# APPELLATE ASSTT. COMMR. ETC. ETC v. L.M.S. SADAK TAMBY & CO.; ETC. ETC

- **Citation:** [1975] 2 S.C.R. 427
- **Court:** Supreme Court of India
- **Decided:** 1974-10-15
- **Bench:** A. N. Ray; C.J, K.K. Mathew, A. Alagiriswami
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/appellate-asstt-commr-etc-etc-v-l-m-s-sadak-tamby-co-etc-etc-6320
- **Pages:** 5

## Headnote

Madras Act 37 of 1964, Section 2(1)-Levy of tax on the sale of tanned hides
.and skins-Tax on the amount for which hides and skins were last purchased in the
11nta11ned condition-No distinction· between purchases made inside or outside tile
State-Tax, whether contravenes Article 286 of the Constitution.
· Jn Firm A.T.B. Mehtab Majid & Co. v. State of Madras, [1963] Supp. 2 S.C.R.
435, the Supreme Court struck down Rule 16 of the Madras General Sales Tax
Rules made under Madras General Sales Tax Act, IX of 1939, on the ground that
where a tanner buys raw hides and skins inside the State and sells them after tanning
he pays the tax only on the purchase price of raw hides and skins w:1ereas a dealer
who purchases raw hides and skins from outside the State a~:! sells the tan~ed hides
and skins pays the tax on the price for which tanned hides and skins are sold and
therefore pays more tax.
Jn order to deal with this situation, the Madras Legislature passed Act 11 of 1963. As section 2(1) of this Act provided a uniform rate
of 2 per cent for sales during the whole of the period between !st April 1955 .and
31st March 1959, it was struck down by the Supreme Court in A. Hajee Abdul
Shakoor & Co. v. State of Madras [1964] 8 S.C.R. 217.
In order to get over this objection section 2(1) had been enacted by Madras
Act 37 of 1964.
Under this section the tax is leviable on the first seller of dressed
hides and skins at the rate of one and nine-sixteenth per cent for the p~riod between
1st April 1955 and 31st March 1957. For the period between 1st April 1957 and 31st
March 1959 it is to be at the rate of two p~r cent. The tax is on the am)unt for
which such hides and skins were last purchased in the untanned ccnditicn.
On the question whether seciion 2(1) of Madras Act 37 of 1964 contravenes
Article 286 of the Constitution,
HELD : What is taxed under the impugned statute is not the purchase of raw
hides and skins whether inside or outside the State. In b)th the c1ses it is on the
first sale of tanned hides and skins. Even if a pmon pur~ha>es raw hide> and skins
inside the State and sells it after tanning he pays the tax 0:1 the s1\e of the t1nnd
hides and skins and not on the purcha~e or raw hides and skin; though the am)unt
of tax payable is calculated on the amount for which such raw hid·es and skin; were
purchased. Similar is the position with regard to raw hides and skins P"rchased
outside the State. Thus there is no discrimination b~tw~en the s~llers of tanned
hides and skins whether the raw hides and skins out of which they were .tanned
were purchased inside the State or outside the State .. The tax is not leviable even
in th~ case of raw hides aqd skins imp)rted from another State but on hides and
skins tanned from those raw hides and skins. Only th~ taxi> levied on the amount
for which the raw skins and hides w~re P"rchased. This amount is used only for
the purpose or quantification or the tax. The impugned statute does not suffer
from the vice of taxation of the imp)rted raw hides and skins. [ 430 C-F]

## Text

A
8
c
D
E
F
G
H
427
APPELLATE ASSTT. COMMR. ETC. ETC.
v.
L.M.S. SADAK TAMBY & CO.; ETC. ETC.
October 15, 1974
[A. N. RAY; C.J., K.K. MATHEW AND A. ALAGIRISWAMI, JJ.]
Madras Act 37 of 1964, Section 2(1)-Levy of tax on the sale of tanned hides
.and skins-Tax on the amount for which hides and skins were last purchased in the
11nta11ned condition-No distinction· between purchases made inside or outside tile
State-Tax, whether contravenes Article 286 of the Constitution.
