Rajagopala Ayyangar, J.
1. The question raised by this writ petition relates to the legality of the assessment made against the petitioners under the Madras General Sales Tax Act.
2. The petitioners, M.A. Noor Mahomed & Co., carry on tannery business at Chromepet near the City of Madras. They had not taken any license under the provisions of the Madras General Sales Tax Act and for the assessment year 1952-53 they had a turnover of Rs. 6,77,376-4-4. The Deputy Commercial Tax Officer, Saidapet, who has territorial jurisdiction over the place where the petitioners carry on their business called upon them by an order, dated 28th February, 1954, to pay a tax of Rs. 10,584-0-0 being computed on their sale turnover. Complaining that the said assessment was illegal and not warranted by the provisions of the Madras General Sales Tax Act, the petitioners have applied to this Court for issue of writ of certiorari to quash this assessment and they have obtained a rule nisi.
3. The question raised for our consideration in this petition is whether an unlicensed dealer in untanned hides and skins is lible to pay tax on his sale turnover under the provisions of the Madras General Sales Tax Act.
4. The question as to the basis of libility to tax and the taxing provisions in relation to hides and skins has been the subject of consideration in several decisions of this Court. Among them is that of the Full Bench reported in Hajee Abdul Shukkoor and Co. v. State of Madras (1955) 2 M.L.J. 494 . In view of these decisions and particularly that of the Full Bench, we propose first to summarise the law as laid down by the Full Bench and then proceed to consider the liability of an unlicensed dealer to tax on his sale turnover in the light of these decisions.
The question of law considered by the Full Bench was
whether a licensed tanner who purchases untanned hides and skins from an unlicensed dealer is liable to be taxed on his turnover under Rule 16(a) or under any other provisions of the Madras General Sales Tax Act and the Rules framed thereunder?
5. This was answered in the negative and in favour of the assessee. Though the question which has arisen for our consideration, namely, the liability of an unlicensed dealer to tax on his sale turnover was expressly excluded from consideration by the Full Bench, that decision is important in that it lays down the basis of the tax liability in the case of hides and skins.
6. In view of the arguments before us, it would be necessary to refer to the statutory provisions relevant for that purpose. As these have been set out by the Full Bench and their scope determined, we propose first to extract material passages from that judgment where these are dealt with.
Section 3 of the Act is what might be termed the principal charging provision. The relevant portion of this Section is in these terms:
3. (1) Subject to the provisions of this Act, (a) every dealer shall pay for each year a tax on his total turnover for such year; and
(3) A dealer whose total turnover in any year is less than-ten thousand rupees shall not be liable to pay any tax for that year under Sub-section (1) or Sub-section (2).
(4) For the purposes of this section and the other provisions of this Act, turnover, shall be determined in accordance with such rules as may be prescribed;
Provided that no such rules shall come into force unless they are approved by a resolution of the Legislative Assembly.
(5) The taxes under Sub-sections (1) and (2) shall be assessed levied and collected in such manner and in such instalments, if any, as may be prescribed.
Provided that
(i) in respect of the same transaction of sale, the buyer or the seller, but not both, as determined by such rules as may be prescribed shall be taxed;
(ii) where a dealer has been taxed in respect of the purchase of any goods in accordance with the rules referred to in Clause (i) of this proviso, he shall not be taxed again in respect of any sale of such goods effected by him.
'Dealer' is defined in Section 2 (b) as any person who carries on the business of buying or selling goods.
Though Section 3(1) levies a tax on the sale of goods on every dealer on his total turnover - subject to exceptions which are not relevant - in the case of hides and skins this provision is subject to the terms of Section 5 enacting single point taxation. Section 5 reads:
5. Subject to such restrictions and conditions as may be prescribed including conditions as to licences and licence fees:
(i) the sale of handspun yarn and of any cloth woven on handlooms wholly with handspun yarn and sold by persons dealing exclusively in such cloth, shall, be exempt from taxation under Section 3, Sub-section (1).
