ASSOCIATED TANNERS VIZIANAGRAM, A.P.versusCOMMERCIAL TAX OFFICER, VIZIANAGRAM, ANDHRA PRADESH & ORS.

                                                           969

                                                                  A
             ASSOCIATED TANNERS VIZIANAGRAM, A.P.
                              v.
                    COl!MEJ!CIAL TAX OFFICER,
              VIZIANAGRAM, ANDHRA l'RADESH & ORS.

                        MARC!! 18, 1986                           B

          [R.S. PATHAK AND SABYASACHI MUKllARJI, JJ,]

      Andhra Pradesh General Sales Tax Act, 1957 Item 9(b) of
Third Schedule whether unconstitutional and void and offends
Articles 14 and 304(a) of the Constitution of India - Whether
Central Sales Tax Act could be levied or leviable under the       c
Central Sales Tax Act on the inter-State Sales of tanned hides
which have already suffered tax at the untanned stage.

      Under item 9(b) of the Third Schedule to the Andhra
Pradeah General Salea Tax Act, 1957 tanned hides and skins,
(which were not subjected to tax as untanned hides and skins),    D
when purchased by a manufacturer in the State at the point of
purchase by the manufacturer and in all other cases at the
point of purchase by the last dealer who buys them in the
State, salea tax on the turnover calculated at the rate of 2
paise in the rupee was payable. In reapect of the interstate
salea Salea Tax under the Central Salea Tax was also leviable     E
under the Central Sales Tax Act.

      The appellant purchasea raw hidea and skins in the State.
of A. P. , tan the same and mostly used to sell such tanned
hidea in the course of inter-State trade. The first Reapondent
by his order dated 30th January, 1969 had assessed the            F
appellants' inter-State sales turnover at Rs. 16,23,194.29 and
levied a tax of Rs. 48,695,82 under the Central Act. The local
purchase turnover of raw hidea was assessed at Rs. 7 ,92,585
and a tax of Rs. 23,777.66 was also levied. The appellant,
therefore, filed a Writ Petition No. 3464/71 in the A.P. High
Court for declaring (i) that no tax could be levied or was        G
leviable under the Central Sales Tax Act on the inter-State
sales of tanned hides which have already suffered tax at the
untanned stage. The High Court having dismissed the Writ
Petition, the appellant has come in appeal by Special Leave.

      Dismissing the appeal, the Court,                           H
    970                  SUPREME COURT REPORTS      [1986] 1 S.C.R.

A
           lllUI : 1.1 When a taxing statute was not imposing rates
    of tax on i11POrted goods different from rates of tax on goods
    Ullllfactured or produced, article 304 bad no application. So
    long u the rate was the same, article 304 was satisfied. When
    the rate la applied the resulting tax might be somewhat higher
    but that ilid not contravene the equality clause contemplated
B   by Article 304 of the Constitution. In the instant case, the
    tax being at the same .rate, article 304(a) is not offended.
    [975 G-fl)

           latta t.i ' Co. and Anr. •· ?be Aaening AatboritJ '
    .&ar•• [1969) 2 s.c.R. 544 discuased and applied.
c
          1.2 The le.y by the State Act is in consonsnce with the
    acheme of Central Act. By sub-section (2) of section 8 of the
    Central Act, the tax payable by any dealer on his turnover in
    ao far u the turnover of any part thereof relates to the sale
    of good• in the course of inter-State trade or counerce not
D   falling under sub-section (1), shall be at the rate specified
    in sub-section (2) of section 8. these goods do not fall in
    aub-9ection (1) of section 8. [976 C-D)

           The effect of an imposition of tax might worlt
    ilifferently upon different dealers namely, those who use
E   imported tanned goods and those who purchase these locally and
    tan these locally and then sell in the course of inter-State
    sales. But that effect cannot be said to be arising directly,
    or u an i-.liate effect of the imposition of the tax.
    Therefore there cannot be any question of violation of article
    304(a) of the Constitution. [977 C-E)
F
          1.3 The i11P09ition, in this case, was in implementation
    of the Central Act. 'lbere is no prohibition under Article 304
    of tha Constitution on the Parliaent for imposition of any
    tax. The abargo that was placed by Article · 304 of the
    Constitution was on the Legislature of a State. [977 E-F)
G
          CIVIL APPEil.ATE JURISDICTION : Civil Appeal No. 1345
    (NT) of 1974.