· Jn Firm A.T.B. Mehtab Majid & Co. v. State of Madras, [1963] Supp. 2 S.C.R.
435, the Supreme Court struck down Rule 16 of the Madras General Sales Tax
Rules made under Madras General Sales Tax Act, IX of 1939, on the ground that
where a tanner buys raw hides and skins inside the State and sells them after tanning
he pays the tax only on the purchase price of raw hides and skins w:1ereas a dealer
who purchases raw hides and skins from outside the State a~:! sells the tan~ed hides
and skins pays the tax on the price for which tanned hides and skins are sold and
therefore pays more tax.
Jn order to deal with this situation, the Madras Legislature passed Act 11 of 1963. As section 2(1) of this Act provided a uniform rate
of 2 per cent for sales during the whole of the period between !st April 1955 .and
31st March 1959, it was struck down by the Supreme Court in A. Hajee Abdul
Shakoor & Co. v. State of Madras [1964] 8 S.C.R. 217.
In order to get over this objection section 2(1) had been enacted by Madras
Act 37 of 1964.
Under this section the tax is leviable on the first seller of dressed
hides and skins at the rate of one and nine-sixteenth per cent for the p~riod between
1st April 1955 and 31st March 1957. For the period between 1st April 1957 and 31st
March 1959 it is to be at the rate of two p~r cent. The tax is on the am)unt for
which such hides and skins were last purchased in the untanned ccnditicn.
On the question whether seciion 2(1) of Madras Act 37 of 1964 contravenes
Article 286 of the Constitution,
HELD : What is taxed under the impugned statute is not the purchase of raw
hides and skins whether inside or outside the State. In b)th the c1ses it is on the
first sale of tanned hides and skins. Even if a pmon pur~ha>es raw hide> and skins
inside the State and sells it after tanning he pays the tax 0:1 the s1\e of the t1nnd
hides and skins and not on the purcha~e or raw hides and skin; though the am)unt
of tax payable is calculated on the amount for which such raw hid·es and skin; were
purchased. Similar is the position with regard to raw hides and skins P"rchased
outside the State. Thus there is no discrimination b~tw~en the s~llers of tanned
hides and skins whether the raw hides and skins out of which they were .tanned
were purchased inside the State or outside the State .. The tax is not leviable even
in th~ case of raw hides aqd skins imp)rted from another State but on hides and
skins tanned from those raw hides and skins. Only th~ taxi> levied on the amount
for which the raw skins and hides w~re P"rchased. This amount is used only for
the purpose or quantification or the tax. The impugned statute does not suffer
from the vice of taxation of the imp)rted raw hides and skins. [ 430 C-F]
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos.
1366,
1850to 1863 &2550to 2551ofl969,1355 & 1356ofl970and 1292and
1293 of 1973.
From the Judgments & Order dated the !st March/26th February;
1969/29th July/2nd August, 1971 of the Madras High Court in W.Ps.
Nos. 1895 of 1966, 1084, 1192, 1194, 1800, 1896, 1898, 1907-1910,
2089 of 1966, 646 of 1967, 3536-3537 of 1965 and Tax Cases Nos.
57 & 58of1969 and 191 & 197 ofJ971 respectively.
'
SUPREME COURT REPORTS
[1975) 2 ~.C.R.
Govind Swaminathan, Advocate Genera/for the State of Tamil Nadu,
.A. V. Rangam, K. Venkataswami, N.S. Sivam and A. Subhashini, for
the appellants (In all the Appeals & SLP No. 1974/70)
A. Abdul Karim and K. Rajendra Choudhary, for the respondents
(In 1366, 18~0-53 & 1858-·186.l/69)
K. V. Pillai~ for the respondents (In 18.54/69)
E.C. Agarwala, for the applicant/intervener.
A.K. Sen and S. Gopalakrishnan, for respondents (In 2550-51/69,
1355-1356/70. and 1292-1293/73).
