1. These petitions filed under Article 226 of the Constitution of India may be disposed of by a single order as a common question raised is the legality of orders passed regarding the levy of sales tax on the purchase turnover of petitioners with respect to transactions in untanned hides and skins. Admittedly none of the petitioners had obtained licences to carry on the transactions and the orders have been passed after giving the petitioners opportunities to make any representations which they chose before the taxing officers.
2. The main grounds on which the orders were attacked by Sri Ullal who appeared for all the petitioners and addressed the same arguments on behalf of all were :
(1) The assessments offend the provisions of Article 286(3) of the Constitution of India.
(2) Rules in accordance with which assessments were made are invalid as these were not passed by the Legislature.
(3) Rules 23(5) which alone can be availed of for the purpose of the levy is declared to be ultra vires by the Supreme Court. Since the liability cannot be imposed on the petitioners under any other provisions and the view of the Supreme Court is binding, the petitioners cannot be taxed at all.
3. Articles 286(3), contravention of which is alleged, states :
'No law made by the Legislature of a State imposing, or authorising the imposition of, a tax on the sale or purchase of any such goods as have been declared by Parliament by law to be essential for the life of the community shall have effect unless it has been reserved for the consideration of the President and has received his assent.'
4. In Act LII of 1952 [Essential Goods (Declaration and Regulation of Tax on Sale or Purchase) Act, 1952] passed on 9th August, 1952 hides and skins are included in the schedule specifying goods essential for the life of the community. On the basis of these, it was argued that lack of consent of the President is an impediment to the assessment for the period subsequent to August, 1952. The argument would have had force if hides and skins had been taxed after the date of the Constitution as it is stated in section 3 of the Act that any law therefore can be operative only with the approval of the President. Soma Singh v. State of Pepsu : 1SCR955 has laid down that clause (3) of Article 186 does not affect pre-existing laws. The Mysore Sales Tax Act under which the tax is levied on hides and skins came into force in 1948 and not being a post-Constitutional law is exempted from the requirement of the President's assent for being effective.
5. The second objection has reference to the amendment of rule 1(2) in Schedule I of the Act. As originally framed this rule provided that in the case of untanned hides and skins the gross turnover of a dealer for the purpose of assessment was the amount for which the goods are bought by licensed tanners in Mysore. The word 'licensed' was deleted by notification in 1952 so that 'tanners licensed or unlicensed' were placed on the same footing as regards liability and the gross turnover in the case of both was the amount for which goods were bought. The petitioners being unlicensed dealers are affected by this and so it is contended on their behalf that the amendment is illegal. Sub-rule (2) provides an exception to the general provision in rule 1(1) that the sales turnover has to be taken into account. The contention is thus against shifting the liability from the seller to the buyer. Whether it is the buyer or seller from whom the tax is collected the burden ultimately is transferred to the consumer. Hugh Dalton in his book on Principles of Public Finance at page 54 has said :
'It makes no essential difference whether the tax is legally imposed on buyers or sellers, though this may effect the length of time which will elapse before the process of shifting the direct money burden or part of it, from one side to the other is completed.'
6. In Syed Mohammad and Co. v. State of Madras : AIR1953Mad105 it was held that the words 'sales tax' are generally understood as importing an occasion of sale and that it is immaterial whether it is collected in the first instance from the sellers or the purchasers. Section 3(4) of the Act itself provides for the turnover being determined in accordance with the rules contained in the Schedule to the Act and empowers Government to vary any part of the Schedule after duly notifying the changes in the official Gazette. The Legislature has conferred the power on the Government and the question whether the buyer or the seller has to bear the burden is a matter of detail in giving effect to the object of the Act without involving delegation of polity which the Legislature has to determine, and the amendment cannot be assailed as being due to exercise of power not lawfully vested in Government.
7. Rule 23(5) applicable to the assessment in the case of petitioners reads as follows :
'Sales of hides or skins by dealers other than licensed dealers in hides or skins shall, subject to the provisions of section 3, be liable to taxation on each occasion of sale.'
8. Section 3 states :
'(1) Subject to the provisions of this Act (a) every dealers shall pay for each year a tax on his total turnover for such year.
* * * (5) The taxes under sub-sections (1) and (2) shall be assessed, levied and collected in such manner and in such instalments, if any, as may be prescribed : Provided that
(i) in respect of the same transaction of sale, the buyer or the seller, but not both, as determined by such rules as may be prescribed, shall be taxed;
(ii) where a dealer has been taxed in respect of the purchase of any goods in accordance with the rules referred to in clause (i) of this proviso, he shall not be taxed again in respect of any sale of such goods effected by him.'
