1989 (2) TMI 198 - SC - VAT / Sales Tax

Leather splits and coloured hides remain one commodity under Sections 14 and 15 CST Act for single-point tax

SC held that leather splits, cuttings and coloured leather remain 'hides and skins' within the meaning of Section 14 of the CST Act, irrespective of ... Scope of expression “raw or dressed skin” in Section 14 - Whether the assessee entitled, in respect of their sales, to the concessions available u/s 15 of the CST Act viz. the benefits of single point taxation and of a smaller rate of tax? - leather splits or cuttings are “scrap” and do not qualify any longer to be described as hides and skins; and (b) that coloured leather is a totally new and sophisticated product known as leather and can no longer be described merely as hides and skins. Held that:- We do not find any factual basis even to cast any doubt upon the appellant’s claim. It is a pity that the assessing authority should have followed the audit objections without the application of his own mind. Leather from the stage of raw skins to the stage of dressed hides and skins may undergo various stages of changes. Under the classification for the purposes of Section 14 of the Central Sales Tax Act, the various stages are irrelevant. For the purposes of Tamilnadu General Sales Tax Act, 1959, only two stages that are relevant are the skins at the raw stage and the skins in the form of dressed hides and skins (or tanned hides and skins). The appellant purchases semi-finished leather and undertakes further process of finishing with a view to colour the hides and skins for certain uses of skins. He says that he purchased the same tanned hides and skins and sold the tanned hides and skins. According to him the products purchased and sold are not different even under the classification by way of the dichotomy between raw and dressed hides and skins under the Tamilnadu General Sales Tax Act. Under the Central Sales Tax Act, the appellant is in a much better position, because all the hides and skins are brought together in one entry. Whether raw or dressed, the product falls under the same entry. We are of opinion that this represents the correct view of the scope of the entry in question. - We are, therefore, of the view that the High Court was right in holding that ‘splits’ and ‘coloured leather’ continue to be hides and skins eligible for special treatment under the CST Act. All the appeals, therefore, fail and are dismissed. Issues Involved:1. Interpretation of the expression 'hides and skins, whether in a raw or dressed state' under Section 14 of the Central Sales Tax Act, 1956 (CST Act).2. Classification of 'leather splits' and 'coloured leather' under the CST Act.3. Eligibility of these items for the benefits under Sections 14 and 15 of the CST Act.Detailed Analysis:1. Interpretation of 'hides and skins, whether in a raw or dressed state':The core issue revolves around the interpretation of the term 'hides and skins, whether in a raw or dressed state' as used in Section 14 of the CST Act. The respondents, who are dealers in hides and skins, argue that both leather splits and coloured leather fall within this description and thus should be eligible for the benefits under Sections 14 and 15 of the CST Act. The department contends that leather splits are 'scrap' and coloured leather is a new product, thus not qualifying as 'hides and skins.'2. Classification of 'leather splits' and 'coloured leather':Leather Splits:The department argues that leather splits, being cut pieces obtained in the process of cutting raw or tanned hides and skins, should be classified as 'scrap' and not as 'hides and skins.' The Board of Revenue supported this view, stating that these splits, being of lesser value and used for miscellaneous purposes, cannot be equated to dressed skins.Coloured Leather:The department contends that coloured leather, obtained by dyeing tanned hides and skins, represents a new and sophisticated product different from hides and skins. The process of dyeing or colouring changes the commercial nature of the dressed skins, making them distinct products in trade circles.3. Eligibility for Benefits under Sections 14 and 15 of the CST Act:The respondents argue that both leather splits and coloured leather should be considered as 'hides and skins' under Section 14 of the CST Act, thus making them eligible for the benefits of single-point taxation and a smaller rate of tax under Section 15. They refer to contemporaneous circulars and decisions of the Sales Tax Appellate Tribunal supporting their claim.Judgment Analysis:Leather Splits:The court concluded that leather splits are indeed cut pieces of hides and skins and do not cease to be hides and skins merely because they are called 'scraps.' The court emphasized that the name 'scraps' only indicates that they are cut pieces and does not imply that they have become a different commercial commodity. Therefore, leather splits should be considered as 'hides and skins' and eligible for the benefits under Sections 14 and 15 of the CST Act.Coloured Leather:The court referred to the opinion of the Leather Development Wing of the Ministry of Commerce and Industry, which clarified that the expression 'hides and skins in a dressed state' includes all stages from raw hides and skins to tanned and finished materials. The court also noted that the departmental view was inconsistent, with different officers having different interpretations. The court relied on the contemporaneous exposition by the administrative authorities and the definitions provided by the Indian Standards Institution and the British Standards Institution. The court concluded that coloured leather, being a form of leather obtained after tanning and dyeing, still falls within the scope of 'hides and skins in a dressed state' and is thus eligible for the benefits under Sections 14 and 15 of the CST Act.Conclusion:The court held that both leather splits and coloured leather continue to be 'hides and skins' eligible for special treatment under the CST Act. All appeals were dismissed, and the High Court's judgment was upheld, confirming that the respondents are entitled to the benefits under Sections 14 and 15 of the CST Act for these items. No order as to costs was made.