          From the Judgment and Order dated 14th December, 1972 of    ,--"-
    the Andhra Pradesh High Court in Writ Petition No. 3464 of
H   1971.
     ASSOCIATED TANNERS v. C.T.O, [SABYASACHl MUKHARJI, J.]       971
                                                                        A
          D.P. Mukharjee and G.S. Chatterjee for the Appellant.

          K, Ram Kumar for Respondent Nos. I and 2.

          Anil Dev Singh, Ms Halida Khatun and C. V. Subba Rao for
    Respondent No. 3.                                                   B

          The Judgment of the Court was delivered by

         SABYASAQII MllKllAl!JI, J. This appeal by special leave
    arises from the judgment and order dated 14th December, 1972
    of a Bench decision of the High Court· of Andhra Pradeah in
    Writ Petition No. 3464 of 1971.                                     C

          The Division Bench dismissed the application under
    article 226 of the Constitution filed by the appellant. The
    appellant was a tanner who had his tannery at Vizianagram and
    was at the material time a dealer under Andhra Pradesh General
    Sales Tax Act, 1957 as well as the Central Sales Tax, 1956,         D·
    hereinafter called the 'State Act' and the 'Central Act'
    respectively. The appellant purchases raw hides and skins in
    the State of Andhra Pradesh and tan the same. The appellant
    used mostly to sell such tanned hides in the course of inter-
    state trade.
                                                                        E
          The first respondent i.e. the Commercial Tax Officer,
    Vizianagram, by his order dated 30th January, 1969 had
    assessed the appellant's inter-State sales turnover at
    Rs.16,23,194.29 and levied a tax of Rs.48,695.82 under the
    Central Act. The local purchase turnover of raw hides was
    assessed at Rs.7,92,585 and a tax of Rs.23,777.66 was also          F
'   levied.

          The appellant had filed previously writ petition No.3436
    of 1969 challenging the validity of the Central Sales Tax
    Amendment Act, 1969. That petition, however, was withdrawn in
    view of the judgment of the Andhra Pradesh High Court in            G
    January, 1971. The appellant thereafter filed the present
    petition out of which this appeal arises for declaring item
    9(b) of Schedule Ill of the State Act as unconstitutional and
    void and further declaring that no tax could be levied or was
    leviable under the Central Sales Ta£ Act on the inter-State
    sales of. tanned hides which have already suffered tax at the       H
                                                                               .,,
    972                     SUPREME COURT REPORTS      [1986] 1 S.C.R.

A
    untanned stage. Further declaration was sought prohibiting the
    respondents who are the sales tax authorities from enforcing
    the order dated 30th January, 1969 and directing the
    respondents to refund the amount already collected.

          In order to appreciate the contention it is necessary to
B   refer to item 9(b) of Schedule III of the State Act as it
    stood at the relevant time which read as follows

                              "THIRD SCHEDULE

                  (Declared goods in respect of Which a single point
c                 tax only is leviable under section 6).


    Description of goods      Point of levy          Rate of tax
            (1)                    (2)                   (3)

D                                                                        -'y
           xxx                      xxx                   xxx

    9,(b) Tanned hides and      When purchased
          skins (which were     by a manufacturer
          not subjected to      in the State at
E         tax as untanned       the point of
          hides and skins)      purchase by the        2 paise
                                manufacturer and       in the
                                in all other cases    rupee".
                                at the point of
                                purchase by the
F                               last dealer who
                                buys them in
                                the State.


