V. GURUVIAH NAIDU AND SONS ETC. versus STATE OF TAMIL NADU AND ANR. ETC.

Citation: [1977] 1 S.C.R. 1065 · Decided: 02-11-1976 · Supreme Court of India · Bench: HANS RAJ KHANNA · Disposal: Dismissed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

\ 
.., 
1 
• 
-
1065 
V. GURUVIAH NAIDU AND SONS ETC. 
• 
v. 
STATE OF TAMIL NADU AND ANR. ETC. 
November 2, 1976 
[H. R. KHANNA AND V. R. KRISHNA IYER, JJ.] 
Madras General Sales Tax Act, 1959, Schedule ll, items 7(a) and (b)-lf 
ultra vires. 
'!taw as well as dressed hides and skins are declared goods under Central 
Sales Tax Act, 1956. 
Section 4 of the Madras General Sales Tax Act, 
1959, 
provides that the tax shall be payable by a dealer, on the sale or purchase of 
declare! goods inside the State, at the rate and only at the point specified in the 
Second Schedule to the Act, on the turnover in such goods. 
Item 7 (a) of the 
Schedule provides that with respect to raw hides and skins, the rate of tax shall 
be at 3 % and the point of levy shall be at the point of last purchase in the 
State. 
Item 7 (b) provides that with respect to dressed hides and skins (which 
were not subjected to tax under the Act as raw hides and skins), the rate of tax 
shall be B % and the point of lev)I shall be at the point of first sale in the State. 
The appellants are dealers in hides and skins. 
They purchase raw hides and 
skins locally as well as in the course of inter-state trade and commerce, convert 
them into dressed hides and skins and sell them either locally or in the course 
of export. 
Th~ appellants challenged the validity of items 7(a) and 7(b). The 
challenge to item 7 (a) Wl!_S that the item would also cover inter-state sales and 
as such was beyond the competence of the State Legislature; and the challenge 
to item 7(b) was that it was violative of Art. 304 (a) of the Constitution on 
the ground that whereas dressed hides and skins sold locally, but which 
have 
been made out of imported raw hides and skins, are subject to tax under the 
item similar sale of dressed hides and skins made out of raw hides and skins 
which have been subjected to tax at the purchase stage are not subject to tax 
under the item . 
HELD : (1) Item 7(a) relates only to intra state sales and not to inter-state 
sales. 
This is clear from the language used in the item, especially the words 
"purchase in the State"'. 
Assuming the language is ambiguous it should be so 
construed as would sustain its constitutional validity. [1067 Fl 
(2) Article 304(a) does not prevent levy of tax on goods : what it prohibits 
is such levy of tax on goods as would result in discrimination between goods 
imported from other states and similar goods manufactured or produced within 
the State. 
The object is to prevent discrimination against imported goods by 
imposing tax on such goods at a rate higher than that borne by local 
goods 
since the difference between !ibe two rates would constitute a fiscal barrier and 
thus impede the free llow of inter-state trade and commerce. The scheme of 
items 7(a) and (b)eis that in the case of raw hides and skins which are pur-
chased locally in the State, the levy of tax would be at the rate of 3 % . When 
such locally purchased raw hides and skins are tanned and sold locally as 
dressed hides and skins no levy would be made on such sales, as those hides and 
skins have already been subjected to tax at 3% when purchased in 
the raw 
form. 
On the other hand, in the case of hides and skins imported from other 
States in the raw form, thereafter tanned, and then sold inside the 
State as 
dressed hides and skins, the levy of tax is at 1 t%. This levy however, cannot 
be considered discriminatory because the Legislature, while prescribing the rate 
in item 7(b) at half that levied und~r item 7(a) took into account the higher 
price o! dressed hides and skins (nearly double) as compared to the price of 
raw hides and skins, and the fact that no tax under the State Act has been paid 
in respect of imported raw hides and skins. Even though dressed hides 
and 
skins are treated as ~ .. separate commodity there is a clear nexus between hides 
A 
B 
c 
D 
E 
F 
G 
• 
H 
• 
A 
B 
c 
D 
E 
1066 
SUPREME COURT REPORTS 
[ 1977] 1 S.C.R. 
and skins in the raw form and those in the dressed form; and hence, there is no 
infirmity i.n the legislative provision, which, while levying tax on the · sale 
of 
dressed hides and skins takes into account the levy in respect of r<Av hides and 
skins. [1070 D_HJ 
· 
The onus of showing that there would be discrimination between raw hides 
and skins purchased locally and then tanned, and raw hides and skins imported 
and then tannoo is on the appellant, and the appellant has not discharged the 
o

Excerpt shown. Read the full judgment & AI analysis in Lexace.