(ii) the sale of cotton (including kapas) and of cotton yarn other than handspun yarn shall be liable to tax under Section 3, Sub-section (1), only at such single point in the series of sales by successive dealers as may be prescribed and only at the rate of one-half of one per cent, of the turnover at that point;
(iii) the sale of any cloth woven on handlooms wholly or partly with mill yarn shall be exempt from taxation under Section 3, Sub-section (1), if the sale is to a wholesale or retail dealer in the State, or if the sale is for delivery outside the State and delivery is actually so made;
(iv) the sale of bullion and specie shall be liable to tax under Section 3, Sub-section (1), only at such single point in the series of sales by successive dealers as may be prescribed and only at the rate of one-fourth of one per cent, of the turnover at that point;
(v) the sale of the tea grown by the seller or grown on any land in which he has an interest, whether as owner, usufructuary mortgagee, tenant or otherwise, shall be exempt from taxation under Section 3, Sub-section (1), if the sale is for delivery outside the State and delivery is actually so made;.
(vi) the sale of hides and skins, whether tanned or untanned...shall be liable to tax under Section 3, Sub-section (1) only at such single point in the series of sales by successive dealers as may be prescribed.
Section 3(1) itself opens with the words 'subject to the provisions of this Act' Section 3, would be subject to the provisions of, among others, Section 5(vi). It will be noticed that Sub-sections (4) and (5) of Section 3 and Section 5 refer to 'prescription' and under Section 2(f) 'prescribed' means prescribed by rules made under the Act. In accordance with these provisions, rules have been made providing inter alia whether the buyer or the seller has to be taxed in respect of a transaction of sale under provisio (1) to Section 3(5) for the determination of the turnover of a dealer under Section 3(4), and also generally for the assessment, levy and collection of the tax under Section 3(5) as also in regard to restrictions and conditions including conditions as to licence and licence fees referred to in the opening words of Section 5.
The rules are in two sets. The first is Madras General Sales Tax (Turnover and Assessment) Rules dealing with the determination of the turnover, the 'prescribing' of the person whose turnover is liable to be taxed, fixation of the points at which the transaction is liable to taxation in respect of those commodities for which a single point taxation is provided for in the Act as also for the levy and collection of the tax. The other set of rules entitled the Madras General Sales Tax Rules lays down the procedure for application for licence under the Act, the authorities to grant them, the conditions subject to which they are granted, the fees prescribed therefor, the accounts to be maintained by assessees, the hierarchy of officials and authorities who are to carry out the assessment or hear appeals or deal with revisions therefrom and such other procedural matters. In the present case we are concerned with the Turnover and Assessment Rules, Rule 4 of these Rules provides:
4. (1) Save as provided in Sub-rule (2) the gross turnover of a dealer for the purposes of these rules shall be the amount for which goods are sold by the dealer.
(2) In the case of the under-mentioned goods the gross turnover of a dealer for the purposes of these rules shall be the amount for which the goods are bought by the dealer-
(a) groundnut.
(b) Cashew, cotton (including kapas) bought by spinning mill or by dealer who exports outside the State,
(c) untanncd hides and skins bought by a licensed tanner in the State, and
(d) untanned hides and skins exported outside the State by a licensed dealer in hides and skins.
Rule 5 sets out how the net assessable turnover is derived, and Rules 6 and 13 lay down the procedure by which the assessing authority determines the turnover and levies the tax. Rule 14 enjoins upon the assessing authority the necessity to record its reasons in writing in cases where it determines the turnover on a figure different from that shown in a return submitted under the provision of the rules, with a proviso that the same shall not affect the validity of assessments duly made. Rules 15 and 16 are the special rules designed to apply to the assessment and levy of the tax payable on hides and skins. Rule 5(1) enacts that Rules 6 to 13 shall not apply to licensed tanners and other licensed dealers in hides end skins in respect of their dealings in hides and skins but that the provisions of that and the following rule shall apply to them in respect of such dealings. The other sub-clauses of Rule 15 are not very relevant in the present context as they relate to the provisional assessments, their collection and the final adjustments in the light of the turnover for the year when finally ascertained. Rule 16 is the crucial rule which determines the points at which the tax on hides and skins is levied. It is necessary, therefore to set out this rule in full:
16. (1) In the case of hides and skins the tax payable under Section 3(3) shall be levied in accordance with the provisions of this rule.
(2) No tax shall be levied on the sale of untanned hides or skins by a licensed dealer in hides or skins except at the stage at which such hides or skins are sold to a tanner in the State or are sold for export outside the State.
