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K.M. Adam Vs. the State of Madras - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case NumberTax Case No. 162 of 1967 (Revision No. 87 of 1967)
Judge
Reported in[1973]31STC349(Mad)
AppellantK.M. Adam
RespondentThe State of Madras
Appellant AdvocateK. Srinivasan, ;D.S. Meenakshisundaram and ;K.C. Rajappa, Advs.
Respondent AdvocateFirst Government Pleader (Taxes)
Excerpt:
- orderramanujam, j.1. the assessee in this case is a dealer in reptile skins. he reported a total turnover of rs. 10,56,391.03 for the year 1962-63 and claimed exemption in relation to the entire turnover on the ground that it represented sales in the course of export. the assessing authority, after check of the accounts, found that the assessee had a total turnover of rs. 12,91,408.31, made up of rs. 12,64,483.42 relating to purchase of raw reptile skins, rs. 26,330.90 relating to the purchase of tanning materials and rs. 593.99 relating to the sales of tannery waste. he determined the taxable turnover of the assessee as rs. 12,91,408.31 and assessed him at 2 per cent, on rs. 12,65,077.41 and at one per cent, on rs. 26,330.90. the assessee had contended before the assessing authority that.....
Judgment:
ORDER

Ramanujam, J.

1. The assessee in this case is a dealer in reptile skins. He reported a total turnover of Rs. 10,56,391.03 for the year 1962-63 and claimed exemption in relation to the entire turnover on the ground that it represented sales in the course of export. The assessing authority, after check of the accounts, found that the assessee had a total turnover of Rs. 12,91,408.31, made up of Rs. 12,64,483.42 relating to purchase of raw reptile skins, Rs. 26,330.90 relating to the purchase of tanning materials and Rs. 593.99 relating to the sales of tannery waste. He determined the taxable turnover of the assessee as Rs. 12,91,408.31 and assessed him at 2 per cent, on Rs. 12,65,077.41 and at one per cent, on Rs. 26,330.90. The assessee had contended before the assessing authority that the purchase of raw reptile skins would fall under item 52 of the First Schedule of the Tamil Nadu General Sales Tax Act and not under item 7(a) of the Second Schedule. According to the assessing authority, the purchase of reptile skins is taxable at the hands of the assessee as the last purchase under item 7(a) of Schedule II of the Act.

2. Aggrieved by this, the assessee preferred an appeal to the Appellate Assistant Commissioner who, by his order dated 31st August, 1964, negatived the contention of the assessee that raw reptile skins fall under item 52 of Schedule I of the Act and held that it fell under item 7(a) of Schedule II of the Act. The Appellate Assistant Commissioner, however, held that the assessee having purchased raw reptile skins for a sum of Rs. 2,75,193.44 inter-State, the said turnover was liable to be exempted. He ultimately determined the turnover relating to the local purchase of reptile skins at Rs. 9,90,883.97 and the taxable turnover at Rs. 10,17,214.87.

3. The assessee took the matter to the Tribunal where he contended that the sum of Rs. 9,90,883.97 representing the last purchases of reptile skins within the State would not fall under item 7(a) of Schedule II and that if at all the sales of those reptile skins could be brought under item 52 of Schedule I. The Tribunal, however, held that the assessee is liable to be taxed in respect of the said turnover under item 7(a) of Schedule II. That view of the Tribunal is being challenged before us.

4. The assessee usually purchases raw reptile skins from dealers both inside the State and outside the State. After tanning, he exports them to foreign countries. As regards the purchase of raw reptile skins by the assessee from the local dealers, he will be the last purchaser. As regards the purchase of reptile skins from dealers outside the State, the purchase would become inter-State and the assessee cannot be treated as the last purchaser within the State. Therefore, the Appellate Assistant Commissioner rightly took the purchase of raw reptile skins by the assessee from the local dealers alone as the last purchase within the State.

