The State of Tamil Nadu vs Madras Tanning Company

Balasubrahmanyan, J.—The assessee in this sales tax revision is a dealer in hides and skins. He purchases raw hides and skins in the State of

Tamil Nadu. After tanning them the assessee sells them as dressed hides and skins. Sales of dressed hides and skins are effected by the assessee

both inside the State and also in the course of inter-State trade.

For 1973-74, the assessee effected sales of dressed hides and skins in the course of inter-State trade in the sum Rs. 2,24,720.55. The hides

and skins in question were originally purchased in this State in their raw state. The assessee tanned them before selling them as dressed hides and

skins in the course of inter-State trade. There is no doubt that this sales turnover of Rs. 2,24,720.55 in dressed hides and skins is assessable under

the Central Sales Tax Act, 1956. In point of fact, however, no assessment has yet been made on the assessee on this turnover under the Central

Sales Tax Act for the relevant year 1973-74. Consequently, no Central sales tax had been paid by the assessee on that turnover.

In this situation, the assessee''s assessment under the Tamil Nadu General Sales Tax Act, 1959, for the year 1973-74 was taken up and

completed by the assessing authority. In that assessment, the assessing authority brought to tax purchase turnover of Rs. 88,107 which, according

to the assessing authority, represented the value of raw hides and skins, which were duly tanned and sold as dressed hides and skins in the course

of inter-State trade and commerce for Rs. 2,24,720.55.

Hides and skins, whether in a raw or dressed state, are ""declared goods"" u/s 14(iii) of the Central Sales Tax Act, 1956. Section 15(b) of that

Act provides for double tax relief as follows : Where tax has been levied on the sale or purchase of any declared goods under any sales tax law of

a State, and tax has been paid under the Central Sales Tax Act in respect of such goods on sales in the course of inter-State trade, then, the

assessee concerned would be entitled to reimbursement of the tax levied under the State law. This provision in the Central Sales Tax Act for

double tax relief has been reciprocated and incorporated in section 4-A of the Tamil Nadu General Sales Tax Act. The question is whether the

assessee in this case is entitled to double tax relief under these provisions.

The answer is plain enough, having regard to the state of the assessment proceedings in this case. We have earlier pointed out that no

assessment under the Central Sales Tax Act had been made on the assessee for the assessment year in question charging to tax Rs. 2,24,720.55

representing the sales of dressed hides and skins in the course of inter-State trade. In this state of affairs when the assessee has not paid a single

pie towards Central sales tax, the assessee cannot be held entitled to any relief u/s 15(b) of the Central Sales Tax Act (or, as the case may be,

section 4-A of the Tamil Nadu General Sales Tax Act). The relief under these provisions is given by way of reimbursement or refund of the State

tax. The relief is not granted either by way of set-off, or by way of adjustment, or by way of sheer non-assessment on the State tax. The other

condition precedent for the reimbursement of the State tax also is very clearly laid down in the relief provision. The requirement is not a mere

accessibility to Central sales tax or even the making of an actual assessment order. The requirement is that the assessee should have actually paid

the Central sales tax on the concerned declared goods. Such is not the position, however, in this case. As pointed out, more than once, the Central

sales tax assessment has not even been taken up in the assessee''s case. There has been neither demand nor payment of Central sales tax. It

follows that the assessee is not entitled to any relief u/s 15(b) of the Central Sales Tax Act or section 4-A of the Tamil Nadu General Sales Tax

Act.

It would seem that for a long time the practice of the Commercial Tax Department in this State was not quite in keeping with the procedure laid

down by section 15(2) of the Central Sales Tax Act or section 4-A of the Tamil Nadu General Sales Tax Act. The department was minded to give

effect to the spirit of the relief provision, without following it to the letter. They had been adopting a pragmatic approach to the question of double

tax relief. Whenever declared goods figured in an assessment proceeding under the Tamil Nadu General Sales Tax Act and it was found that the

same declared goods were also clearly liable to Central sales tax, the assessing authorities followed the simple expedient of excluding from the

assessment on hand the turnover assessable under the Tamil Nadu General Sales Tax Act. In following this practical method of granting relief, the

department apparently thought they would be eschewing unnecessary refinement and waste of time in relief procedure. The department, perhaps,

wished to avoid the time and trouble involved in making the assessment first, asking the assessee to pay the tax under the State law and also the tax

under the Central Sales Tax Act, and then, after this period of waiting issue the reimbursement or refund order. Recently, however, the department

would seem to have suddenly become alive to the strict requirements of the procedure for double tax relief laid down in sections 15(b) and 4-A. In

the assessment now under revision, which illustrates the department''s change in practice, the assessing authority refused to grant relief to the

assessee for the reason that the assessee had not been assessed to Central sales tax, nor had it paid any tax under any such assessment. While the

assessee was only too conscious of the fact that there was no assessment under the Central Sales Tax Act of Rs. 2,24,720.55 representing the

sales turnover of dressed hides and skins, there was at the same time an apprehension in the mind of the assessee that a Central sales tax

assessment may never get done at all in its case, in which event, it would be running the risk of losing the benefit of double tax relief forever. This

was the reason why the assessee made a request to the Tribunal that relief might be granted to it prematurely, as it were, by simply declaring the

relevant purchase turnover of Rs. 88,107 as not taxable and deleting the said amount from the assessment already made by the assessing authority.

