JUDGMENT

L. Palamalai, Administrative Member

1. This tax revision case is against the order of the Sales Tax Appellate Tribunal (Main Bench), Chennai, in T.A. No. 211 of 1998 and C.O. P. No. 313 of 1998 dated July 28, 1999. The disputed items in the revision are as follows :

(A) The total suppression fixed by the Appellate Tribunal at Rs. 4,61,730. This amount consists of the following items :

(i)

Value of excess stock of 313 pieces of finished leather noticed at the time of inspection.

Rs. 31,300

(ii)

Value of 1,946 pieces of finished leather held in stock without any documentary evidence for the receipts.

Rs. 1,94,600

(iii)

Last purchase of raw skins wrongly accounted for under inter-State purchase.

Rs. 81,920

Rs. 3,07,820

Add 50% for estimated suppression

Rs. 1,53,910

Total ....

Rs. 4,61,730

(B)

Disallowance of the claim of exemption in respect of raw hides and skins under section 5(3) of the CST Act.

Rs. 7,40,986

(C)

Penalty levied under section 12(3)(b) of the Act for the difference of tax between tax payable and tax paid.

2. The findings of the Appellate Tribunal in respect of the disputed items are as follows :

At the time of inspection on August 12, 1993 by the Enforcement Wing Officers, the assessee admitted the excess stock of 313 pieces of leather before the inspecting authorities. It was contended before the Appellate Tribunal that the excess stock related to goods received for colour dyeing for reference. In the absence of any record to show that the goods were received for. reference purpose and in the absence of any entry in the records maintained in the business, the Appellate Tribunal disallowed the plea and upheld the suppression with reference to excess stock of 313 pieces admitted during inspection. Similarly, at the time of inspection, the officers also found excess stock of 1,946 pieces of finished leather. The plea of the assessee that the goods related to job-work was not accepted by the Tribunal as such a plea was not supported by relevant records. Considering the fact that the assessee was maintaining a job-work register, the Tribunal concluded that it was not reflected in the accounts that such goods were received for job work even if the goods were taken to own stock. In reality, the officers found excess and the transaction was not reflected in the accounts. Accordingly, the suppression treated by the assessing authority was upheld. Regarding a turnover of Rs. 81,920 not recorded as last purchase as found by the officers, the Appellate Tribunal rejected the plea that the transaction was subsequently brought to accounts in the next month on the ground that no stock account was produced to prove the claim. Therefore, on appreciating the facts, the Tribunal sustained an actual suppression of Rs. 3,07,820 and adding 50 per cent on the actual suppression having regard to the defects such as stock variation, misclassification, the total suppression in the business was refixed at Rs. 4,61,730. As regards the claim of exemption in respect of raw hides and skins purchased locally and exported as dressed hides and skins, the Appellate Tribunal held that following the ratio in the case of K.A.K. Anwar & Co. v. State of Tamil Nadu reported in [1998] 108 STC 258 (SC) wherein it was held that raw hides and skins and dressed skins are different commodities, the disallowance of claim of exemption is in order as the commodity purchased, namely, raw hides and skins and taxed under Section 7-A of the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as "the Act") is different from the exported commodity, namely, dressed hides and skins. The Tribunal categorically held that when raw hides and skins and dressed hides and skins are different commercial commodities, naturally the assessee is not eligible for exemption under Section 5(3) of the CST Act in regard to the purchase of raw hides and skins. As regards penalty, the Appellate Tribunal held that there was suppression and the levy of penalty under Section 12(3) of the Act is automatic and therefore the penalty being the difference between the tax assessed and tax paid is in order.