(1) In the case of all untanned hides or skins sold to a tanner in the State, the tax shall be levied from the tanner on the amount for which the hides or skins are bought by him.
(ii) In the case of all untanned hides or skins which are not sold to a tanner in the State but are exported outside the State, the tax shall be levied from the dealer who was the last dealer not exempt from taxation under Section 3(3) who buys them in the State on the amount for which they were bought by him.
(3) Sales by licensed dealers of hides or skins which have been tanned within the State shall be exempt from taxation provided that the hides or skins have been tanned in a tannery which has paid the tax leviable under the Act. If such hides or skins have been tanned in a tannery which is exempt from taxation under Section 3(3), the sale of such hides or skins shall be liable to taxation as under the next sub-rule below dealing with hides or skins tanned outside the State.
(4) Sales by licensed dealers in hides or skins which have been tanned outside the State shall be exempt from taxation except at the stage of sale by the dealer, who is the first dealer not exempt from taxation under Section 3(3) who sells them within the State. The tax shall be levied from such dealer on the amount for which he sells such hides or skins.
(5) Sale of hides or skins by dealers other than licensed dealers in hides or skins shall, subject to the provisions of Section 3, be liable to taxation on each occasion of sale.
Before considering the exact terms of this rule, it is necessary to set out the terms of Rule 5 of the General Sales Tax Rules under which dealers have to obtain licence, for the purpose of their dealings. This rule runs thus:
5. (1) Every person who
(a) deals in cotton and or cotton yarn other than handspun yarn and or handspun yarn, or
(b) deals exclusively in cloth woven on handlooms wholly with handspun yarn, or
(c) deals in cloth woven on handlooms wholly or partly with mill yarn, or
(d) deals in bullion and or specie, or
(d) deals in hides and or skins whether as a tanner or otherwise, or
(f) for an agreed commission or brokerage, buys and or sells goods of any description on behalf of known principals shall, if he desires to avail himself of the exemption provided in Sections 5 and 8 or the concession of taxation only at a single point or of taxation at the rate specified in Section 5 submit an application in Form 1 for a licence in respect of each of his places of business to the authority specified in Sub-rule (2) so as to reach him not later than the 30th day of April of the year for which the licence is applied for.
* * * * *It will be seen that the licensing provisions are not compulsory and the basis upon which they are worked is that if a dealer desired to avail himself of the exemption provided under Sections 5 and 8 or the concession of taxation only at a single point, he has to obtain a licence. In other words the penalty for not taking out a licence is the deprivation of the concessions named in Sub-clause 5(1)(f).
The Full Bench was not concerned with the exact scope of the concession under Rule 5 of the General Sales Tax Rules, because the case then under consideration related to a licensed dealer whose liability to tax was governed by Rule 16 of the Turnover and Assessment Rules. The Full Bench rejected an argument advanced by the learned Advocate-General who appeared for the State that Rule 4(2) of the Turnover and Assessment Rules fixed the single point for the tax in regard to hides and skins and held that in the case of licensed dealers the single point was fixed under Rule 16 with the consequence that the charge to tax also arose only at the point fixed under that rule. This reasoning is to be found in a passage at page 500 where they said:
In the case of hides and skins no turnover is liable to tax until the single point in the series of sales is fixed by the rules and the turnover represents the total of the transactions in the year. Rule 15 is very clear that the turnover in respect of dealings in hides and skins has to be ascertained and assessed under Rule 16. Rule 15, it will be noticed, specifically prescribes that the provisions of that rule apply to the dealings by 'licenced' tanners and dealers. Therefore in the absence of any specifie indication to the contrary, the dealings referred to in Rule 16 would be held to mean only dealings by licensed dealers. It is in that context that the terms of Rule 16 have to be understood. Rule 16(1) is a further declaration which emphasises that in respect of dealings in hides arid skins the determination of the taxable turnover would be governed by the other sub-rules. Rule 16(2) enacts a general rule that in respect of dealings in hides and skins, there shall be no taxation at successive points but only at two mutually exclusive points, thus