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1997 DIGILAW 817 (ALL)

LUCKNOW SKIN CO v. STATE OF U P

1997-07-23

A.S.GILL, BRIJESH KUMAR

body1997
BRIJESH KUMAR, J. The petitioners, who carry on the business of sale and purchase of hides and skins of animals at Lucknow, feel aggrieved against the notice issued under section 21 of the Central Sales Tax Act, 1956 for the assessment year 1980-81. The main contention is that sale of raw skin for the purposes of export is exempt from the sales tax; therefore, the assessment proceedings cannot be reopened for levy of Central Sales Tax. We have heard the learned counsel for the petitioners and the learned State counsel. 2. It appears that regular assessment for the assessment year 1980-81 was made under section 9 (2) of the Central Sales Tax Act, vide assessment order dated February 24, 1982. In the year 1984, the petitioners had been served with a notice under section 21 of the Central Sales Tax Act for reopening of the assessment. The reason indicated for reopening the assessment is that the raw skin which had been sold by the petitioners to the purchaser outside the State was dressed and then exported by the purchasers. The notice further indicates that the raw and the dressed skins are two different commercial items under section 14 of the Central Sales Tax Act. The petitioners were not entitled to the benefit given to them under section 5 of the Central Sales Tax Act. 3. Under the provisions of the Central Sales Tax Act, certain items sold to the purchasers who export them to other countries, such sale to the exporter-purchasers is exempt from sales tax. The purchaser furnishes from H as prescribed to the seller and the seller has to submit the same, namely, from H, to the assessing authority so as to be entitled for the tax benefit, on such transactions. 4. Learned counsel for the petitioners has drawn our attention to annexure VIII to the writ petition, dated December 2, 1981, which is a letter issued by the Commissioner, Trade Tax, U. P. , marking it as "confidential" for the use of the department. It is mentioned in this letter that legal opinion was taken from the Law Department of the State Government and on the basis of the decision of the honourable Supreme Court, reported in [1964] 15 STC 719 (SC); AIR 1964 SC 1729 (A. Hajee Abdul Shukoor and Co. It is mentioned in this letter that legal opinion was taken from the Law Department of the State Government and on the basis of the decision of the honourable Supreme Court, reported in [1964] 15 STC 719 (SC); AIR 1964 SC 1729 (A. Hajee Abdul Shukoor and Co. v. State of Madras) it was held that the raw skin sold to the exporter is an item different from dressed skin exported by the purchaser, hence benefit of section 5 (3) of the Central Sales tax Act would not be admissible to the assessee. It is thus clear that the notice reopening the assessment was issued in view of the said letter of the Commissioner, Trade Tax, U. P. , dated December 2, 1981. 5. It will be useful to reproduce sub-section (3) of section 5 of the Central Sales Tax Act : " 5. When is a sale or purchase of goods said to take place in the course of import or export.- (1 ). . . . . . . . . . . . . . . (2 ). . . . . . . . . . . . . . . (3) Notwithstanding anything contained in sub-section (1), the last sale or purchase of any goods preceding the sale or purchase occasioning the export of those goods out of the territory of India shall also be deemed to be in the course of such export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for or in relation to such export. " Under section 14, certain goods have been declared of goods of special importance in inter-State trade or commerce, clause (iii) of which includes "hides and skins, whether in a raw or dressed state". 6. On a perusal of the provisions quoted above, it is clear that for the purposes of section 14 of the Central Sales Tax Act, hides and skins in a raw or dressed form have been treated as one item, i. e. , as goods of special importance in inter-State trade or commerce. Further, according to section 5 (3) of the Central Sales Tax Act, the last sale of goods before export is to be treated as sale or purchase of goods in the course of import or export. Further, according to section 5 (3) of the Central Sales Tax Act, the last sale of goods before export is to be treated as sale or purchase of goods in the course of import or export. According to the impugned notice, there does not seem to be any dispute that the goods sold by the petitioners was the sale preceding the export but the reason for reopening of the assessment is that the goods sold as raw skin has been exported by the purchaser as dressed skin/leather which, according to the opposite parties, is a different item from the raw skin; therefore, on the basis of the decision in the case of A. Hajee Abdul Shukoor & Co. [1964] 15 STC 719 (SC); AIR 1964 SC 1729 , the transaction of sale of raw skin to the exporter was liable to be taxed. 