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Union Leather Company Vs. Joint Commercial Tax Officer, Periamet Assessment Circle, Madras - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case NumberWrit Appeal No. 523 of 1979
Judge
Reported in[1987]66STC277(Mad)
ActsTamil Nadu General Sales Tax Act, 1959 - Sections 16 and 16(1)
AppellantUnion Leather Company
RespondentJoint Commercial Tax Officer, Periamet Assessment Circle, Madras
Appellant AdvocateG. Narayanan, Adv.
Respondent AdvocateK.S. Bakthavatsalam, Additional Government Pleader
Cases ReferredDeputy Commissioner of Commercial Taxes v. Devandran
Excerpt:
.....section 16 - appellant contended that when in original assessment assessing officer having taxed dressed hides and skins it is not open to him to reopen assessment to tax raw hides and skins at last purchase point - when there are two taxable events state bound to tax first event and exempt second event - hides and skins being declared goods taxable only at single point either at raw state or in dressed state - writ appeal allowed. - - 2. the appellant challenged in the writ petition an order of the respondent dated 19th july, 1979, passed under section 16 of the tamil nadu general sales tax act, 1959 (hereinafter called 'the act'). 3. the facts relating to the matter briefly are the following :4. the petitioner is a dealer in hides and skins and as such used to purchase raw hides..........raw hides and skins from various places in the state of tamil nadu and process the same into dressed hides and skins and thereafter used to sell locally as well as outside. for the assessment year 1973-74, the appellant was finally assessed on a total and taxable turnovers of rs. 2,77,27,170 and rs. 1,54,77,907 respectively by an order dated 11th july, 1975. out of the said taxable turnover of rs. 1,54,77,907 a turnover of rs. 6,91,980 was taxed at the rate of 3 per cent and the balance of rs. 1,47,85,927 was taxed at the rate of 1 1/2 per cent. subsequently, the respondent issued a notice under section 16 of the act on 14th february, 1979, stating that in view of the judgment of the supreme court in guruviah naidu and sons v. state of tamil nadu [1976] 38 stc 565, the assessment.....
Judgment:

Venkataswami, J.

1. This appeal is directed against the order of V. Ramaswami, J., dated 5th September, 1979, in W.P. No. 3528 of 1979. The learned Judge has dismissed the appellant's writ petition in limine stating that it being a tax matter involving both questions of fact and law, the petitioner before him will have to pursue his remedy provided under the Act first before invoking the jurisdiction of this Court under article 226 of the Constitution.

2. The appellant challenged in the writ petition an order of the respondent dated 19th July, 1979, passed under section 16 of the Tamil Nadu General Sales Tax Act, 1959 (hereinafter called 'the Act').

3. The facts relating to the matter briefly are the following :

4. The petitioner is a dealer in hides and skins and as such used to purchase raw hides and skins from various places in the State of Tamil Nadu and process the same into dressed hides and skins and thereafter used to sell locally as well as outside. For the assessment year 1973-74, the appellant was finally assessed on a total and taxable turnovers of Rs. 2,77,27,170 and Rs. 1,54,77,907 respectively by an order dated 11th July, 1975. Out of the said taxable turnover of Rs. 1,54,77,907 a turnover of Rs. 6,91,980 was taxed at the rate of 3 per cent and the balance of Rs. 1,47,85,927 was taxed at the rate of 1 1/2 per cent. Subsequently, the respondent issued a notice under section 16 of the Act on 14th February, 1979, stating that in view of the judgment of the Supreme Court in Guruviah Naidu and Sons v. State of Tamil Nadu [1976] 38 STC 565, the assessment already made for the year 1973-74 has to be reopened and revised and called upon the appellant to show cause against that proposal. Against the show cause notice, the appellant filed W.P. No. 1178 of 1979 challenging that the show cause notice was without jurisdiction. That writ petition was dismissed by Mohan, J., on 30th March, 1979, holding that the appellant must exhaust the statutory remedies available and the same cannot be by-passed. Thereafter, the appellant filed objections to the proposed revision of the assessment and the respondents overruling the objections passed an order on 19th July, 1979, confirming the proposal and the appellant is aggrieved by the said order.

5. As pointed out earlier, the writ petition challenging the revised assessment order was dismissed by the learned Judge in limine and hence this writ appeal.