conforming to the requirements of the prescription called for by Section 5(vi). The two mutually exclusive points are set out in Sub-clauses (i) and (ii) which follow the main portion of the sub-rule. The first relates to a tanner which in the context undoubtedly means and can only mean a tanner who has actually tanned those goods. Sub-clause (ii) deals with goods exported outside the State. It will be seen that in both these cases this will be the last sale of goods within the State as untanned hides and skins for in the first case, after tanning it will become tanned hides and skins, a matter which is dealt with by Rule 16(3) and in the case covered by Sub-clause (ii) the untanned hides and skins would have left the State. Therefore, there could be no further sales of the commodity within the State. The terms of Rule 15 as well as those of Rule 16(2) make it clear that it is a dealing by a licensed dealer that is being dealt with under these rules. The argument of the Advocate-General is that paragraphs (i) and (ii) of Rule 16(2) have to be divorced from the opening portion of Rule 16(2) which refers to dealings of licensed dealers and should be read as re-enacting the provisions of Rule 4(2)(c) which do not specifically refer to the dealer who sells to the tanner as being licensed. An analysis of Rule 16(2) clearly establishes the untenability of the argument on behalf of the State. The opening paragraph consists of two parts. The first is couched in the negative and reads like an exemption of the levy of tax on the sales of untanned hides and skins by licensed dealers thus carrying out the object of Rule 15(1) under which this rule has to provide for dealings in hides and skins by licensed dealers. To this extent it negatives any liabilities that might arise on sales of hides and skins which might have attached to such sales by reason of the language of Rule 4(1). The second limb of the sub-rule enacts two exceptions and provides for taxability in those two cases. The types of transactions are indicated as the stages at which the tax would be levied. The first is when such goods are sold to a tanner in the State and the second is when they are sold for export outside the State. Having regard to the form of this rule which deals with sales and not with purchases, the rule has to be read as a sale by a licensed dealer to a tanner in the State. Though the sub-rule if read in vacuo might mean 'whether the sale is effected to a licensed or an unlicensed tanner' yet read in conjunction with Rule 15(1) there can be no doubt that the tanner who is referred to in the second limb of the opening paragraph of Rule 16(2) is a licensed tanner and this construction would be in accord with the form of Rule 4(2)(c) also. In the same manner the sale for export which is referred to in the last portion of this paragraph would necessarily mean a sale by a licensed dealer.
7. The terms of Rule 15 of the Turnover and Assessment Rules excluding licensed tanners from the operation of Rules 6 to 13 of the Turnover and Assessment rules read in conjunction with the opening words of Rule 16(1) led the Full Bench inevitably to the conclusion that the only dealings which were the subject of tax were confined to those set out in Rule 16(2) and that as this provision did not extend to purchase from unlicensed dealers no tax liability was imposed upon purchases from unlicensed dealers. Both Rule 15 and Rule 16(1) (2) (3) and (4) are all concerned with dealings of licensed dealers. That is why the Full Bench excluded from their consideration the tax liability of unlicensed dealers. What is to the point now is the conclusion reached by the Full Bench at page 501:
The conclusion we have reached as a result of the above discussion is that (1) the charging provision, Section 3 is subject in the case of transactions in hides and skins, to the terms of Section 5(vi) under which a single point of taxation in a series of sales has to be fixed by the Rules (2) Rule 4(2) is not the fixation of a single point within Section 5(vi) but it is merely designed to determine whether it is the buyer or the seller that shall be liable to be taxed; (3) the single point is fixed and the liability to tax is established only under Rule 16; and (4) that under Rule 16(2)(i) it is only the sale of untanned hides and skins by a licensed dealer to a licensed tanner who tans the same that gives rise to a tax liability and that purchases of untanned hides and skins by tanners from persons other than licensed dealers are not within the taxing provision.
8. In the light of these we have to proceed on this postulates : In the case of hides and skins the charge levied by Section 3 is subject to the provisions of Section 5, arid in the case of licensed dealers in hides and skins, the charging provision is Rule 16 of the Turnover and Assessment Rules.
