State sales tax on hides and skins upheld where classification between raw and dressed goods was held rational and non-discriminatory.

Item 7(a) of the Second Schedule to the Madras General Sales Tax Act, 1959 was construed as confined to intra-State sales of raw hides and skins, because the charging scheme referred to purchase in the State and the point of last purchase in the State; any ambiguity was resolved to preserve constitutional validity. Item 7(b), which taxed dressed hides and skins at a different point and rate, was treated as a rational classification reflecting their higher price and the prior tax incidence on local raw hides and skins. On that reasoning, the article states that no actual discrimination under Article 304(a) was established and the levy was upheld.

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Issues: (i) Whether item 7(a) of the Second Schedule to the Madras General Sales Tax Act, 1959 was confined to intra-State sales of raw hides and skins or extended to inter-State sales; (ii) Whether item 7(b) of the Second Schedule, imposing tax on dressed hides and skins at a different point and rate, was discriminatory and violative of Article 304(a) of the Constitution of India.

Issue (i): Whether item 7(a) of the Second Schedule to the Madras General Sales Tax Act, 1959 was confined to intra-State sales of raw hides and skins or extended to inter-State sales.

Analysis: The charging scheme under Section 4 of the Madras General Sales Tax Act, 1959, read with item 7(a), referred to purchase in the State and to the point of last purchase in the State. On that language, the levy was directed to transactions within the State. Even if ambiguity were assumed, the provision had to be construed so as to sustain its constitutional validity. The declared goods character of hides and skins under Section 14(iii) of the Central Sales Tax Act, 1956 did not alter that construction.

Conclusion: Item 7(a) was held to apply only to intra-State sales and not to inter-State sales.

Issue (ii): Whether item 7(b) of the Second Schedule, imposing tax on dressed hides and skins at a different point and rate, was discriminatory and violative of Article 304(a) of the Constitution of India.

Analysis: Article 304(a) prohibits discrimination against imported goods by subjecting them to a tax burden higher than that on similar local goods. The Court found that the scheme of items 7(a) and 7(b) treated raw hides and skins purchased locally and dressed hides and skins sold after processing on a rational basis, taking into account the higher price of dressed hides and skins and the fact that local raw hides and skins had already suffered tax. The appellants failed to establish actual discrimination. The earlier decisions striking down comparable provisions were distinguished because the present levy used a lower rate for dressed hides and skins and operated on a materially different footing. The provision also had a clear nexus between raw and dressed hides and skins, both being covered together in Section 14(iii) of the Central Sales Tax Act, 1956.

Conclusion: Item 7(b) was held not to be discriminatory and not violative of Article 304(a).

Final Conclusion: The constitutional attack on the relevant entries in the Second Schedule failed, and the levy on raw and dressed hides and skins under the State Act was upheld.

Ratio Decidendi: A State tax on declared goods does not offend Article 304(a) unless the challenger proves that the levy discriminates against imported goods by imposing a heavier burden than that on similar local goods; a classification tied to the different stage, price, and prior incidence of tax may validly sustain the levy.

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