TaxTMI 
TaxTMI 
1955 (3) TMI 18
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.... to tax under rule 16 (2) of the Turnover and Assessment Rules, since the provision was, it was contended, so framed as to impose a tax liability only when the purchase was from a dealer who was licensed under the Madras General Sales Tax Act, and that a purchase from an unlicensed dealer was not liable to be included in the turnover of a tanner-assessee. The argument was that rules 15 and 16 were the sole charging provisions as regards dealers in hides and skins, and that rule 4 (2) was not a charg- ing section, but merely determined whether it was the seller or the buyer that was liable to be taxed. Reliance was placed in this connec- tion on a judgment in Mohd. Zackria and Co. v. Government of Madras(1), which, though not a final decision on the point, appears to be inclined (1) [1954] 5 S.T.C. 399; (1954) 2 M.L.J. 668. to consider favourably such a construction of the provisions. On the other hand, the learned Advocate-General drew our attention to a passage in the decision of this Court in Syed Mohamed and Co. v. State of Madras(1), which appears to support the interpretation that rule 4(2) is a charging provision. These observations are really obiter, and though this judgment....
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....y a resolution of the Legislative Assembly. (5) The taxes under sub-sections (1) and (2) shall be assessed, levied and collected in such manner and in such instalments, if any, as may be prescribed: Provided that- (i) in respect of the same transaction of sale, the buyer or the seller, but not both, as determined by such rules as may be prescribed, shall be taxed; (ii) where a dealer has been taxed in respect of the purchase of any goods in accordance with the rules referred to in clause (i) of this proviso, he shall not be taxed again in respect of any sale of such goods effected by him." "Dealer" is defined in section 2(b) as any person who carries on the business of buying or selling goods. Though section 3(1) levies a tax on the sale of goods on every dealer on his total turnover-subject to exceptions which are not rele- vant-in the case of hides and skins this provision is subject to the terms of section 5 enacting single point taxation. Section 5 reads: "5. Subject to such restrictions and conditions as may be pres- cribed, including conditions as to licences and licence fees- (i) the sale of handspun yarn and of any cloth woven on handlooms wholly with handspun yarn and s....
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....s the Madras General Sales Tax (Turnover and Assessment) Rules dealing with the determination of the turnover, the "prescribing" of the person whose turnover is liable to be taxed, fixation of the points at which the transaction is liable to tax- ation in respect of those commodities for which a single point taxation is provided for in the Act as also for the levy and collection of the tax. The other set of rules entitled the Madras General Sales Tax Rules lays down the procedure for application for licences under the Act, the authority to grant them, the conditions subject to which they are granted, the fees prescribed therefor, the accounts to be maintained by assessees, the hierarchy of officials and authorities who are to carry out the assessment or hear appeals or deal with revisions therefrom and such other procedural matters. In the present case we are concerned with the Turnover and Assessment Rules. Rule 4 of these rules provides, "4. (1) Save as provided in sub-rule (2) the gross turnover of a dealer for the purposes of these rules shall be the amount for which goods are sold by the dealer; (2) In the case of the undermentioned goods the gross turnover of a dealer for the....
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....last dealer not exempt from taxation under section 3(3) who buys them in the State on the amount for which they were bought by him. (3) Sales by licensed dealers of hides or skins which have been tanned within the State shall be exempt from taxation provided that the hides or skins have been tanned in a tannery which has paid the tax leviable under the Act. If such hides or skins have been tanned in a tannery which is exempt from taxation under section 3(3), the sale of such hides or skins shall be liable to taxation as under the next sub-rule below dealing with hides or skins tanned outside the State. (4) Sales by licensed dealers in hides or skins which have been tanned outside the State shall be exempt from taxation except at the stage of sale by the dealer, who is the first dealer not exempt from taxation under section 3(3) who sells them within the State. The tax shall be levied from such dealer on the amount for which he sells such hides or skins. (5) Sale of hides or skins by dealers other than licensed dealers in hides or skins shall, subject to the provisions of section 3, be liable to taxation on each occasion of sale." Before considering the exact terms of this rul....