3. Mrs. Chitra Venkatraman, the learned Senior Counsel, contended that the Appellate Tribunal in the absence of materials showing any purchase or sales omission has wrongly concluded there was suppression and in such circumstances, the refixed suppression of Rs. 4,61,730 is not in order. There is absolutely no justification for levy of penalty. She vehemently contended that the disallowance of export exemption by the Appellate Tribunal is contrary to the law laid down by the High Court and Supreme Court. Referring to the decision of the Madras High Court in T. Azeezur Rahman and Company v. State of Tamil Nadu [1991] 82 STC 355, it was contended that for purpose of determining a claim under Section 5(3) of the CST Act, the fact that raw and dressed hides and skins are commercially treated as distinguished commodities or that the entry 7 of the Second Schedule to the Act deal with them as two different and distinct commodities has no relevance at all. Subject to the limitation of the entry as contained in Section 14(iii) read with Section 15 of the Central Sales Tax Act, 1956 and the lack of commercial identity of the goods has no relevance and what is relevant is whether the sale or purchase in question is the "penultimate sale or purchase" that satisfies the two conditions specified in Section 5(3) of the Act. The words "those goods" found in Section 5(3) of the CST Act do not mean and refer to the goods sold or purchased preceding the sale or purchase occasioning the export, in the same condition as they were so purchased or sold, when so long as the identity of the goods is not altered bringing into existence a new commercial product of different character and property. Thus, applying the ratio of the decision in the case of T. Azeezur Rahman & Co. v. State of Tamil Nadu [1991] 82 STC 355 (Mad.) the claim of the petitioner ought to have been allowed by the Appellate Tribunal. The Andhra Pradesh High Court also in State of Andhra Pradesh v. Mohd. Basheer & Company [1989] 72 STC 185, observed as follows :

"Simply because a manufacturing process is gone through, it does not necessarily follow that different goods emerge. 'Hides and skins whether in raw or dressed state' occurring in Section 14(iii) of the Central Sales Tax Act should be treated as the same goods for the purpose of Section 5(3) of the Central Act.

Merely because particular goods are treated as different commodities for the purposes of the State Sales Tax Act, it does not necessarily follow that for the purposes of the Central Sales Tax Act also they should be treated as different goods."

4. In the above case, the order of the Tribunal upholding the claim of exemption was confirmed after distinguishing the Supreme Court decision in A. Hajee Abdul Shukoor and Co. v. State of Madras reported in [1964] 15 STC 719. This decision of the Andhra Pradesh High Court when taken on appeal to the Supreme Court was dismissed on December 3, 1990 in S.L.P. No. 13104 of 1990 and S.L.P. Nos. 10525 to 10534 of 1989 reported in [1991] 80 STC FRSC page 4. The Karnataka High Court also in the case of Farida Prime Tannery v. State of Karnataka [1992] 84 STC 133 treated the raw hides and skins and dressed hides and skins as a single commodity and the following observations are relevant :

"For the purposes of the Central Sales Tax Act raw hides and skins and dressed hides and skins are the same goods, even though the latter is the result of the processes undergone by the former to enable their preservation and utilisation. Where, for the purpose of complying with agreements entered into for the export of dressed hides and skins, raw hides and skins were purchased, such purchase would fall within the ambit of Section 5(3) of the Central Sales Tax Act, 1956."

5. In this judgment also, the Karnataka High Court has distinguished the judgment of the Supreme Court reported in [1964] 15 STC 719 (A. Hajee Abdul Shukoor and Co. v. State of Madras). Similarly, the Madras High Court in M.S. Mohamed Siddique and Company v. State of Tamil Nadu reported in [1993] 91 STC 336 held as follows :

"Hides and skins purchased and exported after tanning cannot be treated as a different commodity and exemption under Sub-section (3) of Section 5 of the Central Sales Tax Act, 1956, is allowable, provided the other conditions set out in Section 5(3) of the Central Sales Tax Act are satisfied."