7. Learned counsel for the petitioners has rightly submitted that the view taken in the case of A. Hajee Abdul Shukoor [1964] 15 STC 719 (SC); AIR 1964 SC 1729 is mainly based on the provisions as contained in the Madras General Sales Tax (Special Provisions) Act, 1963. In the Schedule under consideration, the raw skin and dressed skin were specifically provided as two different commodities liable to be taxed on different rates. The State Legislature was quite competent to make such a provision drawing distinction between raw skin and dressed skin as two different items, for the purposes of sales tax liability on different rates. The Andhra Pradesh High Court, in the case of Mohd. Basheer and Co. reported in [1989] 72 STC 185; (1989) 28 STL 55 (AP) has distinguished the case of Hajee Abdul Shukoor [1964] 15 STC 719 (SC); AIR 1964 SC 1729 in the similar circumstances, which was later on upheld by the honourable Supreme Court. Reference to above cases shall be made in the latter part of this judgment. 8. In the case in hand, there is no such parallel provision, as was under consideration before the honourable Supreme Court in the case of A. Hajee Abdul Shukoor [1964] 15 STC 719; AIR 1964 SC 1729 . Reference to above cases shall be made in the latter part of this judgment. 8. In the case in hand, there is no such parallel provision, as was under consideration before the honourable Supreme Court in the case of A. Hajee Abdul Shukoor [1964] 15 STC 719; AIR 1964 SC 1729 . On the other hand, section 14, clause (iii) of the Central Sales Tax Act declares the goods of special importance though in inter-State trade or commerce, for the purposes of taxation and tax benefits clearly providing "hides and skins, whether in a raw or dressed state" as one item. Learned counsel for the petitioners submits that in view of the provisions in the Central Tax Act, as indicated above, raw skin and dressed skin would not be treated as two different commercial items for the purposes of Central Sales Tax Act; they have to be treated as one single item. 9. In support of the above contention, that for the purposes of Central Sales Tax Act, raw skin and dressed skin are to be treated as one item, reliance has been placed upon a decision of the honourable Supreme Court, reported in [1989] 73 STC 228; 1989 UPTC 737 (State of Tamil Nadu v. Mahi Traders ). It has been held that in view of section 14 (iii), hides and raw skin and dressed skin are to be treated as one item and no distinction can be made for the purposes of Central Sales Tax Act. We find that in the rejoinder affidavit, field on behalf of the petitioners, some of the judgments of different High Courts have also been annexed therewith, in which same view was taken that sale of raw skins which may be dressed by the purchaser and then exported, would be exempted from Central Sales Tax. One of the decisions is referred to in para 4 of the rejoinder affidavit, viz. , State of Andhra Pradesh v. Mohd. Basheer and Co. decided by a Division Bench of Andhra Pradesh High Court, reported in [1989] 72 STC 185; (1989) 28 STL 55 (AP), a copy of the judgment has been filed as annexure RA-1. One of the decisions is referred to in para 4 of the rejoinder affidavit, viz. , State of Andhra Pradesh v. Mohd. Basheer and Co. decided by a Division Bench of Andhra Pradesh High Court, reported in [1989] 72 STC 185; (1989) 28 STL 55 (AP), a copy of the judgment has been filed as annexure RA-1. It was held that hides and skins are the same commodity, basing the conclusion on the provisions of the Central Sales Tax Act, namely, section 14 (iii) and holding that benefit of exemption of sales tax on sale of raw skin shall be admissible to the petitioners under section 5 (3) of the Central Sales Tax Act. It is averred in para 4 of the rejoinder affidavit and submitted by the petitioners that the decision of the Andhra Pradesh High Court in State of Andhra Pradesh v. Mohd. Basheer [1989] 72 STC 185; (1989) 28 STL 55 referred to above was upheld by the honourable Supreme Court and the appeal of the State of Andhra Pradesh was dismissed and for that purpose, a reference has been made to [1991] 80 STC FRSC 4 (State of Andhra Pradesh v. Aaisha Tanning Co. and State of Andhra Pradesh v. Mohd. Basheer and Co. S. L. P. (Civil) Nos. 13104 of 1990 and 10525-13534 of 1989 decided on December 3, 1990); a copy of the same has been filed as annexure RA-2. A Division Bench decision of the Madras High Court dated March 13, 1991 in Tax Case No. 896 of 1981, reported as T. Azeezur Rahman and Company v. State of Tamil Nadu [1991] 82 STC 355 (Mad.) has also been annexed as annexure RA-3. The same view as indicated above, has been taken by the Madras High Court as well. A copy of judgment of a Division Bench of the Karnataka High Court [the reference appears to be to Farida Prime Tannery v. State of Karnataka [1992] 84 STC 133 (Kar ).