APPELLATE ASSTT. COMMR. ETC. ETC. versus L.M.S. SADAK TAMBY & CO., ETC. ETC.

Citation: [1975] 2 S.C.R. 427 · Decided: 15-10-1974 · Supreme Court of India · Bench: A.N. RAY · Disposal: Appeal(s) allowed

Judgment (excerpt)

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427 
APPELLATE ASSTT. COMMR. ETC. ETC. 
v. 
L.M.S. SADAK TAMBY & CO.; ETC. ETC. 
October 15, 1974 
[A. N. RAY; C.J., K.K. MATHEW AND A. ALAGIRISWAMI, JJ.] 
Madras Act 37 of 1964, Section 2(1)-Levy of tax on the sale of tanned hides 
.and skins-Tax on the amount for which hides and skins were last purchased in the 
11nta11ned condition-No distinction· between purchases made inside or outside tile 
State-Tax, whether contravenes Article 286 of the Constitution. 
· Jn Firm A.T.B. Mehtab Majid & Co. v. State of Madras, [1963] Supp. 2 S.C.R. 
435, the Supreme Court struck down Rule 16 of the Madras General Sales Tax 
Rules made under Madras General Sales Tax Act, IX of 1939, on the ground that 
where a tanner buys raw hides and skins inside the State and sells them after tanning 
he pays the tax only on the purchase price of raw hides and skins w:1ereas a dealer 
who purchases raw hides and skins from outside the State a~:! sells the tan~ed hides 
and skins pays the tax on the price for which tanned hides and skins are sold and 
therefore pays more tax. 
Jn order to deal with this situation, the Madras Legis-
lature passed Act 11 of 1963. As section 2(1) of this Act provided a uniform rate 
of 2 per cent for sales during the whole of the period between !st April 1955 .and 
31st March 1959, it was struck down by the Supreme Court in A. Hajee Abdul 
Shakoor & Co. v. State of Madras [1964] 8 S.C.R. 217. 
In order to get over this objection section 2(1) had been enacted by Madras 
Act 37 of 1964. 
Under this section the tax is leviable on the first seller of dressed 
hides and skins at the rate of one and nine-sixteenth per cent for the p~riod between 
1st April 1955 and 31st March 1957. For the period between 1st April 1957 and 31st 
March 1959 it is to be at the rate of two p~r cent. The tax is on the am)unt for 
which such hides and skins were last purchased in the untanned ccnditicn. 
On the question whether seciion 2(1) of Madras Act 37 of 1964 contravenes 
Article 286 of the Constitution, 
HELD : What is taxed under the impugned statute is not the purchase of raw 
hides and skins whether inside or outside the State. In b)th the c1ses it is on the 
first sale of tanned hides and skins. Even if a pmon pur~ha>es raw hide> and skins 
inside the State and sells it after tanning he pays the tax 0:1 the s1\e of the t1nnd 
hides and skins and not on the purcha~e or raw hides and skin; though the am)unt 
of tax payable is calculated on the amount for which such raw hid·es and skin; were 
purchased. Similar is the position with regard to raw hides and skins P"rchased 
outside the State. Thus there is no discrimination b~tw~en the s~llers of tanned 
hides and skins whether the raw hides and skins out of which they were .tanned 
were purchased inside the State or outside the State .. The tax is not leviable even 
in th~ case of raw hides aqd skins imp)rted from another State but on hides and 
skins tanned from those raw hides and skins. Only th~ taxi> levied on the amount 
for which the raw skins and hides w~re P"rchased. This amount is used only for 
the purpose or quantification or the tax. The impugned statute does not suffer 
from the vice of taxation of the imp)rted raw hides and skins. [ 430 C-F] 
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 
1366, 
1850to 1863 &2550to 2551ofl969,1355 & 1356ofl970and 1292and 
1293 of 1973. 
From the Judgments & Order dated the !st March/26th February; 
1969/29th July/2nd August, 1971 of the Madras High Court in W.Ps. 
Nos. 1895 of 1966, 1084, 1192, 1194, 1800, 1896, 1898, 1907-1910, 
2089 of 1966, 646 of 1967, 3536-3537 of 1965 and Tax Cases Nos. 
57 & 58of1969 and 191 & 197 ofJ971 respectively. 
' 
SUPREME COURT REPORTS 
[1975) 2 ~.C.R. 
Govind Swaminathan, Advocate Genera/for the State of Tamil Nadu, 
.A. V. Rangam, K. Venkataswami, N.S. Sivam and A. Subhashini, for 
the appellants (In all the Appeals & SLP No. 1974/70) 
A. Abdul Karim and K. Rajendra Choudhary, for the respondents 
(In 1366, 18~0-53 & 1858-·186.l/69) 
K. V. Pillai~ for the respondents (In 18.54/69) 
E.C. Agarwala, for the applicant/intervener. 
A.K. Sen and S. Gopalakrishnan, for respondents (In 2550-51/69, 
1355-1356/70. and 1292-1293/73). 
The JudJnent of the Court was delivered by 
ALGIRJSWAMI, J.-Thes1: appeals raise the question of the validity 
of section 2(1) of Madras Act 37 of 1964. That section reads as 
follows : 
"Spe¢ial provisions in respect of tax on rnle of dremd hides 
and skin

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