          The submission urged on behalf of the dealer/appellant
G   was that item 9(b) of Schedule III of the State Act discrimi-
    nated between hides and skins imported from outside the State
    and those manufactured or produced in the State. The
    contention was that item 9(b) provides for levy of tax on the
    sale of hides and skins brought from outside the State and
    tanned inside the State whereas if raw hides and skins were
H   locally purchased and tanned, there was no tax leviable on the
  ASSOCIATED TANNERS v. C,T,Q, [SABYASACHI MUKHARJI, J.]    973

                                                                   A
tanned hides and skins as the untanned hides and skins in such
cases alone were taxed. It was urged that the result of the
taxation scheme was that a dealer who brought raw hides and
skins from outside the State and tanned these locally was
taxed on the amount of the sale of such tanned hides and ,
skins, whereas the locally purchased raw hides and skins and       B
tanned were taxed on the amount of the purchase of the raw
hides and skins and tanned were taxed on the amount of the
purchase of the raw hides and skins the price of which
compared to the price of tanned hides and skins would be very
insignificant. It was submitted that such taxation scheme,
therefore, descriminated against the import of raw hides and
skins for bringing them inside the State. It was submitted         c
that this of fended Article 304(a) of the Constitution inastDJch
as the goods manufactured or produced locally got a more
favourable treatment than the goods imported from other
States.

      After considering the decisions of this Court in Firm        D
A.T.B. llehtap Majid & Co. v. State of Madras & Anr., [1963] 2
Suppl. s.c.R. 435 = 14 s.T.c. 355; A Hajee Abdul Shakoor and
Company v. State of Madras,     (1964] 8 s.c.R. 217; State of
Madras v. H.K. Natraja MudaUar, [ 1968] 3 S.C.R. 829 and
Rattan Lal & Co. & Anr. v. 'lbe Assessing .Authority & Anr.,
(1969] 2 S.C.R. 544; the High Court was of the view that every     E
tax did not interfere with the freedom of trade guaranteed
under Article 301 of the Constitution. Titere was interference
only in case the legislat'ion directly and immediately
restricted or hampered the free flow of trade, commerce or
intercourse. It was highlighted that the discrimination JDJst
be direct and arise out of the taxing provisons them.selves.       F
Any discrimination arising out of any indirect effect was not
within the purview of article 304(a) of the Constitution. It
was emphasised that a State law with respect to taxation could
not be said to infringe the Constitution merely because it
operated unequally in the different States not from anything
done by the law making authority but on account of the             G
inequality of conditions obtaining in the respective States.
Thus, if a general rule levying the rate of tax was made
applicable to the imported as well as local goods alike but
which operated or might operate unequally and with different
results in several States it did not offend the provisions
against discriminating taxation.                                   H
    974                  SUPREME COURT REPORTS      [1986] 1 S.C.R,

A                                                                      .l
            The High Court was of the view that if the rate of tax
    was the same, article 304 would be satisfied. The High Court
    was of the view that it was to the rate of tax to which we
    llllSt look and not the operation of the tax in practice in any
    particular State.

