FIRM A. T. B. MEHTAB MAJID AND CO. v. STATE OF MADRAS AND ANOTHER

Citation: [1963] SUPP. 2 S.C.R. 435; 1962 INSC 342

Court: Supreme Court of India

Bench: S.K. DAS , J.L. KAPUR, A.K. SARKAR, M. HIDAYATULLAH, RAGHUBAR DAYAL

Judgment date: 1962-11-22

Case summary

1962 INSC 342. Supreme Court of India judgment dated 1962-11-22. FIRM A. T. B. MEHTAB MAJID AND CO. v. STATE OF MADRAS AND ANOTHER. Read the judgment and...

Judgment text

2 S. C. R. SUPREME COURT REPORTS 435 to Shri Ramchandra Swamy temple, set aside the judgment and decree of the High Court and send the case back to the High Court for disposal of the appeal, after deciding the other issues in the suit that require to be decided for its proper disposal. Costs will abide the result. Appeal allowed. FIRM A. T. B. MEHTAB MAJID AND CO. "· STATE OF MADRAS AND ANOTHER (S. K. DAB, J. L. KAPUR, A. K. SARKAR, M. HIDAYATULLAH and RAGHUBAB DAYAL, . U,) 8alM Tax-Tannw hidu and ski11 imporld from o! IUitk and •old in. aide tht State-Hide8 and •l Blituted by new rule-Old nde '°'8 not ,.. ,;.. when new ruks declar"1 invalid-0""8titvtiol& of India, Arta. 391, 304-Madras Genenil Salt. a Tax Aol (IX of 193"), ••· 3,5, 19- Jladraa General Salu Tax Rulu, r. 16. This is a petition under Art. 32 of the Constitution, the petitioners are dealers in hides and skins in the State of Madras.

The impugned sales tax assessment relates to turnover of sales of tanned hides and skins which had been obtained from outside the Su. te of Madra•. The main contention of the petitioners is that the tanned hides and skins imported from outside and sold inside the State arc, under r. 16 of the Madras General Sales Tax Rules, subject to a higher rates of tax than the tax imposed on hides and skins tanned and sold within the State and this discriminatory taxation offended Art. 304 (a) of the Constitution. The respondents contentions were (a) sales tax doc. not come within the purview of Art. 304 (a) as it is not a tax on the import of gogd. 1 at the point of entry, (b) the impugned rule is n d by Art. 301. They are excluded from the purview of the provisions of Part XIII of the Constitution for the simple reason that they do not hamper trade, commerce and intercourse but rather facilitate them .... Subba Rao J. , concurred in this view and said at p. 1436: "{l) Art.

301 declares a right of free movement of trade without any obstructions by way of barriers, inter-State or intra-State, or other impediments operating as such barriers. (2) The said freedom IS not impeded, but, on the other hand, promoted, by regulations creating con-ditions for the free movement of trade, such as, police regulations, provision for services, main-tenance of roads, provision for aerodromes, wharfs etc. , with or without compensation. " It is therefore now well settled that taxing laws can be restrictions on trade, commerce and intercourse, if they hamper the flow of trade and if they are not what can be termed to be compensatory taxes or regulatory measures. Sale~ tax, of the kind under consideration here, cannot be said to be a measure regulating any trade or · a compensatory tax levied for the use of trading facilitit;i.

Sales tax, which has the effect of discriminating between goods of one State and goods of another, may affect the free flow of trade and it will then offend against Art. 301 and will be valid only if it comes within the terms of Art. 304 {a). Article 304{a) enables the Legislature of a State to make laws affecting trade, commerce and intercourse. It enables the imposition of taxes on goods from other States if similiar goods in the State are subjected . to similiar taxes, so as not to discriminate between the goods manufactured or produced in Ffrm . 4. T. B. M1ft. '46 Majid .. , Co. that State and the goods which are imported from Y, others States. This means that if the effect of the St•ll •f Muros sales·tax on tanned hides or skins imported from Ra1A•bar Do,. ,, J. outside is that the latter becomes subject to a higher tax by the application of the proviso to sub-rule of r. 16 of the Rules, then the tax is discriminatory and unconstitutional and must be struck down.