6. When this matter was taken to the Supreme Court, the Appeal No. C.A. 2046 of 1996 came up for hearing along with the batch of cases relating to K.A.K. Anwar & Co. reported in [1998] 108 STC 258 (SO and the honourable Judges who heard the case reserved judgment except C.A. No. 2046/96 and this case was delinked from other batch cases and it was observed that as the High Court remanded the matter to the Appellate Assistant Commissioner for fresh disposal, the case would go back to the Appellate Assistant Commissioner for disposal in accordance with law. Therefore, this clearly indicates that Supreme Court itself felt that the decision in the Main Bench of K.A.K. Anwar & Co. [1998] 108 STC 258 (SC) would not apply to the exemption considered in C.A. No. 2046/96 pertaining to exemption under Section 5(3) of the CST Act. In fact the decision in K.A.K. Anwar & Co. reported in [1998] 108 STC 258 (SC) did not go into the scope of exemption of raw skins under Section 5(3) of the Central Act and the decisions reported in [1989] 72 STC 185 (AP) (State of Andhra Pradesh v. Mohd. Basheer & Company) ; [1992] 84 STC 133 (Kar) (Farida Prime Tannery v. State of Karnataka) and [1991] 82 STC 355 (Mad.) (T. Azeezur Rahman and Company v. State of Tamil Nadu) have not been overruled. In the decision reported in [1998] 108 STC 258 (K.A.K. Anwar & Co.), the Supreme Court considered specifically the following questions only :

(i) Whether inter-State sales of tanned skins which have once been taxed under the TNGST Act on purchases at the raw stage could be taxed again ; and

(ii) Whether the provisions of Section 3 of the Tamil Nadu General Sales Tax (Third Amendment) Act, 1987, providing for tax on purchases of raw skins as well as on sales of tanned skins (during the period from March 22, 1987 to September 5, 1991) were valid.

7. Even subsequent to the decision reported in K.A.K. Anwar & Co. [1998] 108 STC 258 (SC) on November 27, 1997, the Supreme Court dismissed the SLPs filed by the State Government of Uttar Pradesh in similar situations and upheld the grant of exemption under Section 5(3) of the CST Act. These decisions reported in [1998] 108 STC FRSC page 5 and [1998] 111 STC FRSC page 4 are relevant. The Supreme Court in K.A.K. Anwar & Co. v. State of Tamil Nadu [1998] 108 STC 258 confirmed the judgment reported in [1984] 56 STC 58 (Mad.) (K.A.K. Anwar and Company v. State of Tamil Nadu) and [1993] 91 STC 1 (Mad.) (Brown Leather Company v. State of Tamil Nadu) and adopted the earlier view of the Supreme Court in [1964] 15 STC 719 (A. Hajee Abdul Shukoor and Co. v. State of Madras). Even in Brown Leather & Company v. State of Tamil Nadu [1993] 91 STC 1, the Madras High Court at page 24 held as follows :

"The decision in Azeezur Rahman & Co.'s case [1991] 82 STC 355 authored by me on behalf of the division Bench of this Court, presided over by Dr. Justice A.S. Anand, the then learned Chief Justice, has no relevance to the case on hand. That decision was rendered on the peculiar facts of the case and in the context of the claims made under Section 5(3) of the Central Act and the scope as well as the content of Section 5(3) of the Central Act. The observations in paragraph 16 of the said judgment have to be considered and viewed in the context of the views expressed in paragraphs 12 to 15 of the same decision."

8. Thus the decision of the Supreme Court in K.A.K. Anwar & Co. v. State of Tamil Nadu [1998] 108 STC 258 would not apply to the case reported in [1991] 82 STC 355 (Mad.) in the case of Azeezur Rahman. In fact the Commissioner of Commercial Taxes also clarified in circular dated July 18, 1994 in letter No. Acts Cell/III/129820/93 that if the raw hides and skins purchased locally converted into finished leather and exported against a specific order from the foreign buyer for export of such finished goods of dressed hides and skins such raw hides and skins and dressed hides and skins are treated as one and the same commodity and eligible for exemption under Section 5(3) of the CST Act. In short while raw hides and skins and tanned hides and skins could be treated as different commodities under the local Act in so far as the CST Act is concerned both the commodities namely raw hides and skins and tanned hides and skins should be treated as single commodity only as clearly indicated in Section 14(iii) of the CST Act read with Section 15 of the Act and as confirmed in the various decisions of the High Court and Supreme Court cited above. Therefore the disallowance of exemption is not quite in order.

9. We have considered the contentions carefully and perused the records. The major thrust of the arguments of the learned Senior Counsel for the petitioner related to disallowance of exemption claimed under Section 5(3) of the CST Act, Sub-section (3) of Section 5 of the CST Act which was introduced w.e.f. April 1, 1976 reads as follows :

"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."