9. In the case of an unlicensed dealer, the question to be considered is slightly different. Rule 15(1) does not exclude the applicability of Rules 6 to 13 of the Turnover and Assessment Rules, and therefore Rule 16(1) to 16(4) do not serve to fix the single point. On the rules as they originally stood, in their case the single point stood excluded and under Sub-rule (5) of Rule 16, the tax was levied at the sale point on each occasion of sale. But this sub-rule was deleted by an amendment which came into effect 2 days before the assessment order now impugned was passed. The argument the learned Assistant Government Pleader submitted on behalf of the Government was, however, this. Section 3 is the charging provision. No doubt, this is subject to the other provisions of the Act, but the other provisions do not qualify this charge in the case of these unlicensed dealers. Section 5 might have operated as a qualification, but in the present case it does not. That section starts by enacting that the provision in Sub-clause (vi) regarding the tax on the sale of hides and skins being levied only at the single point in the series of sales, is 'subject to such restrictions and conditions as may be prescribed including conditions as to licence and licence fees.' Rule 5 of the General Sales Tax Rules has been framed by virtue of the provisions contained in the opening words of Section 5. That rule, though it does not compel any dealer in hides and skins to take out a license, confines the benefit of taxation at a single point to those who take out a licence. If this rule were intra vires of the rule making power and in conformity with Section 5, the failure to take out the licence necessarily involves that the concession as to the single point taxation is not available to the dealer with the result that Section 5(vi) becomes inapplicable to him, and therefore we are thrown back to the charging Section 3(1) which in consequence becomes absolute, and unqualified. The petitioner is a dealer and he is therefore liable to pay tax on the total turnover of his goods under Section 3(1). The tax will be at the sale point, because Rule 4(2)(c) and (d) of the Turnover and Assessment Rules are confined to licensed dealers in hides and skins, and therefore the residuary Rule 4(1) would govern the transaction of the unlicensed dealer.
10. The learned Assistant Government Pleader also placed some reliance on the provisions of Section 6 (a) in support of this construction.
11. Before dealing with these arguments it might be useful to restate the position so far as the rules are concerned in relation to unlicensed dealers. We have already referred to the fact that in relation to licensed dealers, the opening words of Section 5 would be inapplicable to them by reason of their satisfying the condition laid down in Rule 5 of the General Sales Tax Rules, and therefore they would be entitled to the advantage of taxation at a single point provided by Sub-section (vi). The single point in their case was fixed only by Rule 16, and therefore that became the charging provision so far as they were concerned. In regard to unlicensed dealers, the position was that Rule 5 of the General Sales Tax Rules denied them the benefit of taxation at a single point. Their case would not fall within Rule 16(1) to 16(4) which fixed the single point in regard to licensed dealers and therefore there was no such point fixed for the levy of tax at a single point on them. But the Rule making authority however proceeded to enact the logical conclusions of the provision in Rule 5 of the General Sales Tax Rules by framing Sub-rule (5) of Rule 16 of the Turnover and Assessment Rules dealing with taxes to be levied on unlicensed dealers. That rule ran in these terms:
Sale of hides and skins by dealers other than licensed dealers in hides and skins shall subject to the provisions of Section 3 be liable to taxation on each occasion of sale.
There is no doubt that this sub-rule logically carried out the legal effect of the provision in Rule 5 of the General Sales Tax Rules confirming the right to single point taxation to dealers who chose to take out a licence. The effect of Rule 16(5) was that not only would there be a tax on successive unlicensed dealers, but in view of Rule 4(1) of the Turnover Rules the tax would be levied on the sale turnover of each such dealer. Undoubtedly if this rule were valid and if the legal result of the other provisions were the same as that expressed in Rule 16(5) of the Turnover and Assessment Rules, the State has a right to levy the tax on the assessee in the present case.
12. In Syed Mohamed & Co. v. The State of Madras : AIR1953Mad105 , it has held that Sub-rule (5) of Rule 16 of the Turnover and Assessment Rules was ultra vires of the rule making authority as being in contravention of Section 5(vi) of the General Sales Tax Act. This decision was affirmed on appeal by the Supreme Court in Syed Mohammad & Co. v. State of Andhra (1954) 1 M.L.J. 619 : 1954 S.C.J.390 . As a result of this decision the, sub-rule was deleted by the State Government as and from 26th February, 1954, the assessment in this case having been completed by the Deputy Commercial Tax Officer on 28th February, two days after that sub-rule ceased to exist.