5. The question posed before us by the learned counsel for the assessee relates to the relative scope of item 52 of Schedule I and item 7(a) of Schedule II which are as follows:

Item 52 of Schedule I:Furs and skins (other than those of At the point of first salecattle, sheep and goats) and Articles in the State at 6 perof personal or domestic use made cent.therefromItem 7(a) of Schedule II:Raw hides and skins At the point of lastpurchase in the State at2 per cent.

7. If item 52 of Schedule I is taken to cover the reptile skins, the assessee has to be taxed only on his first sale at 6 per cent. But the assessee having exported the reptile skins to foreign countries his sales cannot be brought to charge under item 52 as they will be either export sales or sales in the course of export. If the reptile skins are taken to fall under item 7(a) of Schedule II, then the assessee is liable to pay tax at the last purchase of such skins inside the State at 2 per cent. All the authorities below have held that the assessee is liable to pay tax on his purchase of reptile skins under that item. Therefore, the question for consideration is as to whether reptile skins fell under item 52 of Schedule I or under item 7(a) of Schedule II.

8. According to Mr. Srinivasan, the learned counsel for the assessee, the words 'raw hides and skins' it item 7(a) would take in only skin of animals and reptile not being an animal its skin cannot be brought under that item, but such skins would fall under entry 'furs and skins' (other than those of cattle, sheep and goats) occurring in item 52 of Schedule I. In other words, Mr. Srinivasan contends that skins other than those of animals would come under item 52 of Schedule I. The learned counsel draws our attention to the Tamil translation of the Act to show that item 7(a) 'raw hides and skins' has been translated as (sic). It is also contended that the expression 'hides and skins' occurring in item 3 of Section 14 of the Central Sales Tax Act, 1956, has been incorporated as item 7(a) and 7(b) of the Second Schedule to the Madras General Sales Tax Act and the expression has to be understood as relating only to 'hides and skins' of cattle, sheep and goats and not to reptile skins, whether raw or dressed. But, we are not able to appreciate the contention that item 3 relating to hides and skins in Section 14 of the Central Sales Tax Act could be taken to refer only to skins of cattle, sheep and goats. We are of the view that there is no reason as to why the scope of the words 'hides and skins' ought to be restricted to the skins of cattle, sheep and goats. There is nothing to suggest from the words in that item that the intention of the Legislature is to give a restricted meaning to the words. We are not, therefore, inclined to hold that the words 'hides and skins' occurring in item 3 of Section 14 of the Central Sales Tax Act could be understood in such a narrow sense as suggested by the learned counsel. It is true that item 52 of Schedule I read along with item 7(a) of Schedule II would suggest that the former entry was intended to cover skins other than the skins of cattle, goats and sheep. But it has to be remembered that the Madras General Sales Tax Act, 1959, was enacted after the Central Sales Tax Act came into force and, therefore, all hides and skins which come under item 3 of Section 14 of the Central Sales Tax Act can be subjected to only a single point levy at a rate not exceeding the rate fixed under Section 15(a) of the Central Sales Tax Act. If item 52 is understood to take in skins other than those of cattle, sheep and goats for levy at the point of first sale at 6 per cent., such levy would clearly contravene Section 15 of the Act. As already stated, a conjoint reading of item 52 of Schedule I and item 7(a) of Schedule II would mean that all skins would be charged to tax at the point of last purchase in the State at 2 per cent, under item 7(a) and when the skins other than those of cattle, sheep and goats are sold after dressing, tax will be levied thereon at 6 per cent, on those sales as first sales in the State under item 52. This will clearly contravene Section 15(a) of the Central Sales Tax Act, which prohibits the levy of tax at more than one stage and at the rate exceeding the rate mentioned in Sub-section (a) of Section 15 in respect of goods declared to be of special importance in inter-State trade or commerce under Section 14. It is well-established that a statutory provision should normally be interpreted in a manner which would make it valid and for that purpose the statutory provision even though appears to have a wider scope could be interpreted in a restricted sense so as to make it a valid provision.