10. The Appellate Tribunal declined to grant exemption under Section 5(3) of the CST Act on the ground that the goods purchased and the goods exported are not the same but different commodities. The petitioner claimed that both raw hides and skins purchased and dressed hides and skins exported are one and the same commodity, The Supreme Court in Sterling Foods v. State of Karnataka reported in [1986] 63 STC 239 after referring to the provision of Section 5(3) of the CST Act observed at page 242 as follows :

"It is clear on a plain reading of Sub-section (3) of Section 5 of the Central Sales Tax Act, 1956, that in order to attract the applicability of that provision, it is necessary that the goods which are purchased by an assessee for, the purpose of complying with the agreement or order for or in relation to export, must be the same goods which are exported out of the territory of India. The words 'those goods' in this sub-section are clearly referable to 'any goods' mentioned in the preceding part of the sub-section and it is therefore obvious that the goods purchased by the assessee and the goods exported by him must be the same. If by reason of any processing to which the goods may be subjected after purchase, they change their identity so that commercially they can no longer be regarded as the original goods, but instead become a new and different kind of goods and then they are exported, the purchases of original goods made by the assessee cannot be said to be purchases in the course of export."

11. This view of the Supreme Court is reiterated in Vijayalaxmi Cashew Company v. Deputy Commercial Tax Officer reported in [1996] 100 STC

571. Wherein the following observations were made :

"In order to resist imposition of sales tax by the State, the assessee will have to establish the identity of the goods purchased with the goods to be exported out of the territory of India. In order to fulfil an export obligation, if an exporter purchases goods and as a result of some processing, the identity and character of the goods change, then it will not be a case of export of the same goods."

12. Therefore the crucial question in the present case for allowing exemption under Section 5(3) of the CST Act is whether raw hides and skins and dressed hides and skins are different commodities or a single commodity. The Appellate Tribunal relied on the decision of the Supreme Court in K.A.K. Anwar & Co. v. State of Tamil Nadu reported in [1998] 108 STC 258 wherein it was held that dressed hides and skins are different from raw hides and skins. The question considered in K.A.K. Anwar's case [1998] 108 STC 258 (SC), is whether the turnover in respect of hides and skins which has once been subjected to tax under the Tamil Nadu General Sales Tax Act, 1959 on its purchase at the raw stage could be taxed again on inter-State sales as tanned or dressed hides and skins. In that case, the appellant purchased raw hides and skins and after dressing they sold the goods in the course of inter-State trade. The contention raised for claiming exemption was that hides and skins, whether in a raw or dressed form, are declared goods under Section 14(iii) of the CST Act, 1956 and they are regarded by the Central Act as a single commodity. Therefore when Section 15 of the CST Act provides that the goods which have suffered tax once cannot be taxed again, it has to be held that once tax had been levied at the time of purchase of hides and skins, there is no case to levy any tax on the inter-State sales after the said hides and skins have been dressed. This contention was not accepted by the assessing authority, and the appellate authorities also affirmed the view of the assessing authority. The High Court, by different decisions came to the conclusion that raw hides and skins was a commodity which was commercially different from dressed hides and skins both under the State Act as well as the Central Act and that the State had the legislative competence to tax inter-State sale of dressed hides and skins even though tax had been paid on the purchase of raw hides and skins. When this matter was taken up before the Supreme Court, after referring to various decisions relied on by the appellants including the case of Mahi Traders reported in [1989] 73 STC 228 (SC) it was observed by the Supreme Court in K.A.K. Anwar & Co. v. State of Tamil Nadu [1998] 108 STC 258 at page 265 as follows :