13. It would follow from what we have stated above that the whole question turns upon whether the Rule 5 of the General Sales Tax Rules is in accord with Section 5, and we would add that if it were in accord, Rule 16(5) of the Turnover and Assessment Rules would also have been in accord with Section 5. After the deletion of Rule 16(5) of the Turnover and Assessment Rules the question now to be considered is whether Rule 5 of the General Sales Tax Rules is valid. It would be apparent that there is an intimate connection between the validity of Rule 16(5) and the question now under consideration. It therefore becomes necessary to investigate the grounds upon which this Court held Rule 16(5) to be ultra vires the rule-making authorities.
14. The assessee Syed Mohammad & Co. whose liability to tax was considered by this Court in the decision in Syed Mohamed & Co. v. The State of Madras : AIR1953Mad105 , was a licensed dealer in hides and skins. One of the contentions raised by him was that the Rules framed under the Act did not properly carry out the policy laid down in the main enactment and Venkatarama Ayyar, J., said in regard to this at page 612:
Rule 16(5) provides that sale by dealers other than licensed dealers will be liable to taxation on each occasion of sale. Under this sub-clause when there are successive sales by unlicensed dealers the tax will be leviable on such occasion of sale and that will be inconsistent with Section 5(vi) which provides for taxation at a single point.
The learned Judge summarised the position at page 613 thus:
The contention of the petitioners is that where there are sales by unlicensed dealers to unlicensed tanners or unlicensed dealers there is the possibility of multiple taxation and that would be in violation of Section 5(vi). It is not disputed on behalf of the Government that Rule 16(5) is repugnant to Section 5(vi). It must therefore be held to be ultra vires. But this can bring no relief to the petitioners as they are all licensed tanners and are in no manner hurt by the operation of Rule 16(5). This was conceded by the learned Advocate-General for the petitioners.
The result was stated at page 614:
It must be held that the provisions of the Madras General Sales Tax Act and the Rules except Rule 16(5) are intra vires and valid and not abnoxious to Article 14.
This decision was taken upon appeal to the Supreme Court whose Judgment is reported in Syed Mohommad & Co. v. State of Andhra (1954) 1 M.L.J. 619 : 1954 S.C.J.390 Das, J., (as he then was) who delivered the judgment of the Court said:
Lastly the learned Advocate urges that Rule 16(5) clearly contravenes the provisions of Section 5(vi) of the Act. This sub-rule has been held to be ultra vires by the High Court and, indeed, the learned Advocate-General, Madras did not in the High Court, as before us, dispute that Rule 16(5) was repugnant to Section 5(vi). That sub-rule however affects only unlicensed dealers and the appellants who are admittedly licensed dealers are not affected by that sub-rule. Further it has not been suggested before us that the appellants were ever called upon to pay any tax on purchase of hides or skins in respect of which tax had been previously paid by some prior purchasers. That sub-rule is clearly severable and cannot affect the validity of the rules which may otherwise be within the ambit of the Act.
15. Thus it was made clear that Rule 16(5) was ultra vires of the rule making power because it contravened Section 5(vi). It should be unnecessary for us to supplement the decision of this Court or of the Supreme Court by finding other grounds to support that decision. Still we take leave to point out that Section 5(vi) contemplates a series of successive dealers in hides and skins and provides that in these series of sales, the tax should be levied only at a single point and leaves it to the rules to prescribe that single point. Under Rule 16 the single point has been fixed as either (1) the last purchase by the tanner who tans which purchase was the last dealing in the goods before they ceased to be untanned hides and skins, or (ii) the last purchase before the goods cease to be in the State by being exported as untanned hidesand skins. Under this scheme of levy of tax at a single point, the last purchaser is entitled to insist that the goods on the purchase of which he is called upon to pay the tax had not already been subjected to tax at the hands of any other dealer. Suppose there are a series of dealers whom we shall call, A. B. C. D. E and F, F being the last purchaser who actually tans the goods and who according to Rule 16(2) would have to pay the tax. If F were a licensed tanner he is entitled to insist by reason of Section 5(vi) that the goods which he has purchased have not been subjected to tax at the hands of A to E whether those dealers are licensed or unlicensed. That is the scheme of the single point taxation envisaged by Section 5(vi). The entire idea behind this provision in regard to hides and skins is based on this well-known fact that the commodity is usually the subject of export; and the favourable treatment is designed to prevent any unreasonable rise in the price of these goods consequent on multipoint taxation, in which event the goods from this State would not be able to compete on equal terms in the world market. This was pointed out in Syed Mohamed & Co. v. The State of Madras : AIR1953Mad105 . If this were the basis of the provision, the invalidity of Rule 16(5) of the Turnover and Assessment Rules would follow from its violating the basic provision of Section 5(vi).
