Exclusive Leather vs State of Jammu and Kashmir

This appeal is directed against the judgment and order passed by the High Court of Jammu and Kashmir in O.W.P. No. 633 of 1998, dated 05.10.2001, whereby and whereunder the High Court has dismissed the Writ Petition filed by the Appellant-assessee as being devoid of any merit. Short facts of this case are: the Appellant herein is a partnership firm with its head office at Srinagar in the State of Jammu and Kashmir and branch office at New Delhi. The Assessee is engaged in the business of manufacture and sale of finished products from raw hides and skin. The Assessee purchases raw skins in Srinagar and dispatches them to New Delhi for manufacture of finished products and subsequently, effects the sale of such products in New Delhi.

The Appellant is a dealer registered under the provisions of the Jammu and Kashmir Sales Tax, 1962 (for short ''the Act'') and also the Central Sales Tax Act, 1956.

The State Government in exercise of its powers under Section 5-A of the Act has issued two notifications dated 15.10.1997 and 30.05.1998, respectively. By the first notification, the State Government has permitted the dealers dealing in hides and skins to pay an amount of Rs. 6.50 per skin by way of composition and by the second notification, the State Government has enhanced the composition rates prescribed under the first notification.

The tax liability to the tune of Rs. 4,00,000/- was levied on the Assessee under the Act by virtue of the first notification which was paid by the Assessee.

Upon issuance of the second notification, the Appellant aggrieved by the levy of compounded rate of tax had called in question the two notifications by filing a Writ Petition before the High Court. In the said Writ Petition, inter alia, the Appellant had taken a stand, that, since he is not liable to pay either the sales tax or the purchase tax within the State of Jammu & Kashmir, the Assessee could not be held liable to pay the compounded rate under the aforesaid notifications.

The High Court after considering the submissions made by both the parties to the lis has come to the conclusion that the Writ Petition filed by the Appellant herein is devoid of any merit and dismissed the case of the Appellant.

Aggrieved by the aforesaid, the Appellant is before us in this Civil Appeal.

We have heard the Learned Counsel appearing for the parties to the lis and perused the documents on record including the impugned notifications and the judgment and order passed by the High Court.

In our considered view, the issue raised in this Civil Appeal could be decided on a very short ground and therefore we do not intend to go into other aspects of the case.

The Assessee does not question any order of assessment but only impugns the aforesaid notification under which composition tax is levied on the sale of raw skin. The impugned notifications provide for composition of the tax payable by the dealer under the Act. It is relevant to notice certain provisions of the Act. The charging provisions are Section 4 and Section 4B. Section 4 provides for the levy of tax on the sale of goods by a dealer and Section 4B provides for levy of tax on certain purchases of taxable goods from any source in the State of Jammu and Kashmir by a dealer who is liable to pay tax under the Act. Section 5 provides for exemption from payment of tax to any class of dealer or any goods or class or description of goods. The Act under Section 5A makes provision for payment of tax liability under composition scheme and the Commissioner is vested with the power to permit any class of Assessees to pay a lump sum by way of composition in lieu of the amount of tax payable by him under this Act, subject to the conditions as prescribed under the rules made under the Act. The Section is extracted and it reads as under:

"5A Composition of tax payable:--

Notwithstanding anything contained in Sections 4 and 5, the Commissioner may, in such circumstance, under such conditions and for such period as may be prescribed, permit any class of Assessees to pay in lieu of the amount of tax payable by him under the provisions of this Act, a lump sum determined in the prescribed manner at prescribed rate by way of composition and the sum so compounded shall be payable by the Assessee. Provided that the provisions of this Act and the rules made thereunder relating to the filing of returns and the maintenance of accounts by such Assessees shall not apply to them.

(Emphasis supplied)

In the instant case, it is the stand of the Assessee that it neither pays the sales tax nor pays the purchase tax within the State of Jammu & Kashmir. A perusal of the aforesaid provisions of the Act would indicate that the composition benefit is available to a dealer under the Act in case it is liable to pay either the sales tax under Section 4 of the Act or the purchase tax under Section 4B of the Act. If that is so, since the Assessee claims that it is not liable to pay any tax under Sections 4 and 4B, it cannot take the benefit or the advantage of the composition scheme under the impugned notifications issued by the State Government and hence could not have challenged the said notifications in the Writ Petition before the High Court. We are of the opinion that the Assessee was not properly advised when he questioned the notifications before the High Court.

In that view of the matter, we dismiss the Civil Appeal for the reasons mentioned by us in the previous paragraphs. We make it clear that we have not accepted the observations made by the High Court while rejecting the Writ Petition filed by the Appellant herein.

If, for any reason, the Appellant is aggrieved by the Demand Notices issued by the Respondent-authorities, we permit him to file appropriate appeals before the appropriate authorities as provided under the Act within a month''s time from today. If such an appeal is filed within the aforesaid time granted by this Court, the authorities shall consider the appeal on merits without any reference to the observations made by the High Court. All the contentions of both the parties are left open. Ordered accordingly.