"Even though the aforesaid decisions seem to support the contentions urged on behalf of the appellants, we find that the two questions involved in these cases, namely, whether dressed hides and skins and raw hides and tanned skins are different commodities and, secondly, whether Section 14(iii) of the Central Sales Tax Act regards them as a single commodity, appear to have been decided differently by a Constitution Bench of this Court in Hajee Abdul Shukoor and Company v. State of Madras [1964] 15 STC 719 ; [1964] 8 SCR 217. The appellant therein had contended that tanned and untanned hides and skins did not form different commodities and, therefore, tax could not be levied on the sales of hides and skins in the raw condition when no tax is levied on the sale of hides and skins in the tanned condition. On the other hand, the State had contended that they were two different commodities and constituted two separate commodities for the purpose of taxation. The court at page 727 of STC (page 227 of SCR) observed that 'hides and skins in the untanned condition are undoubtedly different as articles of merchandise than tanned hides and skins'. It then dealt with the contention that tanning was only a preservative process which makes no change in the nature of the article itself, a submission which has also been raised in the present case on behalf of the appellant. The court, however, did not accept this submission and in this connection it approved the observations in Government of Andhra v. Nagendrappa [1956] 7 STC 568 (AP) and State of Andhra Pradesh v. Mohammad Azam Abdul Bari and Co. [1958] 9 STC 231 (AP) to the effect that tanning of raw hides and skins was a manufacturing process as a result of which the product that emerges is different from the raw material as after tanning the hides and skins become a different commodity and then concluded at page 728 of STC (page 228 of SCR) that 'it is, therefore, not correct to say that the process of tanning brings about no change in the raw hides and skins and that therefore both types of hides and skins form one commodity'. The appellant therein had also referred to the decision in Abdul Subhan and Company v. State of Madras [1960] 11 STC 173 (Mad.) where the following observations had been made at page 728 of STC (page 228 of SCR) :

'Section 14(3) of the Central Sales Tax Act, 1956 (Act 74 of 1956), also treats hides and skins, whether dressed or raw, as a single commodity....... Since skins, tanned or untanned, constitute only one class of goods, and the sale of that class of goods can be taxed only at a single point, obviously there can be no tax on a sale of tanned goods, if tax has already been paid on an earlier transaction when those skins were untanned.'

The aforesaid conclusion in Abdul Subhan's case [1960] 11 STC 173 (Mad.) was not accepted by this Court and it was observed at page 728 of STC (page 228 of SCR) that 'no reason is given why the two kinds of hides and skins are treated as a single commodity'. Again at page 729 of STC (page 229 of SCR) the finding of the court was that 'we therefore hold that raw hides and skins and dressed hides and skins constitute different commodities of merchandise and they could therefore be treated as different goods for the purposes of the Act."

13. In regard to Sections 14 and 15 of the CST Act, the Supreme Court further observed at pages 268-269 as follows :

"When dressed hides and skins are different goods from raw hides and skins, we do not find anything in the language of Section 14 of the Central Sales Tax Act which can lead us to the conclusion that these two different commodities were to be regarded as constituting a single commodity for the purpose of taxation. Sections 14 and 15 of the Central Sales Tax Act have to be read together as they constitute a scheme relating to taxation of goods of special importance in inter-State trade or commerce. While Section 14 enumerates the items which are regarded as being goods of special importance in inter-State trade or commerce, it is Section 15 which imposes the restrictions and conditions in regard to tax on sale or purchase of declared goods within a State. Section 14, in other words, is not a taxing provision but it merely classifies different commodities under the same species under one entry. Merely because different goods or commodities are listed together in the same sub-heading or sub-item in Section 14 cannot mean that they are regarded as one and the same item. Whenever the Legislature wanted different goods placed in the same entry to be regarded as a single commodity it expressly provided for the same. By Act 103 of 1976, Sub-Sections (c) and (d) were inserted in Section 15 of the Central Sales Tax Act. With the introduction of Section 15(d) 'each of the pulses referred to in Clause (vi-a) of Section 14, whether whole or separated, and whether with or without husk, were to be treated as a single commodity for the purposes of levy of tax under that law'. If the intention of the Legislature had been that the various commodities mentioned in the same clauses in Section 14 were to be regarded as a single commodity it would have specifically provided as such. The Legislature, however, chose to single out different types of pulses only to be regarded as a single commodity. Notwithstanding the fact that the raw hides and skins had been held by this Court in Hajee Abdul Shukoor's case [1964] 15 STC 719 ; [1964] 8 SCR 217 as being distinct from dressed hides and skins the Legislature did not think it appropriate to insert a clause similar to Section 15(d) which may have had the effect of regarding raw hides and skins and dressed hides and skins as being treated as a single commodity for the purposes of levy of tax."