16. If Rule 16(5) were invalid for the reason we have set out above, the question that arises, is, whether Rule 5, in the form in which it is found and of which Rule 16(5) was the logical consequence, can be held to be valid. Mr. Venkatasubramania Ayyar, learned Counsel for the petitioners urged that though dealers in hides arid skins might be compelled to take out licence and pay license fees therefor, the provision in the rule, that the holding of a licence was necessary in order to confer the benefit of a single point taxation, was not a condition contemplated by Section 5 and would be inconsistent with its main purpose. We see considerable force in this argument both independently by itself and as following logically from the decision holding that Rule 16(5) was ultra vires the rule making authorities as being in contravention of Section 5(vi).
17. Learned Counsel for the petitioners presented this point also from another aspect. Section 5 contains six sub-clauses and the exemptions or the lifting of the charge imposed by Section 3 fall into two categories. Sub-clauses (i) (ii), and (v) deal with what could be called personal exemptions that is exemptions, based upon considerations personal to the dealer; and in the case of dealers falling within that category particular transactions are exempted. Thus for instance the transactions in handspun yarn and cloth woven on handlooms wholly with handspun yarn are exempted by Sub-clause (i)
provided the person who claimed exemption was one who was carrying on business solely in such commodities.
18. But when one comes to Sub-clause (ii), (iv) and (vi) it is the commodity that is exempted or gets the benefit of some favourable system of taxation. His contention was that in these cases comprised within Sub-clauses (ii) (iv) and (vi) and particularly the last one, the exemption looks to the commodity and is of an 'impersonal' character. The argument further was that it was the intention of the legislature, as gathered from the purpose and object in enacting Sub-clause (vi) that the scope of the exemption, which was designed to prevent a rise in the price of a commodity which was of value in international trade, could not be restricted by reason of the personal qualifications or disqualifications of the persons who effected such sales. In our opinion, this argument also is well founded. The restrictions and conditions to be prescribed ought to be consistent with the main purpose of the sub-clause, namely, providing for a single point at which the tax should be levied. This construction does not, however, render the reference to licence and licence fees; otiose. If such licensing is validly made compulsory those who fail to take out the licence might be penalised by the usual methods of enforcements, namely prosecution with the resultant fine or imprisonment. In other words, the penalties that might be imposed for breach of a condition ought to be personal and cannot extend to deprive the commodity of the benefit of the single point taxation. So viewed, it would be clear that the frame of Rule 5 of the General Sales Tax Rules, which restricts the benefit of the single point taxation to those who take out licences, is contrary to the provisions of Section 5(vi) which do not contemplate such a condition being imposed and would appear to forbid the imposition of such a restrictive condition. This conclusion that we have reached as to the proper interpretation of the opening words of Section 5 is exactly identical with the ration on the basis of which this Court held Rule 16(5) of the Turnover and Assessment Rules to be invalid.
19. We have reserved to the last an argument of the learned Assistant Government Pleader who invoked the provisions of Section 6-A as assisting him in this matter. It will be seen from the frame of that section that it is inapplicable to the case of a condition couched in the form which Rule 5 of the General Sales Tax Rules has adopted. Section 6-A runs thus:
If any restrictions or conditions prescribed under Section 5 or notified under Section 6 are contravened or are not observed by a dealer, or in case a condition so prescribed or notified requires that a license shall be taken out or renewed if a license is not taken out or renewed by the dealer or if any of the conditions of a license taken out or renewed by him are contravened or are not observed, the sales of the dealer, with effect from the commencement of the year in which such contravention or non-observance took place, may be assessed to tax or taxes under Section 3, as if the provisions of Section 5 or of the notification under Section 6, as the case may be, did not apply to such sales and notwithstanding that a license, if any, taken out or renewed by the dealer continued or continues to be in force during the year.