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.... to consider the terms of rule 16 under which in the case of hides and skins the single point in the series of sales by successive dealers has been prescribed. Sub-rule (1) laying down that "in the case of hides and skins the tax payable under section 3(1) shall be levied in accordance with the provisions of this rule" makes it clear that so far as hides and skins are concerned, the levy of the tax under the charging provision, section 3(1), is to be determined only in accordance with the provisions of rule 16. This really carries out the provisions of rule 15(1) under which in relation to licensed tanner and other licensed dealers in hides and skins in respect of their dealings in hides and skins, the provisions of rule 16 shall apply. This reference is concerned with the proper interpretation of rule 16(2) which runs: "No tax shall be levied on the sale of untanned hides or skins by a licensed dealer in hides or skins except at the stage at which such hides or skins are sold to a tanner in the State or are sold for export outside the State. (i) In the case of all untanned hides or skins sold to a tanner in the State, the tax shall be levied from the tanner on the amount for wh....
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.... is no doubt that in the present case, it is a licensed tanner who has bought the goods. The expression "bought by a licensed tanner" in the context and in the light of the other provisions of the rules should be understood to mean "bought by a tanner" for the purpose of tanning and is actually tanned by him, that is, the licensed tanner is referred to not in an occupational sense merely. The forms prescribed under the rules for the returns to be submitted by the dealers in hides and skins effectuate this purpose and enable the tax to be levied on the pur- chase turnover of hides which are really consumed in a tannery or which are exported outside the State as untanned hides and skins in respect of which also the tax is laid down by the sub-rule. The forms referred to are Forms A-4 and A-5 and under these the tanner-dealer returns his purchase turnover but this is deducted from the assessable turnover when the goods are sold to another dealer within the State without being tanned by the tanner-purchaser. The argument is that it is immaterial for the purpose of rule 4(2)(c) as to the person from whom the licensed tanner purchases and that a liability to pay the tax arises on his pur....
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....(c) or rule 16(2)(ii) that the purchase by the tanner should have been from a licensed dealer so that every purchase from whatever source would have to be included in his turnover. On the other hand, the contention of Mr. K.V. Venkatasubramania Aiyar, the learned counsel for the assessee, is that the charging provision under the Madras General Sales Tax Act is section 3(1) but that it becomes operative on the rule prescribing whether it is the buyer or the seller on whose turnover the tax is to be levied in respect of parti- cular commodity. In addition to this general rule, the levy of tax on hides and skins, is subject to a further condition that the rules must prescribe one single point in the series of sales at which the tax is to be levied. The content and scope of rule 4 is merely to prescribe under proviso (1) to section 3(5), namely the determination as to whether it is the buyer or the seller that should be taxed and rule 4(2)(c) cannot be read as the fixation of a single point for taxation within the meaning of section 5(vi) of the Act. He points out that section 5(vi) requires that in the case of all transactions in hides and skins, the single point for taxation has to b....
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....tanned those goods. Sub- clause (ii) deals with goods exported outside the State. It will be seen that in both these cases this will be the last sale of the goods within the State as untanned hides and skins for in the first case, after tanning, it will become tanned hides and skins, a matter which is dealt with by rule 16(3) and in the case covered by sub-clause (ii) the untanned hides and skins would have left the State. Therefore, there could be no further sales of the commodity within the State. The terms of rule 15 as well as those of rule 16(2) make it clear that it is a dealing by a licensed dealer that is being dealt with under these rules. The argu- ment of the Advocate-General is that paragraphs (i) and(ii) of rule 16 (2) have to be divorced from the opening portion of rule 16(2) which refers to dealings of licensed dealers and should be read as re-enacting the provisions of rule 4(2)(c) which do not specifically refer to the dealer who sells to the tanner as being licensed. An analysis of rule 16(2) clearly establishes the untenability of the argument on behalf of the State. The opening paragraph consists of two parts. The first is couched in the negative and reads like ....
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....purchases from unlicensed dealers. Rule 15(1) specifically declares that the provisions of that and the following rule shall apply to dealings in hides and skins by licensed dealers alone, and this has been consistently carried out by rule 16(2), (3) and (4). This scheme is emphasised by the provisions made by rule 16(5) under which in the case of unlicensed dealers, the rule of single point taxation gives place to multi-point tax. It may be mentioned that this Court has held in Syed Mohamed and Co. v. State of Madras(1), rule 16(5) to be ultra vires of the rule-making power as contravening the provisions of section 5(vi) of the Act and the decision of this Court has been affirmed by the Supreme Court on appeal. What the effect of this is upon the liability of an unlicensed dealer to taxation does not arise for consideration in the present case because the assessee whose case is referred is a licensed dealer. But in considering the scheme of taxation enacted by rule 16, we cannot ignore the existence of sub- rule (5). The conclusion we have reached as a result of the above discussion is that (1) the charging provision, section 3 is subject, in the case of transactions in hide....