14. The Supreme Court categorically observed that Section 14(iii) of the CST Act dealt with two different goods by observing as follows :

"In the present case dressed hides and skins is a separate commercial commodity which emerges after raw hides and skins has been subjected to manufacturing process and, therefore, Section 14(iii) deals with two different types of goods which unlike the case of pulses referred to in Section 15(d), is not regarded by the Act as one and the same commodity."

The Supreme Court finally concluded as follows :

"Having come to the conclusion that raw hides and skins and dressed hides and skins are two types of commodities, it must flow therefrom that when the appellants purchased raw hides and skins on payment of tax they would be liable to pay sales tax in respect of dressed hides and skins and such levy will not fall foul of Section 15 as the two goods are different taxable commodities."

15. Thus, it was categorically held by the Supreme Court in K.A.K. Anwar's case [1998] 108 STC 258 that raw hides and skins and tanned hides and skins are different commercial commodities and therefore levy of tax on the purchase turnover of raw hides and skins under the Tamil Nadu General Sales Tax Act, 1959 is not an impediment for levy of tax on the sale of dressed hides and skins sold on inter-State sales. It is true that in the decision reported in [1998] 108 STC 258 (SC) (K.A.K. Anwar & Co. v. State of Tamil Nadu) the question of exemption under Section 5(3) of the Act was not considered. However, having regard to the principles stated therein, that raw hides and skins and tanned hides and skins are different commercial commodities, naturally the eligibility of the exemption under Section 5(3) of the Act has to be decided having regard to the proposition made by the Supreme Court in [1986] 63 STC 239 (Sterling Foods v. State of Karnataka) and [1996] 100 STC 571 (Vijayalaxmi Cashew Company v. Deputy Commercial Tax Officer). It has been categorically held that if the goods purchased and the goods exported are different commercial commodities, then naturally an assessee is not entitled to exemption in respect of the purchases under Section 5(3) of the CST Act. Thus, in the present case also, we find that the assessee exported dressed hides and skins in pursuance of foreign export order for dressed hides and skins. However, the assessee purchased raw hides and skins which is totally a different commercial commodity as held in the decision reported in K.A.K. Anwar's case [1998] 108 STC 258 (SC), and therefore the purchase of raw hides and skins cannot be considered as "those goods" as contemplated under Section 5(3) of the Act. Thus, we find the conclusion reached by the Appellate Tribunal in disallowing the exemption under Section 5(3) of the CST Act is quite in order.

16. Briefly we shall refer to the decisions relied on by the learned Senior Counsel for the petitioner to show how these decisions are not relevant in the light of the decision of the Supreme Court in K.A.K. Anwar's case [1998] 108 STC 258. In the case of State of Andhra Pradesh v. Mohd. Basheer & Company reported in [1989] 72 STC 185 (AP) after reviewing various decisions, the following principles were stated :

"(1) Merely because particular goods are treated as different commodities for the purposes of the State Act, it does not necessarily follow that for the purposes of the Central Act also they should be treated as different goods. (2) In determining whether the goods purchased and the goods exported are the same goods or not for the purpose of Section 5(3) of the Central Sales Tax Act, the context and setting of the relevant description of the commodity in Section 14 is relevant. For example, because Section 14(ii) of the Central Sales Tax Act declares 'cotton, ginned or unginned', as goods of special importance in the course of inter-State trade or commerce, they are treated as same goods. (3) The question whether the goods purchased and the goods exported are the same or not, has to be decided applying the test of commercial parlance."