20. In order to apply the penal portion of that section, namely, that the provisions of Section 5 would not apply to sales by unlicensed dealers, one of three conditions should be satisfied; (1) the restriction or a condition prescribed under Section 5 should be contravened or should fail to be observed by a dealer; (2) alternatively where a condition prescribes that a licence shall be taken out or renewed, the dealer fails to take out or renew the license; and lastly (3) where a dealer takes out a license but contravenes or does not observe the conditions of the licence. It is only in one of these three classes of cases that the last portion of the section comes into play. In the case of a dealer in hides and skins, under the rules as they stand the taking out of a licence is not compulsory. This was pointed out by the Full Bench in Hajee, Abdul Shukoor & Co. v. State of Madras (1955) 2 M.L.J. 494 . Hence the second alternative is inapplicable. As the dealer in the present case has not taken out a licence the first and third alternatives are not attracted. It follows that Section 6-A has no application at all to the present case.
21. Before concluding it is necessary to refer to the judgment of a Bench of the Andhra High Court which had dealt with an identical question with which we are concerned and on which some reliance was placed by the learned Assistant Government Pleader. That decision rendered in W.A. No. 2 of 1955 has not been reported yet Since reported in (1956) An. W.R. 298. Subba Rao, G.J. who delivered the judgment has reached a conclusion just the opposite to that which we have reached. If analysed, that decision in favour of the State was rested on three bases. First, that Rule 16(5) of the Turnover and Assessment Rules was intra vires and valid. They have held that the observations in the judgment in Syed Mohamed & Co. v. The State of Madras : AIR1953Mad105 , as regards the validity of Rule 16(5) were merely obiter and proceeded upon a concession by the Advocate-General before this Court as well as before the Supreme Court. (2) Secondly that Section 6-A is applicable to the case of a dealer who did not take out a license for dealing in untanned hides and skins. Lastly they appear to doubt the correctness of the decision of the Full Bench in Hajee Abdul Shukoor & Co. v. State of Madras (1955) 2 M.L.J. 494 , though they have reserved their final opinion on the law as enunciated in that case as regards the liability to tax of licensed dealers in regard to purchases from unlicensed dealers. With respect to the learned Judges we are unable to agree with any portion of the reasoning in their judgment. The decision of the Full Bench of this Court is binding upon us; but even apart from that we still feel that it was the only answer possible to the question propounded. Coming to the validity of Rule 16(5) we are clearly of the opinion, that it was a point expressly decided by this Court though no relief flowing from the decision of that question was granted to the petitioners. In a sense it might be obiter; still it was a considered and a definite opinion that was expressed by this Court. We are unable to uphold the argument, that the Court did not apply its mind to the question to reach the conclusion that it expressed in the judgment. No doubt the learned Advocate-General did not seek to support the validity of that rule, but we are satisfied that he did so only after argument and when he found that a contrary position was unsupportable. We further feel that even in the Supreme Court the same thing happened. From what we have stated earlier in the judgment it appears to us that the concession by the Advocate-General did not proceed upon any mistake and was fully justified.
22. If Rule 16(5) was, as we hold, ultra tires on the ground that it was in contravention of Section 5(vi), that reasoning would deprive Rule 5 of the General Sales Tax Rules of its validity, and therefore no reliance can be placed upon the manner in which that rule confines the benefit of the single point taxation to licensed dealers. Again with respect we are unable to agree with the learned Judges of the Andhra High Court on the construction which they have placed on the opening words of Section 5 as permitting a rule in the form in which Rule 5 of the General Sales Tax Rules is now found.
23. We have already stated enough to show that in our opinion Section 6-A has no application to a rule framed in terms of Rule 5 of the General Sales Tax Rules.
24. The learned Government Pleader lastly urged an objection that the petitioners ought to have resorted to the usual remedies by way of appeal etc., to the Tribunals under the Act and that we should, in our discretion, decline to entertain the petition. We are not prepared to uphold this objection. It is conceded that this is a matter of discretion and not any absolute rule of law that bars our jurisdiction. The questions raised are of great importance and complexity and if the point made by the assessee were upheld it would mean that Rule 5 of the General Sales Tax Rules is invalid. This is not certainly a ground which the assessee could put forward before the Tribunals constituted under the Act, and therefore we consider that the petitioners were entitled to approach this Court for relief in the present case.
25. The Writ Petition succeeds and the rule is made absolute. The assessment on the petitioners made by the Deputy Commercial Tax Officer will be set aside; the petitioners are entitled to their costs. Counsel's fee Rs. 200.