We do not agree with the contentions for the respondents. The contention that Art. 304 (a) is attracted only when the impost is at the border, i. e. , · when the goods enter the State on crossing the bor· der of the State, is not sound. Art. 304(a) allows the Legislature of a State to impose taxes on goods imported from other States and docs not support the contention that the imposition must be at the point of entry only. Section 5 (vi) provides that the sale of hides or skins, whether tanned or untanned, shall be liable to tax under s. 3(1) only at such single point in the series of sales by successive dealers as may be prescribed. 'Prescribed' means 'prescribed by rules made under the Act. ' Ruic 16 prescribes such single point. This rule was made by the Governor in the exercise of power conferred on him under s. 19 of the Act and would therefore have statutory force. In fact, sub-s. (5) of s. 19 provides that the rules shall have effect as if enacted in the Act.

We therefore do not agree that r. 16 is not a law which would fall within a law made by the State Legislature. It is true that the impugned rule, by itself, does not impose the tax, but fixes the single point at which the tax imposed by ss. 3 and 5 is to be levied. What the rule provides is a step necessary for the imposition of the tax, in view of ss. 3 and 5 and therefore the impugned rule is a part of the enactment which imposes the tax. The fact that the impugned rule was made in M1/r- order to prescribe the single point in the series of sales by successive dealers at which the tax on sale of hides or skins was to be levied, in view of ss. 3 and 5 of the Act, does not justify the making of such J, a rule which descriminates between the tax imposed on goods imported from outside the State and the goods produced or manfactured in the State.

Now, the only question that remains for consideration is whether this rule discriminates between hides or skins imported from outside the State and those manufactured or produced in the State. Sub-rule ( 1) of the rule deals with the sale of raw hides and skins. The tax is levied from the dealer who is the last purchaser in the State. Its virea is not challenged. Clause (i) of sub-r. (2) provides for the levying of tax on the sale of hides and skins which had been tanned outside the State. The tax is levied from the dealer who, in the State, is the first seller of such hide or skins. The result is that a dealer in hides or skins which have been tanned outside the State has to pay the tax on the amount for which such hides or skins are sold by him. Clause (ii) of this sub-rule is in indentical terms with respect to the sale of tanned hides or skins which have been tanned within the State.

The tax is to be levied from the person who is the first dealer in such hides or skins and is levied on the amount for which they are sold. The descrimination. it is argued, comes in on account of the proviso to this sub-cl. (ii). The proviso is to the effect that if the dealer of hides or skins which had been tanned within the State proves that tax had already been levied on those hide or skins in their raw condition, in accor· dance with sub-r. (1), he will not be liable to the tax under sub-cl. (ii) of sub-r. {2). The result therefore is that the sale of hides or skins which had been purchased in the State and then tanned within the State is not subject to any further tax. Hides and skins tanned within the State are mostly those which Firm A. T. B. Mllr· had been purchased in their raw condition in the let M•jid ,. 4 C. , v. State and therefore on which tax had already been Stell of Mura levied on the price paid by the purchaser at the time Ra1lwbar DoμI, J.

of their sale in the raw condition. If the quantum of tax had been the same, there might have been. no case for grievance by the dealer of the tanned hides and skins which had been tanned outside the State. The grievance arises on account of the amount of tax levied being different on account of the exis-tence of a substantial disparity in the price of the raw hides or skins and of those hides or skins after they had been tanned, though the rate is the same under s. 3 (1) (b) of the Act. If the deiller has purchased the raw hide or skin in the State, he does not pay on the sale price of the tanned hides or skins, he pays on the purchase price only. If the dealer purchases raw hides or skins from outside the State and tans them within the State, he will be liable to pay sales-tax on the sale price of the tanned hides or skins.