6. Before going into the matter further, it is necessary to set out the relevant entries in Second Schedule to the Act dealing with hides and skins. Items 7(a) and 7(b) of the Second Schedule to the Act at the relevant time read as follows :

------------------------------------------------------------------------'S. No. Description of goods Point of levy Rate of tax(per cent.)(1) (2) (3) (4)------------------------------------------------------------------------7(a) Raw hides and skins At the point of 3last purchase inthe State.7(b) Dressed hides and At the point of 1 1/2.'skins (which were first sale innot subjected to tax the State.under this Act asraw hides and skins).------------------------------------------------------------------------

One other factor to be noted is that the Revenue was levying the tax on the purchase turnover of raw hides and skins under item 7(a) and was levying tax on the sales turnover of the dressed hides and skins effected in the State subject to the qualification prescribed under item 7(b) set out above. While so, a Division Bench of this Court in L.M.S. Sadak Thamby & Co. v. Appellate Assistant Commissioner of Commercial Taxes [1969] 24 STC 468 has taken a view that the Revenue has to levy a tax on the sales turnover of dressed hides and skins if the raw hides and skins purchased are processed and sold during the assessment year. In other words, if the raw hides and skins purchased during the assessment year were also processed into dressed hides and skins, the Revenue has no option except to tax the dressed hides and skins on the sale point. It is because of this view expressed by the Division Bench of this Court in the abovesaid judgment, the Revenue was obliged to levy tax on the sales turnover of dressed hides and skins and the original assessment in this matter was made when the abovesaid judgment of this Court was holding the field.

7. While so, the Supreme Court in the decision in Guruviah Naidu and Sons v. State of Tamil Nadu [1976] 38 STC 565 expressed a view that the purchase of raw hides and skins in the State attracts levy under item 7(a) on the purchase turnover subject to the condition that when the same raw hides and skins are tanned in the State and sold during the assessment year as dressed hides and skins, the same will not be taxable under item 7(b). The respondent on the basis of this judgment of the Supreme Court has taken the view that the original assessment was not in conformity with the subsequent judgment of the Supreme Court and, therefore, the original assessment requires revision.

8. The proceedings under section 16 of the Act were resisted substantially on the basis of the judgment of this Court in L.M.S. Sadak Thamby & Co. v. Appellate Assistant Commissioner of Commercial Taxes [1969] 24 STC 468. Even in the affidavit filed in support of the writ petition and the memorandum of grounds in the writ appeal, the contentions are raised based on the said judgment only.

9. Mr. G. Narayanan, learned counsel appearing for the appellant, fairly conceded that in view of subsequent Division Bench judgment in Bava Prima Tannery v. State of Tamil Nadu [1981] 47 STC 7, the judgment of this Court reported in L.M.S. Sadak Thamby & Co. v. Appellate Assistant Commissioner of Commercial Taxes [1969] 24 STC 468 cannot be relied upon. Therefore, instead of pressing the contentions already raised before the assessing officer and in the memorandum of grounds in the writ appeal, the learned counsel submitted that the respondent erred in involving section 16 of the Act. His contention is that once the tax was levied on the dressed hides and skins, there is no scope for reopening the assessment and levying tax on raw hides and skins as hides and skins being declared goods, can be taxed at one point. Another ground of attack is that the assessing officer erred in taking into account in the assessable turnover the opening stocks of raw hides and skins. The third ground of attack is that in the original assessment the local purchase of raw hides and skins was determined at Rs. 1,26,60,822.80 but in the proposal for revision the local purchase of raw hides and skins has been determined at Rs. 1,41,31,371. According to the learned counsel, the impugned order, therefore suffers from errors apparent on the face of the record and is liable to be quashed. Mr. G. Narayanan, in support of his contention placed reliance on a judgment of this Court reported in Deputy Commissioner of Commercial Taxes v. Devandran & Co. [1981] 47 STC 264.

10. Mr. K. S. Bakthavatsalam, learned Additional Government Plead, submitted that the learned Judge was right in dismissing the writ petition directing the appellant to exhaust the effective alternative remedies available under the Act. He also contended that the respondent was well within his jurisdiction in reopening the assessment on the basis of the judgment of the Supreme Court which is subsequent to the original assessment. He placed reliance on a Division Bench judgment of this Court reported in Bava Prima Tannery v. State of Tamil Nadu [1981] 47 STC 7 and also an unreported judgment of the Division Bench in T.C. No. 569 of 1982 (Hazarath Trading Co. v. State of Tamil Nadu, represented by the Commercial Tax Officer, Periamet Assessment Circle).