- Ed. ] has also been filed as annexure RA-4 taking the same view. In yet another case, reported in [1989] 75 STC 392 (P&h); (1990) 32 STL 6 (P&h) (State of Haryana v. Gopal Dass Manohar Lal), the same view has been taken and a copy of the said decision has been filed as annexure RA-5 to the rejoinder affidavit. 10. ] has also been filed as annexure RA-4 taking the same view. In yet another case, reported in [1989] 75 STC 392 (P&h); (1990) 32 STL 6 (P&h) (State of Haryana v. Gopal Dass Manohar Lal), the same view has been taken and a copy of the said decision has been filed as annexure RA-5 to the rejoinder affidavit. 10. The legal position on the basis of different decisions including that of the honourable Supreme Court referred to above, leaves no room for doubt that for the purposes of Central Sales Tax Act, raw skins as sold, which was exported by the purchaser after dressing the same, are to be treated as only one commercial item and not two different items and such transaction of sale shall be a sale in the course of export of goods covered under section 5 (3) of the Act. 11. Learned counsel for the petitioners has next submitted that the notice issued under section 21 of the Central Sales Tax Act for reopening of the assessment proceedings is bad in law for the reason that there is no discovery of any new fact or any new fact or any new development having taken place. The material available before the assessing authority at the time of assessment remains the same. Forms H were submitted by the petitioners before the assessing authority, which were seen and scrutinised and thereafter tax benefit was made admissible to the petitioners. In such circumstances, it only amounts to change of opinion. Assessment proceedings are not to be opened for reconsideration of the whole matter due to change of opinion on the same material as was available at the time of assessment. In support of his contention, reliance has been placed upon a Division Bench decision of this Court, reported in [1997] 107 STC 98; 1994 UPTC 1041 (Harbans Lal Malhotra v. Assistant Commissioner, Sales Tax, Ghaziabad ). In reply to the factual averments, the opposite parties have only indicated in their counter-affidavit that in view of the decision of the honourable Supreme Court in the case of A. Hajee Abdul Shukoor & Co. [1964] 15 STC 719 (SC); AIR 1964 SC 1729 , the proceedings were liable to be reopened. In reply to the factual averments, the opposite parties have only indicated in their counter-affidavit that in view of the decision of the honourable Supreme Court in the case of A. Hajee Abdul Shukoor & Co. [1964] 15 STC 719 (SC); AIR 1964 SC 1729 , the proceedings were liable to be reopened. It has not been denied that forms H submitted by the petitioners at the time of assessment proceedings were before the authorities and after considering all the material on record, tax benefit was made admissible to the petitioners. It is also to be noticed that the decision of the honourable Supreme Court in the case of A. Hajee Abdul Shukoor & Co. [1964] 15 STC 719 (SC); AIR 1964 SC 1729 was also available at the time the assessment proceedings had taken place, since the decision was reported in the year 1964 and still the assessing authority had thought it appropriate to give tax benefit to the petitioners under section 5 (3) of the Central Sales Tax Act after persuing forms H submitted by the petitioners. In the above circumstances, in our view, the petitioners have rightly submitted that it is a case of change of opinion on the same material as was available at the time the assessment proceedings took place. Reopening of assessment proceedings on change of opinion is not permissible under law. 12. We have already observed and dealt with the point that the decision of the honourable Supreme Court in the case of A. Hajee Abdul Shukoor & Co. [1964] 15 STC 719 (SC); AIR 1964 SC 1729 , was based on the provisions of the Madras General Sales Tax (Special Provisions) Act, 1963 hence on that basis raw skins and dressed skins cannot be considered to be two different items and for the purposes of Central Sales Tax Act, they are to be considered as one item in view of section 14 (iii) of the Central Sales Tax Act. 13. In the result, we allow the writ petition and quash the notice issued under section 21 of the Central Sales Tax Act to the petitioners, as contained in annexure VI to the petition. 14. There would, however, be no order as to costs. Writ petition allowed. .