He too will have to pay more for tax even though the hides and skins are tanned within the State, merely on account of his having imported the hides and skins from outside, and having not therefore paid any tax under sub-r. (1). It is true that dealers, though few, selling hides and skins which had been tanned within the State will also have to pay similar tax if no tax had been paid previously, they having not purchased the raw hides and skins at all as they were from the carcasses of animals owned by them; but this does not affect the discriminatory nature of the tax as already indicated.

It is urged for the respondent State that to con· sider discrimination between the imported goods and goods produced or manufactured in the State, cir-cumstances and situations at the taxable point must be similar and that the circumstance of hides or skins tanned within the State and on which tax had been paid earlier at the time of their purchase in the raw condition is sufficient to consider such hides or skins to be different from the hides or skins which had been tanned outside the State. We do not consider that the mere circumstance of a tax having been paid on the sale of such hides or skins in their raw condition justifies their forming goods of a different kind from the tanned hides or skins which had been impor· ted from outside. At the time of sale of those hides or skins in the tanned state, there was no difference between them as goods and the hides or skins tanned outside the State as goods. The simila· rity contemplated by Art.

304 (a) is in the nature of the quality and kind of the goods and not with res· pect to whether they were subject of a tax already or not. We are therefore or opinion that the privisions of r. 16 (2) discriminate against the imported hides or skins which had been purchased or tanned outside the State and that therefore they contravene the provisions of Art. 304 (a) of the Constitution. It has been urged for the respondent that if the impugned rule be held to be invalid; old r. 16 gets revived and that the tax assessed on the petitioner will be good. We do not agree. Once the old rule has been substituted by the new rule, it ceases to exist and it does not automatically get revived when the new rule is held to be invalid. Lastly, we may refer to the Preliminary objection raised on behalf of the respondent to the maintainability of this petition, in veiw of the decision of this Court in Ujjam Bai v. State of Uttar 1 Pradesh {). This petition does not come within that decision.

This is not a case in which the tax has been levied by the Deputy Commercial Tax Olficer by mis-construing certain provisions of a valid Act, but is a case where the taxing officer had no juris-lll'. [19631 I. S. C. R. 778. diction to assess the tax on account of the invalidity of the rule under which the tax was assessed. Fi"" A. T. B. M1ft. r. 6 Majid •' C•. y, We therefore allow this petition with costs Sl•t. of M•dr. s holding the impugned rule 16 (2) invalid and order the is. ,ue of a writ of mandamus to the State of Ratlwbar D•Jdl, J. Madras and the Sales Tax Authorities under the Act to refrain from enforcing any of the provisions of r. 16 (2) and direct them to refund the tax illegally collceted from the petitioner. Petition Allowed. 1962 GOUR CHANDRA ROUT & ANOTHER N_,,,. , 13. ti. THE PUBLIC PROSECUTOR, CUTT ACK (S. J. buv, K. SUBBA RAo, N. R. uAGOPALA AYYANGAR and J. R. MuDHOLKAR, JJ.

) Oriminal Proadurt-Aulkoriaation by GotJtmM Gtntral- AulhMi•<Jtion, whetAor contemp/4ted-Ootl. e of Oriminal Procedure 1898 (V of 1898), "" <Jmttuktl by Oriminal Procedure Ood« (A,,.. ndmtnt) Act, 1955(XXVI of 1955), a. 198-B(l), (3)(1l). The appellann were the editor, printer and publisher of an Oriya Daily Newspaper called "Matrubhumi". In the issue of May 31, 1958, the views expressed by Dr. Ram Manohar Lohia concerning the Political situation created in Orissa by reason of the resignation of the Congress Ministry and its immediate non-acceptance by the Governor were published. During the Press Conference he remarked that the Governor had played as a toy in the hands of the ·Congress and that his one near relation had secured employment with the help of the congress party. After it came to the notice of the Governor, he got it translated into· English and sent to the Government for taking such action as may be necessary.

Shortly thereafter, the Home Secretary to the Government passed an order pur• ported to be a sanction under s. 1988 of the Code of Criminal

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