The Tribunal seemed to have sympathised with the assessee''s apprehension that the assessing authority may not make any Central sales tax

assessment on Rs. 2,24,720.55 at all. At the same time, however, the Tribunal did not accept the short-cut method to grant double tax relief which

the assessee urged for. What the Tribunal did was this : They set aside the assessment of the purchase turnover of Rs. 88,107 made by the

assessing authority and directed the assessing authority to take up both the Central sales tax assessment and the assessment under the State Act for

1973-74 and proceed to complete them together so that the relief to which the assessee may be entitled may be worked out in accordance with

section 15(b) or section 4-A.

In this revision, the State Government questions the propriety of the order and direction which the Tribunal had issued in the manner aforesaid.

We think we must uphold the State Government''s objection. The Tribunal has set aside the assessment of the purchase turnover of Rs. 88,107 for

a reason which, in our view, is not germane to that assessment. Under the Tamil Nadu General Sales Tax Act, raw hides and skins are liable to

single point tax at the last purchase point in the State. The assessee accepts the position that Rs. 88,107 represents the last purchases in this State

of raw hides and skins. The assessment is therefore perfectly valid. It follows that the inclusion of Rs. 88,107 cannot be found fault with and set

aside, as the Tribunal had done. The assessee, for ought to we know, might be entitled to claim a reimbursement of the tax on Rs. 88,107 if and

when the assessee gets assessed to Central sales tax and also pay the tax on Rs. 2,24,720.55 being the corresponding sales turnover of dressed

hides and skins in the course of inter-State trade. But till the Central sales tax assessment is made and till the tax under that assessment actually gets

paid, there can be no question of the assessee being entitled to tax relief u/s 15(b) or section 4-A. In any case, even if the Tribunal''s good impulses

were aimed at passing the way for the assessee to get reimbursement of tax, there can be no justification for choosing the method of setting aside a

valid assessment of the purchase turnover of Rs. 88,107. As we earlier mentioned, the relief u/s 15(b) or section 4-A is a relief by way of

reimbursement of tax. The relief does not disturb either of the assessments concerned, the one under the Central Sales Tax Act and the other under

the relevant State Act. Indeed, the idea of a reimbursement of tax is only consistent with the upholding of the concerned assessments. What the

Tribunal has done in this case is to undermine the assessment by setting aside or deleting the turnover of Rs. 88,107. This has been done not on the

ground that the turnover was not taxable at all, but for a collateral purpose unconnected with the assessment under appeal. The appellate

jurisdiction of the Tribunal no doubt, includes the power to set aside an assessment. We, however, think that this power should be exercised only

for legitimate purposes connected with the assessment under appeal and not for any extraneous reasons. As assessment cannot be set aside in

appeal by the Tribunal merely for the sake of directing the assessing authority to combine the assessment to be redone with another assessment

under a different stature. We, accordingly, restore the assessment of the purchase turnover of Rs. 88,107 in raw hides and skins, and set aside the

order of the Tribunal. It would be open to the assessee to apply for relief under sections 15(b) or section 4-A when the time comes. We do not

expect the assessing authority to deliberately withhold making the Central sales tax assessment merely to block the availability of the relief u/s 15(b)

or section 4-A. In any case, under our constituent court system, the assessee, we dare say, will not be at a loss for a remedy at law for getting the

assessing authority do the right thing. We make it clear that we do not express ourselves, one way or the other, on the merits, or on the eligibility,

of the assessee''s claim for relief u/s 15(b). All we do is to undo the order of the Tribunal, for the reason the Tribunal had exercised their appellate

power wrongly in the assessee''s case.

The Tribunal, for their part, had entered into the merits of the assessee''s claim for relief u/s 15(b), even though, for the purpose of making

available the relief under the section, the Tribunal has set aside the assessment and sent it back to the assessing authority. This part of the

Tribunal''s order dealing with the merits was also canvassed before us by the learned Government Pleader. According to the Tribunal, although

raw hides and skins and dressed hides and skins can be regarded as two different categories of saleable goods, yet, for the purposes of the relief

u/s 15(b) of the Central Sales Tax Act, the two must be regarded as one and the same ""declared goods"". The reason urged was that there was but

a single entry, namely, entry (iii), in section 14 of the Central Sales Tax Act, which covered hides and skins, both in their raw and in their dressed

state. The learned Government Pleader contested the validity of the Tribunal''s reasoning. He urged that under the Second Schedule to the Tamil

Nadu General Sales Tax Act, raw hides and skins are dealt with as constituting a distinct major item of declared goods under clause (a) of entry 7,

whereas dressed hides and skins are placed in a separate category of declared goods under clause (b) of that entry.

We do not, however, wish to take up the controversy and decide here and now whether, for the purpose of relief u/s 15(b), hides and skins,

whether in a raw or dressed state, are to be regarded as a single category of declared goods, or whether the separate categorisation under the

Second Schedule to the Tamil Nadu General Sales Tax Act must be given effect to even for the grant of relief u/s 15(b) of the Central Sales Tax

Act, considering that the reimbursement contemplated in that section is only a reimbursement of the tax levied under the State sales tax law. The

controversy seems to be a very close thing and therefore quiet arguable on both sides. In the view, however, we have expressed in the foregoing

paragraphs that the time for claiming and affording relief u/s 15(b) is only after the assessments are completed, one under the Central Sales Tax

Act and the other under the State sales tax law and only after demand raised under the latter enactment is paid, we do not wish to enter into any

discussion. The occasion for it, as we earlier pointed out, is yet to arrive in this case. Even then, the authority to take the decision is the assessing

authority, in the first instance. We ought not to be making up the assessing authority''s mind for him and in advance of the time. As we earlier

indicated, we express no view in this revision, one way or the other, on the merits of the assessee''s claim for double tax relief.

In the result, the revision is allowed, the order of the Tribunal is set aside and the assessment order is restored. The State will be entitled to its

costs. Counsel''s fee Rs. 250.