9. The words in rule 23(5) framed under the Act in Mysore are the same as in rule 16(5) under the Madras Sales Tax Act. The decision in Syed Mohammad and Co. v. State of Andhra : 1SCR1117 was strongly relied upon by Sri Ullal as being conclusive about rule 16(5) being ultra vires and he argued that rule 23(5) corresponding to it has to be treated likewise with the result there is no rule which can be resorted to for taxing the petitioners. That was a case in which the Act and the Rules were impugned by licensed tanners who were prosecuted for non-payment of the taxes. While considering these as a whole the High Court of Madras expressed that all the rules except rule 16(5) were valid. What was said about this rule was :
'Now the contention of the petitioners is that where there are sales by unlicensed dealers to unlicensed tanners or unlicensed dealers, there is the possibility of multiple taxation and that would be in violation of section 5(vi). It is not disputed on behalf of the Government that rule 16(5) is repugnant to section 5(vi). It must therefore be held to be ultra-vires. But this can bring no relief to the petitioners, as they are all licensed tanners and are in no manner hurt by the operation of rule 16(5).'
10. While dismissing the appeal preferred against the order of the High Court, the Supreme Court observed :
'Lastly, the learned Advocate urges that rule 16(5) clearly contravenes the provisions of section 5(vi) of the Act. This sub-rule has been held to be ultra vires by the High Court and, indeed, the learned Advocate-General of Madras did not in the High Court, as before us, dispute that rule 16(5) was repugnant to section 5(vi). That sub-rule however affects only unlicensed dealers and the appellants who are admittedly licensed dealers are not affected by that sub-rule.'
11. Since the existence of distinction between licensed and unlicensed dealers in regard to assessment is noticed in the question and it was conceded that the sub-rule was ultra vires, the validity or otherwise of the provision so far as unlicensed dealers are concerned cannot be regarded as having been settled.
12. The objection to the sub-rule is that by allowing taxation on each occasion of sale the limitation placed in section 5 of the Act to a single point is negatived and that a rule formulated by Government cannot override a condition enjoined by the Legislature. Section 5 controls the operation of the charging section 3 which is in general terms by stating in sub-section (vi) 'that the sale of hides and skins whether tanned or untanned...........shall be liable to tax under section 3(1) only at such single point in the series of sales by successive dealers as may be prescribed.' Although as a matter of fact in all these cases the tax appears to have been levied only once and not on transactions prior to those of petitioners, it is said that the omission to fix the 'single point' vitiates the assessment. The learned Advocate-General referred to the opening words of the section 'subject to such restrictions and conditions as may be prescribed, including conditions as to licences and licence fees' as qualifying sub-section (5) and argued that the benefit of this can be claimed only by licence holders and not others as is evidenced from section 7 of the Act and rules.
13. Section 7 reads thus :-
'If any restrictions or conditions prescribed under section 5 or notified under section 6 are contravened or are not observed by a dealer or in case the condition so prescribed or notified requires that a licence shall be taken out or renewed, if a licence is not taken out or renewed by the dealer or if any of the conditions of a licence taken out or renewed by him are contravened or are not observed, the sales of the dealer, with effect from the commencement of the year in which such contravention or non-observance took place, may be assessed to tax or taxes under section 3, as if the provisions of section 5 or the notification under section 6, as the case may be did not apply to such sales and notwithstanding that a licence, if any, taken out or renewed by the dealer continues to be in force during the year.'
14. Under the heading 'Licences' in Part II, rule 5(1) states :
'Every person who ............................
(e) deals in hides and/or skins whether as a tanner or otherwise ......shall, if he desires to avail himself of the exemption provided in sections 5 and 9 or of the concession of the taxation only at a single point or of taxation at that rate specified in section 5, submit an application in Form I for a licence etc.'
15. Section 5 cannot therefore be regarded as being complete by itself, independent of other provisions and applicable to all dealers in hides and skins. The operation of section 3 is modified by section 5 and this is not absolute for application uniformly on all dealers in the goods mentioned therein but has to be read along with section 7 and the rules. The sub-section (vi) of section 5 makes an exception to the scheme ordinarily adopted and affords relaxation in the range of taxation by confining it to a single occasion. The rule leaves no room for doubt that the concession may be availed of only by license-holders and this is consistent with what is stated in section 7. The combined effect of sections 5 and 7 and rule 5 is that unlicensed dealers in hides and skins are not entitled to seek restriction of taxation to a single point. Consequently rule 23(5) which relates to transactions of such persons cannot be held to be repugnant to section 5 of the Act. For the purpose of assessment a difference is made between licensed and unlicensed dealers under the Act. The differentiation is not shown to be unreasonable and not held to be so in Syed Mohamed and Co. v. State of Madras : AIR1953Mad105 . The petitioners cannot therefore complain that the rules affecting them are invalid because these are not as favourable to them as to licensed dealers.
16. The petitions are dismissed but without costs.
17. Petitions dismissed.