The JudJnent of the Court was delivered by
ALGIRJSWAMI, J.-Thes1: appeals raise the question of the validity
of section 2(1) of Madras Act 37 of 1964. That section reads as
follows :
"Spe¢ial provisions in respect of tax on rnle of dremd hides
and skins in certain cases :-
Notwithstanding anythingcontained in the Madras General
Sales Ta~: Act, 1939 (Madras Act IX of 1939) (hereinafter
referred to as the said Act), or in the nlles ma.de thereunder
(hereinaft¢r referred to as the said Rules), in respect of sale
of dressed hides and skin~ (which we:re not subjected to tax under
the said Act as raw hides & 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 Sec. 3 of the said Act:-
(i) for the period commencing on the 1st April; 1955
and ending on the :list March 1957, at the rate ofone
& nine-sixteenth per cent, and
(ii) for the period commencing on the 1st April, 1957
and ending on the 31st March 1959, at the rate of two
per cent, of the amount for .which such hides and skins
were last purchased in the untanned condition."
In order to understand the implications of this section it is necc:ssary to refer to certain other provisions of law and two previous
decisions of l:his Court. Rule 16 of the Madras Gc:neral Sales TfLX.
Rules made lunder Madras Act JX of 1939 read as follows :
"In the case of un.tanm:d hides and/or skins the tax under
Sec. 3(1) shall be levied from the dealer who is the last purchaser
in the State not exempt from taxation under Sec. 3(3) on the
amount for which they are bought by him.
2(i) In the case of hides or skins whirh have been tanned
outside the State the tax under Sec. 3(1) shall be levied from the
de . .ler who in the State: is the first dealer in such hides or skins
not exempt from taxation under Sec. 3(3) on the amount for
which they are sold by him.
A
B
c
D
E
F
G
H
A
B
c
D
E
F
G
H
APPEL. ASST. COMMR. v. L.M.S. SADAI: co. (Alagiriswami, 1.) 421)
(ii) In the case of tanned hides or skins which have been
tanned within the S~ate, the tax under sec. 3(1) sl:!aUbe levied,
from a person who is the first dealer in such hides or skins r.ot
exempt from taxation under Sec. 3(3) on the arr.cunt for which
they are sold by him.
·
Provided that, if he pro\ cs that tax has alrci:dy tern kvicd
under Sub-rule (l)on the untanned hides and skins out of which
the. tanned hides and skins had been prcduccd, he 1hall not te
so liable.''
This'.Rule was struck down by this Court on the grour.d that where
a tanner buys raw hides and skins inside the State and sells them after
tanning he pays the ta:x: only on the purcharn price of raw hides and
whereas a dealer who purchases raw hides and skins from outside
the State and sells the tanned hides and skins pays the tax on the price
for which tanned hides and skins are sold and therefore pays more
tax. The judgment of this Court in Firm A.T.B. Mehtab Majid & Co.
v. State of Madras is reported in [1963] Supp. (2) S.C.R. 435. Thereafter the Madras Legislature passed Act 11 of 1963 to deal with this
· situation. Section 2(1) of that Act reads as follows :
"Special provision in respect of tax on sale of drem.d hides
and skins in certain cases:-
Notwithstanding anjrthing contained in the Madras General
Sales Tax Act 1939 (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 pericd commencing on 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 whc in the State is tho
first seller in such Iiides and skirui not exempt from. taxation
under sub-sec. (3) of Sec. (3) of the said Act at the rate of two
per cent of the amount for which such hides and skins were last
purchased in the untanned condition."
It would be noticed that this section deals with the st> Jes during the:
period between 1st Apr'! 1955 and 31st March 1959. From lst
April 1955 to 31st March 1957 the rate of taxation in Madras State
was one and nine-sil~teenth. per cent. As the section provided . a
uniform rate of two 'per cent for sales during the whole of the period
between 1st April 1955 and 31st March 1959 it was struck down by
this Court in A .. Haiee Abdul Shakoor & Co. v. State of Madras
[1964] 8 S.C.R. 217) on the ground that for the period from
1st
April,
1955
to
31st
March, 1957
there was
a
discrimination between a tanner who tans from raw hides and ·
skins purchased inside the State who would pay only one and ninesixteenth per cent on the raw hides and skins purchased by him ancJ
& tanner who purchased skins and hides from outside the State who
would .have tq pay at the rate of two per cent under this section. It
430
SUPREME COURT llEPOR.TS
[1975] 2 s.C.JR.
is to get over this objection that the section first referred to has been
passed.