11. It is not disputed by the learned counsel for the appellant that section 16 of the Act enables the assessing authority to reopen the assessment on the basis of subsequent judgment as section 16(1)(a) as well as 16(1)(b) uses the words 'for any reason' and it is also well-settled by several decisions of this Court and of the Supreme Court. Therefore, the jurisdiction of the assessing officer/respondent in reopening the assessment by invoking section 16 of the Act cannot be doubted. What happened in this case is that out of the total taxable turnover of Rs. 1,54,77,907 the assessing officer taxed Rs. 1,47,85,927 at the rate of 1 1/2 per cent on the basis of the judgment of this Court in L.M.S. Sadak Thamby & Co. v. Appellate Assistant Commissioner of Commercial Taxes [1969] 24 STC 468. This obviously cannot be sustained in the light of the subsequent judgment of the Supreme Court which has been followed by this Court. In the revised turnover, applying the principles laid down in the judgment of the Supreme Court, the entire purchases of raw hides and skins during the assessment year are subjected to tax under item 7(a). According to the learned counsel for the appellant, in the original assessment, the assessing officer having taxed the dressed hides and skins, it is not open to him to reopen the assessment to tax the raw hides and skins at the last purchase point. This very argument was negatived by a Division Bench of this Court in T.C. No. 569 of 1982 (Hazarath Trading Co. v. State of Tamil Nadu). Ramanujam, J., speaking for the Bench has held as follows :

'Thus, the scheme of items 7(a) and 7(b) to the Second Schedule of the State Act is that when raw hides and skins are purchased locally in the State, the levy of tax would be 3 per cent and when the same goods are tanned and sold inside the State as dressed hides and skins, no levy would be made on such sale as those hides and skins have already been subjected to local tax at 3 per cent when they are purchased in raw form. From the mere fact that the assessee considers that the assessment on the sale of dressed hides and skins is beneficial to him, it cannot be said that once the assessment is made on the dressed hides and skins, the tax cannot be levied at the purchase point. It is only when the purchase tax is paid in respect of the same hides and skins, the sales tax need not be paid on the same hides and skins in a dressed state, but not vice versa. As already stated, when there are two taxable events, the State is bound to tax the first event and exempt the second event, as hides and skins being declared goods are taxable only at single point either at the raw state or in the dressed state.'

With respect, we are in entire agreement with the above view.

12. The learned counsel for the appellant relied on another Division Bench judgment of this Court reported in Deputy Commissioner of Commercial Taxes v. Devandran & Co. [1981] 47 STC 264. No doubt, in that case, the Division Bench while dismissing the tax case in admission, has held as follows :

'In this case, as we pointed out already as admitted, the entire sales turnover relating to the tanned hides and skins had been assessed at 1 1/2 per cent under item 7(b) and the sales turnover was assessable only under that item. Only if the whole or any part of this turnover had escaped such assessment, the whole or any part of the turnover can be said to have been assessed at a rate lower than the rate at which the same was assessable so as to attract the provisions of section 16(1)(b). That not being the case, the order of the Tribunal cannot be said to be erroneous in law and consequently the tax revision case is dismissed.'

But it must be noted that except projecting the scope of section 16(1)(b), no other point was placed before the learned Judges and therefore they had no occasion to consider the other aspects, particularly in the light of the Supreme Court decision referred to above. On the other hand, the Division Bench judgment of this Court, relied on by the learned Additional Government Pleader, in T.C. No. 569 of 1982 (Hazarath Trading Co. v. State of Tamil Nadu) deals with the matter elaborately and has also considered the scope of the Division Bench judgment of this Court in Deputy Commissioner of Commercial Taxes v. Devandran & Co. [1981] 47 STC 264. While referring to the judgment of this Court in Deputy Commissioner of Commercial Taxes v. Devandran & Co. [1981] 47 STC 264, Ramanujam, J., speaking for the Bench has held as follows :

'That decision cannot be taken to deal with the scope of section 16(1)(b) or to lay down that under no circumstances the exemption granted in respect of purchase of raw hides and skins can be cancelled and brought to tax by any means. The said decision cannot therefore be applied to the facts of this case.'

For this reason as well, we consider that the judgment will be of no assistance to the appellant. We are satisfied that the assessing officer was well within his jurisdiction in invoking section 16 of the Act and in reopening the assessment.

13. Still on the other two aspects, the matter has to go back. We have already pointed that the learned counsel for the appellant has attacked the revised assessment order on two factual aspects, namely, that the inclusion of opening stocks of raw hides and skins was against the law in fixing the value of local purchases of raw hides and skins, the assessing officer has committed an error. Though in the impugned order of the respondent, an explanation is given regarding higher value of the local purchases of raw hides and skins, nothing is stated about the attack on the inclusion of the opening stock of raw hides and skins. In the counter-affidavit filed in the writ appeal, there is no explanation on these aspects. Therefore, we are inclined to remand the matter for a limited purpose. The respondent/assessing officer, after giving a reasonable opportunity to the assessee on the two points, namely, inclusion of opening stocks of raw hides and skins and regarding higher value of local purchases of raw hides and skins, is directed to pass orders in accordance with law.

14. In the above view, we set aside the order of the learned Judge and also the impugned order of the respondent to a limited extent as indicated above with liberty to the respondent to pass a fresh order of assessment in accordance with law and also in the light of the observations made in this judgment. Consequently, the writ appeal is allowed and the matter is remitted for a limited purpose. No costs.

15. Appeal allowed.


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