17. Applying the above principles, the Andhra Pradesh High Court held that "hides and skins whether in raw or dressed state" occurring under Section 14(iii) of the CST Act should be treated as same goods for the purpose of Section 5(3) of the CST Act. In other words, hides and skins, whether they are in the raw state or in the dressed state, must be understood as same goods having regard to the text and wording of the entry in Section 14(iii) of the CST Act. Once raw and tanned hides and skins are the same goods for the purpose of CST Act, they would also be same goods for the purpose of the Andhra Pradesh General Sales Tax Act. The relevant entry considered by the Andhra Pradesh High Court was as follows :

S.No. (1)

Description of goods (2)

Point of levy (3)

Rate of tax (4)

9

Hides and skins. (3009) (a) Untanned hides and skins

When purchased by a tanner in the State at the point of purchase by the tanner and in all other cases at the point of purchase by the last dealer who buys them in the State.

4 paise in the rupee.

(b) Tanned hides and skins (which were not subjected to tax as untanned hides and skins).

When purchased by a manufacturer in the State at the point of purchase by the manufacturer and in all other cases at the point of purchase by the last dealer who buys them in the State.

4 paise in the rupee.

18. Considering the language of entry 9 of the Third Schedule to the Andhra Pradesh General Sales Tax Act, the High Court observed that though raw hides and skins and tanned hides and skins are mentioned under two different sub-heads still they are not taxable simultaneously but only alternatively. After referring to the Supreme Court decision in Hajee Abdul Shukoor and Co. [1964] 15 STC 719, the Andhra Pradesh High Court observed as follows :

"The court examined the said question from the point of view of the particular enactment, viz., whether the enactment treated the said goods as one or as different goods and on an examination of the relevant provisions, it came to the conclusion that the Madras Act deals with untanned hides and skins as different goods from tanned hides and skins and on that basis, held that Sub-Rule (1) did not become invalid or unenforceable when Sub-Rule (2) of Rule 16 was struck down by the Supreme Court. We are, therefore, of the opinion that the decision of the Supreme Court in [1964] 15 STC 719 (Hajee Abdul Shukoor and Co. v. State of Madras) does not conclude the issue arising before us. The said decision must be understood in the context of the provisions of the Act considered therein and having regard to the contentions urged before and considered by the court."

19. Finally, the Andhra Pradesh High Court observed that the decision reported in [1964] 15 STC 719 (SC) (A. Hajee Abdul Shukoor and Co. v, State of Madras) is distinguishable inasmuch as it dealt with a situation bearing no analogy the question at issue, namely, exemption under Section 5(3) of the CST Act. Finally, the Andhra Pradesh High Court held that the dealers are not liable to pay sales tax on the turnover relating to purchase of raw/untanned hides and skins inasmuch as they purchased the said goods after and for the purposes of complying with the agreement/order for export of the said goods within the meaning of the CST Act read with Section 38 of the Andhra Pradesh General Sales Tax Act. Thus, the Andhra Pradesh High Court on the basis of conclusion that raw hides and skins and tanned hides and skins are the same goods for the purpose of both the CST Act and State Sales Tax Act has held that the assessee is eligible for exemption under Section 5(3) of the CST Act in respect of raw hides and skins though tanned and dressed skins have been exported in pursuance of the purchase order from the foreign buyers. Only this decision when taken up by the State to the Supreme Court in Special Leave Petition was dismissed as reported in [1991] 80 STC FRSC, page 4.

20. The Madras High Court in the case of T. Azeezur Rahman and Company v. State of Tamil Nadu reported in [1991] 82 STC 355, stated that the issue considered in that case was concluded by the decision of the apex Court in Mahi Traders case [1989] 73 STC 228, and the dismissal of the S.L.P. filed by the State against the division Bench judgment of the Andhra Pradesh High Court in Mohd. Basheer & Co. case [1989] 72 STC

185. The High Court in particular laid emphasis on the following observations of the Supreme Court in State of Tamil Nadu v. Mahi Traders reported in [1989] 73 STC 228 :

"Leather from the stage of raw skins to the stage of dressed hides and skins may undergo various stages of changes. Under the classification for the purposes of Section 14 of the Central Sales Tax Act, the various stages are irrelevant. For the purposes of the Tamil Nadu General Sales Tax Act, 1959, only two stages that are relevant are the skins at the raw stage and the skins in the form of dressed hides and skins (or tanned hides and skins). The appellant purchases semi-finished leather and undertakes further process of finishing with a view to colour the hides and skins for certain uses of skins. He says that he purchased the same tanned hides and skins and sold the tanned hides and skins. According to him the products purchased and sold are not different even under the classification by way of the dichotomy between raw and dressed hides and skins under the Tamil Nadu General Sales Tax Act. Under the Central Sales Tax Act, the appellant is in a much better position, because all the hides and skins are brought together in one entry. Whether raw or dressed, the product falls under the same entry.

