, the Sales Tax Appellate Tribunal, Madras dealt with the appeals of the petitioners against the assessment for the years 1955-56 and 1956-57 and in view of S. 2(3) of the Ordinance, set aside the orders of assessment and remanded the matter for re-assessment in accordance with the provisions of the aforesaid Ordinance.5. On August 28, 1963 the Act received the assent of the Governor. Sub-s. (2) of S. 1 provided that the Act would be deemed to have come into force on June 10, 1963. Sub-section (1) of S. 2 of the Act readsNotwithstanding anything contained in the Madras General Sales Tax Act, 1939 (Madras Act IX of 1939) (hereinafter referred to as the said Act, or in the rules made thereunder (hereinafter referred to as the said rules) during the period commencing on the 1st April, 1955 and ending on the 31st March 1959, in respect of sale of dressed hides and skins (which were not subjected to tax under the said Act as raw hides and skins), the tax under the said Act shall be levied from the dealer who in the State is the first seller in such hides and skins not exempt from taxation under sub-sec. (3) of S. 3 of the said Act at the rate of two percent of the amount for which such hides and skins were last purchased in the untanned condition.Explanation I.-The burden of proving that a transaction is not liable to taxation under this sub-section shall be on the dealer.Explanation II.-For the removal of doubts it is hereby declared that in respect of sales to which sub-s.(1) applies, nothing in R. 16(2) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, shall apply or shall be deemed ever to have applied.It is to be noticed that S. 2(1) of the Act is in respect of tax on sale of dressed hides and skins and not in respect of tax on sale of raw hides and skins with which cl. (i) of S. 2(1) of the Ordinance dealt. Consequently the other provisions of the other sub-sections of S. 2, though practically the same as those of the Ordinance, have been suitably modified. They are therefore not set out.It is the validity of S. 2 of the Act that is challenged in these petitions

Court's reasoning:
10. The effect of sub-s. (1) of S. 2 of the Act is the same as was the effect of sub-rule(2) of R. 16 of the Turnover and Assessment Rules 1939, and which was held to be invalid by this Court in Mehtabs case, AIR 1963 SC 928  . The impugned sub-section provides for the assessment of tax on the sale of dressed hides and skins which were not subject to tax under the 1939 Act as raw hides and skins and thus exempts from taxation, in accordance with the provisions of sub-s. (1) of S. 2 of the Act the sale of tanned hides and skins with respect to which tax had been paid on their sale in the raw condition. Such tanned hides and skins had been exempted from taxation under sub-cl. (ii) of R. 2 of the Turnover and Assessment Rules. The same is the position in the present case. The present rule therefore is discriminatory and invalid for the same reasons which led this Court to hold sub-rule(2) of R. 16 invalid in Mehtabs case, AIR SC 928. There is no escape from this conclusion.11. 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 on which the tax is levied as the tax on the tanned hides and skins is levied on the amount for which those hides and skins were last purchased in the untanned condition, but on account of the fact that the rate of tax on the sale of tanned hides and skins is higher than that on the sale of untanned hides and skins. The rate of tax on the sale of tanned hides and skins is 2% 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 difference in tax works out to 7/1600th of a rupee, i.e., a little less than 1/2 naya paise per rupee. Such a discrimination would affect the taxation upto the 1st of August 1957 when the rate of tax on the sale of raw hides and skins was raised to 2% of the sale price.12. The second contention has no force. There is nothing in sub-sec. (1) of S. 2 of the Act to suggest that the seller of the tanned hides and skins in the State, should himself be the purchaser of those hides and skins in the raw condition from outside the State. An importer can import tanned hides and skins as well as untanned hides and skins from outside the State. If he imports tanned hides and skins, he need not necessarily be the last purchaser of this hides and skins in the untanned condition. In that case, it may be difficult to assess the tax on the basis laid down in sub-sec. (1) of S. 2, as the importer may not be able to inform about the price at which those hides and skins were last purchased. Such a price may then have to be determined by estimate. In case the importer himself purchases the untanned hides and skins and then imports them either in the same condition or in the tanned condition, there would be no such difficulty. The difficulty existing in the former case does not necessarily mean that the importer of tanned hides and skins when he himself is not the last