B         In the instant case, the rate of tax was the same both
    for the goods brought from outside as well as local goods and
    it cannot be said that taxation did directly and imnediately
    restrict or hamper the free flow of trade, co111I1erce or inter-
    course and it offended article 304(a). The effect or the
    result of the operation of such tax cannot make out a cause
c   for discrimination. It was pointed out that the last two deci-
    siona of this Court displaced the earlier two decisions of
    this Court and item 9(b) of Schedule Ill of the said State Act
    did not offend article 304(a) of the Constitution. Being
    aggrieved by the said decision, the dealer/appellant has come
    up in appeal before this Court.
D
          The point involved in this case, it appears, is no
    longer res-integra. The effect of the Central Act, and the
    different rates of tax in different States under section 8 of
    the Act was considered exhaustively by a decision of a bench
    of five learned judges of this Court in State of Madras v.
E   N.L Nataraja ....iaJ.iar (supra) where the respondent had claim-
    ed before the Co111I1ercial Tax Officer, Madras that some of his
    goods had been sent from Madras to his depot in Andhra Pradesh
    and that the sale of those goods were intra-State sales in
    Andhra Pradesh where they had been taxed as such. The co111I1er-
    cial Tax Officer, however, held that the goods had been moved
F   from the State of Madras under contracts of sale and were
    therefore taxable as inter-State sales under the Central Act.
    The respondent thereupon filed a petition under article 226 of
    the Constitution. The High Court held that sub-section(2),
    (2A) and (5) of section 8 of the Central Act as these stood at
    the relevant time, imposed or authorised the imposition of
G   varying rates of tax in different States on similar
    inter-State transactions and the resultant inequality in the
    burden of tax affected and impeded inter-State trade, conmerce
    and intercourse and thereby offended article 301 and 303(1) of
    the Constitution. The application of section 9(3) of the Act
    was also considered. Against the said decision there was an
H   appeal to this Court. This Court noted that the view taken by
      ASSOCIATED TANNERS v. C.T.O. [SABYASACRI MUKHARJI, J.]   975

                                                                     A
    the Righ Court was influenced by two decisions of this Court
    on the interpretation of article 304(a); namely in Firm A.T.B.
    Mehtab Majid and Co. v. State of Madras and Another (supra)
    and A. Hajee Abdul Shalcoor and Collpany v. State of Madras·
    (supra). This Court was of the view that in the above two
    mentioned cases, the differential treatment was heeld to have    B
    violated article 304(a) of the Constitution, which authorised·
    the Legislative of a State notwithstanding anything in
    articles 301 and 303 by law to impose on goods imported from
    other States or the Union Territories any tax to which similar
    goods manufactured or produced in that State were subject, so,
    however, as not to discriminate between goods so imported and
    goods so manufactured or produced. This Court was of the view    c
    that imposition of differential rates of t~ by the same State
    on goods manufactured or produced in the State and similar
    goods imported in the State was prohibited by that clause. But
    where the t~ing State was not imposing rates of t~ on
    imported goods different from rates of tax on goods manu-
    factured or produced, article 304(a) has no application.         D
    Article 303 prohibited the making of law which gave, or autho-
    rised the giving of, any preference to one State over another,
    or made, or authorised the making of, and discrimination
    between one State and another. Prevalence of different rates
    of sales tax in the State which have been adopted by the
    Central Sales Tax Act for the purpose of levy of tax under       E
    that Act was, not determinative of the giving of preference or
    making a discrimination.. The view of the Righ Court was
    therefore not upheld. Bachawat, J. was of the view that on
    principle there was no distinction between a tax on
    inter-State and a tax on inter-State sales. The learned judge
    was further of the view that the provision of the Central        F
'   Sales Tax Act were intra-vires.

          In Rattan Lal & Co. Anr. v. The Assessing Authority &
    Anr. (supra), a bench of five learned judges of this Court
    observed dealing with the Punjab General Sales T~ Act that
    when a t~ing State was not imposing rates of t~ on imported      G
    goods different from rates of tax on goods manufactured or
    produced, article 304 had no application. So long as the rate
    was the same, article 304 was satisfied. In the instant appeal
    before us the tax was at the same rate. It cannot be said to
    be higher in respect of imported goods. When the rate is
    applied the resulting tax might be somewhat higher but that      R
    976                   SUPREME COURT REPORTS      [19861 1 s.c.R.

A
    did not contravence the equality       clause   contemplated   by
    article 304 of the Constitution.

           In that view of the matter and as these cases have been
    specifically dealt with, it is no longer necessary for us to
    discuss in detail the decision in the cases of Firm A. T.B.
B   llehtab Majid and Co. v. State of Madraa and Another (supra)
    and A. Hajee Abdul Shakoor and Company v. State of Madraa,
    upon which reliance was placed on before of the appellant
    before us. On a plain reading of article 304 along with the
    provisions of the Central Act, we are in respectful agreement
    with the view expressed by this Court in Rattan Lal & Co. &
c   Ame. v. '1'he Assessing Authority & Ame. (supra).

