1972 (12) TMI 73 - HC - VAT and Sales Tax

Court upholds constitutionality of tax law on hides, denies refund request.

Associated Tanners Versus Commercial Tax Officer (OFA), Vizianagaram

The court dismissed the writ petition challenging the constitutionality of item 9(b) of the Andhra Pradesh General Sales Tax Act, 1957. The court held ... - Issues Involved: Constitutionality of item 9(b) of the Third Schedule to the Andhra Pradesh General Sales Tax Act, 1957, discrimination under Article 304(a) of the Constitution, applicability of Section 15 of the Central Sales Tax Act, and the validity of tax levied on inter-State sales of tanned hides.Issue-wise Detailed Analysis:1. Constitutionality of Item 9(b) of the Third Schedule to the Andhra Pradesh General Sales Tax Act, 1957:The petitioner challenged item 9(b) of the Third Schedule, arguing that it discriminates between hides and skins imported from outside the State and those produced within the State. Item 9(b) taxes tanned hides and skins brought from outside the State and tanned locally, whereas locally purchased and tanned hides and skins are only taxed at the untanned stage. This results in a higher tax burden for imported hides and skins, violating Article 304(a) of the Constitution. The court noted that the quantum of tax on locally purchased untanned hides and skins is less than the tax on tanned hides and skins made from imported untanned hides and skins, leading to discrimination.2. Discrimination under Article 304(a) of the Constitution:The court examined whether the taxation scheme under item 9(b) discriminates against imported hides and skins. Article 304(a) prohibits States from imposing taxes on goods imported from other States that are discriminatory compared to similar goods produced locally. The court referred to the Supreme Court decision in Firm A.T.B. Mehtab Majid & Co. v. State of Madras, which held that a similar taxation scheme was discriminatory because it imposed a higher tax burden on imported tanned hides and skins. The court concluded that the resulting discrimination in the quantum of tax paid on locally purchased and imported hides and skins is offensive to Article 304(a).3. Applicability of Section 15 of the Central Sales Tax Act:The revenue argued that the discrimination was a necessary result of Section 15 of the Central Sales Tax Act, which restricts the State from taxing hides and skins at more than one stage and at a rate exceeding 3 percent. The court disagreed, stating that Section 15 does not authorize the State to discriminate between goods from different States. The court emphasized that even if the State Legislature was compelled to enact item 9(b) due to Section 15, the provision must still comply with Article 304(a). The court held that any State legislation conflicting with Article 304(a) is unconstitutional, regardless of the restrictions imposed by Section 15.4. Validity of Tax Levied on Inter-State Sales of Tanned Hides:The petitioner argued that no tax could be levied on inter-State sales of tanned hides that had already suffered tax at the untanned stage. The court examined the Supreme Court decisions in State of Madras v. N.K. Nataraja Mudaliar and Rattan Lal & Co. v. Assessing Authority, which held that if the rate of tax is the same for both local and imported goods, Article 304(a) is satisfied. The court concluded that since the rate of tax under item 9(b) is the same for both local and imported hides and skins (3 percent), the provision does not violate Article 304(a). The court dismissed the writ petition, holding that item 9(b) is not discriminatory and does not offend Article 304(a).Conclusion:The court dismissed the writ petition, concluding that item 9(b) of the Third Schedule to the Andhra Pradesh General Sales Tax Act, 1957, is not discriminatory and does not violate Article 304(a) of the Constitution. The court emphasized that the rate of tax being the same for both local and imported hides and skins satisfies the requirements of Article 304(a). The petitioner's request for a declaration that no tax can be levied on inter-State sales of tanned hides and for a refund of the amount already collected was denied. The court awarded costs to the respondents.