purchaser, cannot be taxed under sub-s. (1) of S. 2 of the Act.It is therefore not correct to say that the process of tanning brings about no change in the raw hides and skins and that therefore both types of hides and skins form one commodity.The Second Schedule refers to raw hides and skins separately from dressed hides and skins against serial No. 7. The rate of tax is different and so is the point at which the tax is to be levied. This will indicate that in 1959 the legislature in Madras considered raw hides and skins a different commodity from dressed hides and skins. There is no good reason why the legislature be not attributed the same intention when it enacted the 1939 Act especially when there are other reasons also to point to the same conclusion.28. We therefore hold that raw hides and skins and dressed hides and skins constitute different commodities of merchandise and they could therefore be treated as different goods for the purposes of thethey treat them as one class of goods, the contention for the petitioner loses force as taxing of hides and skins at the time of their sale on a raw condition meets the requirements of law as hides and skins could be taxed only at a single point. If the dressed or tanned hides and skins are not taxed at the time of their sale that does not offend against the statutory provisions. No question of discrimination arises as a sale of raw hides and skins of whatever origin, i. e., whether produced in the State or imported into the State would be equally liable to the levy of tax.31. If the statute treats both these kinds of hides and skins as different commodities the provision of sub-rule (1) of R. 16 providing for the levy of tax on raw hides and skins at a certain point even in the absence of any provision for the taxation of dressed hides and skins cannot be said to be discriminatory and invalid. The articles to be taxed were not the same and the legislature could provide differently about their taxation.32. We, therefore, hold that sub-rule (1) of R. 16 did not become invalid on this Courts declaring sub-rule (2) of that rule invalid in Mehtabs case, AIR 1963 SCprovision, however, did not apply to the 1939 Act which had been enacted much earlier than the commencement of the Constitution. By August 28, 1963, when the Act was enacted by the Madras Legislature, Art. 286(3) had been amended and Act LII of 1952 had also been repealed. Consequently there was no Constitutional requirement for the Act being reserved for the assent of the President before it could be enforced. It is contended for the petitioner that the Act really enacted for a period, when if passed, it had to receive the Presidents assent for its enforcement and that therefore the State Legislature could not even in 1963 enact this provision affecting the taxation law in respect of the sale or purchase of goods which were goods declared essential for the life of the community. We do not see why such a fetter be placed on the legislative power of the State legislature. The State legislature is free to enact laws which would have retrospective operation. Its competence to make a law for a certain past period, depends on its present legislative power and not on what it possessed at the period of time when its enactment is to have operation. We therefore do not agree with thisis no force in this contention. The tax is imposed on the sale which took place within the State. The State legislature is competent to impose such a tax. The mere fact that the article sold in the State had been brought from outside the state does not make the sale of that article a sale in the Course of inter-State trade or commerce. It is only when A, in State X, purchased through a commission agent in a State Y and receives the articles purchased through the Commercial agency that the sale comes within the expression in the course of inter-State trade : See 1954 SCR 53     at p 70 : (AIR 1953 SC 333   at p.do not consider the contention sound. The Act makes provision for a period subsequent to the commencement of the Constitution and therefore is to be subject to the provisions of the Constitution.We therefore hold that sub-sec. (1) of S. 2 of the Act discriminates against imported hides and skins which were sold up to the 1st of August 1957 upto which date the tax on sale of raw hides and skins was at the rate of 3 pies per rupee or 19/16th per cent. This however does not mean that the sub-section is valid with respect to the sales which took place subsequent to August 1, 1957. The sub-section being void in its provisions with respect to a certain initial period, we cannot change the provision with respect to the period as enacted to the period for which it could be valid as that would be re-writing the enactment. We have therefore to hold sub-sec. (1) of S. 2 void, and accordingly hold so.In view of the provisions of sub-section (1) of S. 2 being invalid the other provisions of that section become unenforceable.