Purchase turnover tax on raw hides and skins upheld where later inter-State sales of tanned goods escaped State levy.

Local purchase turnover of raw hides and skins could be reassessed under the Tamil Nadu General Sales Tax Act where the goods were later tanned and sold in inter-State trade without State sales tax on the sale turnover. The Madras HC accepted that raw hides and skins and dressed hides and skins are commercially distinct commodities, and that taxation of declared goods at only one stage does not invalidate a levy otherwise authorised by the Act. It found no error of law in the Tribunal's order and sustained the reassessment on purchase turnover.

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Issues: Whether reassessment of the purchase turnover of raw hides and skins under entry 7(a) of the Second Schedule to the Tamil Nadu General Sales Tax Act, 1959 was lawful when the resultant tanned hides and skins were sold wholly in inter-State trade and no sales tax was levied on the sale turnover under the State Act.

Analysis: The reassessment was made under section 16 of the Tamil Nadu General Sales Tax Act, 1959 on the footing that the value of locally purchased raw hides and skins, after tanning and sale outside the State, had escaped assessment. The Court held that the levy on the purchase turnover was legally sustainable. The earlier decision relied upon by the assessee was held not to be inconsistent with the later decision supporting the levy. The Court accepted that raw hides and skins and dressed hides and skins are commercially distinct commodities, and that, in the case of declared goods, taxation at only one stage does not invalidate the State levy. The Court found no error of law in the Tribunal's order.

Conclusion: The reassessment and levy on the purchase turnover were upheld and the challenge failed.

Final Conclusion: The petitioners were not entitled to relief, and the reassessment order sustained by the Tribunal stood affirmed.

Ratio Decidendi: Where raw hides and skins are purchased locally and the resultant goods are dealt with in a manner that does not attract sales tax on the sale turnover, the State may lawfully levy tax on the purchase turnover under the relevant schedule entry, so long as the levy is otherwise authorised by the Act and does not offend the constitutional restriction on multiple-stage taxation of declared goods.

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