Und1r the section the tax, is leviable on the first seller of dresstd
hid·JS and skins at the rate of one and n;ne-sixtGenth per cent for the
p~riod betwr.Jn !st April 1955 and 31st March 1957. For the period
batween !st IApril 1957 and 31st March 1959 it is to be at the rate of
two pJr c~nt. The tax h on the amount for which such hides and
skins wtre last ,purchased in the untanned condition. It would be
notic3dthat it does not m'l.ke any distinction between the purch2.se of
raw hid~s and skins inside the State and outsice the State. The tax
itself is on th~ first sale of the tanned hides and skins but it is calculated
on the basis of the purchase per price of the raw hides and skins whether
they were purch1.sed inside the State or outside the State. The outof-State purbh'lse of raw hides and skins is not taxed.
That would
b~ subject tb tax under the Ct:ntral S1les Tax Act. But what is taxed
und~r the im'lugned statute is not the purcha~e of raw hides and skins
wh~ther in~id~ or outsid1: the State. In both cases it is on the first
sale of tann~d hides and skins. Even if a person purchases raw hide.s
and skins inside the State and sells it aft~r tanning he pays the tax
on the sale ofthe tanned hides and skins and not on the purchase
of the raw h.ides and skins though the amount .of tax payable is ·calculated on the amount for which such raw hides and skins v1~re
purchased. I Similar is the position
with regard to raw hides
and skins purchased outside .11he State. Thus there is no discrimina.
tion between th" sellers of tanned hidc's and skins whether the raw
h:d~s and skins out of which they were tanned were purchased
inside the State or outside the State. The tax is not leviable even in
case of raw hides and skins imported from another State but on hides
and skins tanned from those raw hides and skins. Only the tax is
levied on the amount for which the raw skins and hides were
purchased./ This amount is used ·only for the purpose of quantifica.tion of the tax. The tax is not on the purchase of the raw hides
and skins.
We do not, then.fore, ~ee how the tax levied on the sale
of tanned hides and skins contravenes Articles 286 of the Constitution.
Actually as the value of hides and skins in their tanned condition is
higher tharl the value of raw hides and skins from out of which th~y
are tanned the person impo1rting raw hides and skins from outside
the State ca.n have no grievence that the tax is !ftvied not on the amount
for which 1:he tanned hides and skins are sold but on the amount for
which raw lhides and skins have been purchased. Nor does he pay
a higher ta;x than the p3rson who sells hides and skins tanned from
locally purchased raw hides and skins. It was open to the State to have
levied the tax on the sale price of tanned hides and skins in which
case there c;.ould have been no ar11;ument that it was a tall: on the imported
raw hides ilnd skins. But the State chose to lev) the tax on the basis
of the purchase pric~ of raw hides and skins which would mean lesser
tax. It does not suffer from the vice of taxation of the imported. raw
hides and lskins.
I
We are unable to unders1tand the view of the High Court that if
th~ s1le pric~ were taxed and rebate were given thell there would be
no obj~ction to the ta11;. w~ do not understand how that can be done.
A
B
c
D
E
F
G
H
A
B
APPEL. ASST. COMMll. v. L.M.S. sAl>AK co. (Alagiriswami, /,)
4:U
We asked the learned advocates appearing for the respor.dents to tell
us how that can be done and they were not able to do so. The cost
of conversion of the raw hidts ·and skins to tanned hides and skins
might differ from tanner to tanner. It is ni.uch easier to get figures
for the purchase price of 'the raw hides and skins or the sale price
of the tanned hides and skins than the cost of ccnversicn.
As the
scheme of taxation is not on the basis' of the sale price of tanntd
hides and skins the suggestion of the High Court cannot be adopted.
We, therefore, hold that the High Court was in error in striking dcv. n
the impugned provision of law.
In S.L.P. No. 1974 of 1970, special leave to apreal is granted ar.d
the appeal allowed.
The appeals are allowed with costs.
Appeals allowed.
V.M,.K.