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.... a licensed tanner or to an unlicensed tanner; or there might be a sale by an unlicensed dealer either to licensed tanner or to an unlicensed tanner. When the sale is by a licensed dealer, rule 16(2)(i) provides for a tax being levied on the tanner whether he is licensed or unlicensed. But where the sale is by an unlicensed dealer, there is a difference in the incidence of tax- ation. If the sale is to a licensed tanner, then under rule 4(2)(c), the purchaser has to pay the tax. But where the sale is to an unlicensed tanner rule 4(1) will apply and the tax will fall on the seller. Rule 16(5) provides that sale by dealers other than licensed dealers will be 'liable to taxation on each occasion of sale'. Under this sub-clause when there are successive sales by unlicensed dealers the tax will be leviable on each occasion of sale and that will be inconsistent with section 5(vi) which provides for taxation at a single point." On the facts of the case before this Court, it is clear that the ques- tion as to the liability to taxation by licensed tanners of goods purchased (1) [1952] 3 S.T.C. 367; (1952) 2 M.L.J. 598 at 612. from unlicensed dealers did not arise for consideration at all. T....
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....s rule. If the tanner purchases from a licensed dealer and then sells it without tanning to another tanner, who is also a licensed tanner and so on, all these tanners could be taxed under this rule and unless a limit of the nature suggested, namely, that the purchase must be for tanning by the (1) [1954] 5 S.T.C. 399; (1954) 2 M.L.J. 658. tanner himself is imposed, the multi-point tax cannot be avoided...... As regards the other contention, that the purchase must be from a licensed dealer, with reference to the turnover now in dispute, the assessee did not, no doubt, make any attempt either before the department or before the Appellate Tribunal to raise the question and substantiate the point by placing material before any of them. This was explained by the assessee as due to the fact, that until the law was settled by the Supreme Court and also by this Court that rule 16(5) was ultra vires, it was assumed that even purchases from unlicensed dealers by a tanner could be made liable and that, therefore, there was the omis- sion to draw the distinction between purchase from a licensed dealer and purchase from an unlicensed dealer. Having regard to the fact, that there was some confus....
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....over of the assessees at Rs. 19,82,235-14-5. The assessees filed an appeal to the Commercial Tax Officer and there raised a contention that as the bulk of the goods tanned by them were sold for export they were entitled to exemption under Article 286(1)(b) of the Constitution. They further urged that barring the purchase of a total value of Rs. 8,65,210-2-6 which repre- sented local purchases the rest of the goods were purchased outside the State and therefore not liable to be included in their turnover. These purchases fell under three categories: (1) purchases through their agents at Secunderabad totalling Rs. 95,630-13-6; (2) purchases from merchants in Bombay aggregating to Rs. 2,72,205-8-3; and (3) pur- chases from Bangalore totalling Rs. 7,49,179-6-2. The Commercial Tax Officer rejected the contention put forward on behalf of the asses- sees that none of these categories of purchases were effected outside the Madras State and dismissed their appeal. The matter was then taken up to the Sales Tax Appellate Tribunal by a further appeal by the assessees. Before the Tribunal besides the point urged before the lower authorities, certain additional points which we shall deal with pr....
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....t of Order 30, rule 9, of the Civil Procedure Code (vide also Order 48 A, R.S.C.). In the absence of any legislative guidance, we would have had to consider the very interesting question as to how far the mercantile concept of a firm being invested with juristic personality effected by the combined operation of the terms of the Partnership Act and Order 30 of the Civil Procedure Code has rendered a partner sufficiently distinct from the firm of which he is a member as to render it possible for contracts being concluded between them. In this connection reference may be made to a passage in the judgment of Sir John Beaumont in B. M. Goculdas v. Alembic Chemical Works Co., Ltd.(2), where he said: " The Indian Partnership Act goes further than the English Part- nership Act of 1890 in recognising that a firm may possess a personality distinct from the persons constituting it; the law in India in that respect being more in accordance with the law of Scotland than with that of England." We are however relieved of this necessity by reason of the explana- tion to section 2 (b) of the General Sales Tax Act, which runs: "A co-operative society, a club, a firm, or any association which sell....