9. As a matter of fact, the Government recognised the difficulty in interpretation of the said two items in the light of the Central Sales Tax Act and had issued G. O. Ms. No. 4916, Revenue, dated 13th November, 1961, directing that skins should not be assessed under item 52 of the First Schedule but should be assessed under item 7 of the gecond Schedule pending deletion of item 52 of the First Schedule by an amendment of the Act and the said Government Order gave the following reason for giving such a direction :

Item 52 of the First Schedule specifies the rate of single point tax of 6 per cent, in respect of 'furs and skins (other than those of cattle, sheep and goats) and Articles of personal or domestic use made therefrom'. The term 'skins' is also brought under item 7 in the Second Schedule of the Madras General Sales Tax Act, 1959, as one of the items of declared goods, i. e., hides and skins. under Section 15 of the Central Sales Tax Act, 1956, the single point tax levied under the State Act on declared goods should not exceed 2 per cent. But the rate of tax in respect of skins under item 52 in the First Schedule is 6 per cent. It is accordingly proposed to omit the reference to 'skins' in item 52 of the First Schedule to the Act. Pending amendment of the Act for the purpose, the Board of Revenue is informed that skins should not be assessed under item 52 of the First Schedule, but should be assessed under item 7 of the Second Schedule to the Madras General Sales Tax Act, 1959. The Board is accordingly requested to issue suitable instructions to the office of the Commercial Taxes Department in the light of the position explained above.

10. The Legislature also recognised the situation pointed out in the said G. O. that item 52 of the First Schedule cannot be valid and effective in the face of the provisions of the Central Sales Tax Act. Therefore, it chose to delete that item by Madras Act 7 of 1965 with effect from 1st April, 1965. It is true, this amendment came subsequent to the assessment year in question and we have to understand the relative scope of the two items as it stood before the amendment. But as already stated, the court, while interpreting the two statutory provisions, has to assume that the Legislature intended the provision to be valid and workable. If we interpret item 52 of Schedule I as referring to all skins other than those of cattle, sheep and goats, we would be curtailing the scope of the words 'hides and skins' found in item 7(a) of Schedule II. Though item 52 of Schedule I says skins other than those of cattle, sheep and goats, there is no limitation or restriction placed on the scope of the words 'hides and skins' occurring in item 7(a) of Schedule II. If the Legislature intended such a restriction, the words 'hides and skins' in item 7(a) should also be qualified to mean the skins of cattle, sheep and goats alone. But we find no such restrictive words in item 7(a). It is only by giving the full import to the word 'skins' as meaning all skins whether those of cattle, sheep or goats or not and restricting the scope of the words in item 52 of Schedule I, the taxing provisions relating to hides and skins can be validly and reasonably worked and enforced. If the construction sought for by the assessee is to be accepted, skins other than those of cattle, sheep and goats will completely escape from the levy of tax and we are sure that was not the intention of the Legislature, The Legislature found out the mistake in, the entry and, therefore, deleted the same by the amending Act. But the main reason for our holding that the turnover in question will come under item 7(a) of Schedule II is that the said item is wider in scope and the words 'hides and skins' occurring therein have not been limited to the skins of cattle, sheep and goats as contended by the assessee. In this case, we are concerned whether the purchases of reptile skins by the assessee will come under item 7(a) of Schedule II. If it comes, then the assessee cannot escape the levy of tax under that item. The question whether item 52 of Schedule I will apply or not arises only when the assessee is charged on his first sales of reptile skins. It may be that at that stage he may succeed in establishing that the first sales of reptile skins cannot be taxed at all as reptile skins have been subjected to tax at the purchase point or that the sales have been effected in the course of export. We, therefore, feel that the Tribunal is right in not going into the question whether the sales of reptile skins by the assessee will come under item 52 of Schedule I but mainly confining itself to the question whether the purchase of reptile skins by the assessee will fall under item 7(a) of Schedule II. In our view the Tribunal has come to the right conclusion in this case.

11. The tax case is, therefore, dismissed with costs. Counsel's fee Rs. 150.


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