          It further appears to us that there is another aspect.
    The lvy by the State Act is in consonance with the scheme of
    Central Act; By sub-section (2) of section 8 of the Central
    Act, the tax payable by any dealer on his turnover in so far
D   as the turnover or any part thereof relates to the sale of
    goods in tl").e course of inter-State trade or commerce not
    falling under sub-section (1), shall be at the rate specified
    in sub-section (2) of section 8. It is common ground that
    these goods do not fall in sub-section (1) of section 8.

E         Section 8(2),     in so far as it was material at the
    relevant time was as follows

               (2) The tax payable by any dealer on his turnover
               in so far as the turnover or- any part thereof
               relates to the sale of goods in the course of
F              inter-State trade or commerce not falling within             f
               sub-section (1) -

               (a) in the case of declared goods, shall be
               calculated at the rate applicable to the sale or
               purchase of such goods inside the' appropriate
G              State; and

               (b) in the case of goods other than declared goods,
               shall be calculated at the rate of seven per cent,
               or at the rate applicable to the sale or purchase        ,,--J......_
               of such goods inside the appropriate           State,
H              whichever is higher; and for the purpose of    making
  ASSOCIATED TANNERS v. c.r.o.    [SABYASACHI MUKHARJI, J.]   977

                                                                    A
           any scuh calculation any such dealer shall be
           deemed to be a dealer liable to pay tax under the
           sales tax law of the appropriate State, notwith-
           standing that he, in fact, 111$Y not be so liable
           under that law."
                                                                    B
     Section 14 of the Central Sales Tax Act deals with what
are the goods considered as goods of special. importance in the
course of inter-State sales. It is also comnon case that by
clause (iii) of section 14 hides and skins, whether in a raw
or dressed state are goods of special importance in
inter-State trade or commerce. Section 15 of the Central Act
imposes certain restrictions on the State as to the amount of       C
tax to be imposed. This is also not material for our present
purpose because it is common case that embargo has not been
violated by the imposition itself.

     The effect of an imposition of tax might work differently
upon different dealers namely, those who ·use imported tanned       D
goods and those who purchase these locally and tan these
locally and then sell in the course of inter-State sales. But
that effect cannot be said to be arising directly, or as an
immediate effect of the imposition of the tax. Therefore there
cannot be any question of violation of article 304(a) of the
Col\Stitution.                                                      E

      There is another aspect of the matter. The imposition in
this case was in implementation of the Central Act and it was
submitted on behalf of the respondent that there was no
prohibition under article 304 of the Constitution on the
Parliament for imposition of any tax. The embargo that was          F
placed by article 304 of the Constitution was on the
Legislature of a State.

     Sub-article (a) of article 304 of the Constitution reads
as follows :-
                                                                    G
           "304.   Restrictions    on    trade,   cooanerce   and
           in~ercourse   among States.         notwithstanding
           anything in Article 301 or Article 303, the
           Legislature of a State may by laW -

           (a) impose on goods imported from other States or        H
    978                  SUPREME COURT REPORTS     [1986] 1 S.C.R.
A
               the Union Territories any tax to which similar
               goods manufactured or produced in that State are
               subject, so however, as not to discriminate between
               goods so imported and goods so manufactured or
               produced."
B   Therefore the prohibition was not on the Parliament. But in
    the view we have taken on the first aspect of the matter and      >
    in view of the decisions of this Court in the case of State of
    Madras v. Jl.K. Jlataraja lblaliar (supra) and Rattan Lal & Co.
    & Anr. v. 'lbe Assessing Authority & Anr. (supra), it is not
    necessary for us to discuss this aspect any further.
c
         The High Court was therefore right in dismissing the writ
    petition. The appeal therefore fails and is dismissed with
    costs.



    S~R.                                         Appeal dismissed.




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