We are of opinion that this represents the correct view of the scope of the entry in question."

The High Court further observed as follows :

".......in our view, for purposes of entitling an assessee to the benefits of Section 5(3) in respect of a commodity subject to the limitations contained in Section 14(iii) read with Section 15 of the Central Sales Tax Act, the so-called lack of commercial identity has no relevance and what is really relevant is whether the sale or purchase in question is the 'penultimate sale or purchase' that satisfies the two conditions specified in Section 5(3), namely, (a) that such penultimate sale must take place (i.e., become complete) after the agreement or order under which the goods are to be exported ; and (b) it must be for the purpose of complying with such agreement or order and it is only then that such penultimate sale or purchase is deemed to be in the course of export. We are also of the view that the words 'those goods' found in Section 5(3) of the Act do not mean and refer to the goods sold or purchased preceding the sale or purchase occasioning the export, in the same condition as it was when so purchased or sold immediately before export so long as the identity of the goods is not altered bringing into existence a new commercial product of different character and property."

The High Court further observed as follows :

"In our view, the description of the entry as contained in Section 14(iii) of the Central Act has reference and relates to 'hides and skins' and the specification of the goods as 'hides and skins' constitutes the genus and the further description following the same, i.e., 'whether in a raw or dressed state' not only is inclusive in nature but is meant to be comprehensive enough to include all its species or products emerging from hides and skins until the process of dressing or finishing is done. The entry as it is found in Section 14(iii), in a sense, indicates the legislative intent and in our view constitutes legislative recognition of the fact of the position that simply because manufacturing process of preservative nature is undergone by raw hides a different goods do not necessarily emerge. Such a construction will also be an inevitable consequence of the purpose and object of Section 14(iii) and Section 15 of the Central Act and consequently for purposes of determining a claim vis-a-vis Section 5(3) of the Central Act, the fact that they are commercially treated as distinct commodities or that entry 7 of the Second Schedule to the Tamil Nadu General Sales Tax Act, 1959, deals with them as two different and distinct commodities becomes wholly irrelevant. Thus, raw hides and skins and dressed hides and skins are merely the nomenclature used to identify and indicate the different condition or stages of processing of the one and the same commodity, namely, 'hides and skins', If even during or at either of these stages also the commodity continues to he 'hides and skins' only, the criteria of 'those goods' as found in Section 5(3) of the Central Act must be held to have been satisfied."

21. Thus, after holding the raw hides and skins and tanned hides and skins are a single commodity as contemplated under Section 14(iii) of the CST Act, the High Court held that exemption has to be granted even if the goods sold are dressed skins and the goods purchased are raw hides and skins. However, the matter was remanded to the assessing authority to consider whether the other norms have been fulfilled for granting exemption under Section 5(3) of the Act in the light of the declaration of law, namely, raw hides and skins and tanned hides and skins are single commodity. Only this view of the Madras High Court in T. Azeezur Rahman and Company v. State of Tamil Nadu [1991] 82 STC 355 was followed in M.S. Mohamed Siddique and Company v. State of Tamil Nadu reported in [1993] 91 STC 336 (Mad.) while holding that for the purpose of exemption, Under Sub-section (3) of Section 5 of the CST Act, both raw hides and skins and tanned hides and skins cannot be treated as different commercial commodities. In that case, regarding assessability of first sales of dressed hides and skins under Section 7(b) of the Act, the Tribunal had remanded the matter to the Appellate Assistant Commissioner. Further, though the Madras High Court held that raw hides and skins and tanned hides and skins are one and the same commodity, the matter was remanded so as to find out whether the other norms and conditions fixed to consider the claim of the assessee under Section 5(3) of the CST Act have been satisfied. Therefore, when this matter was taken up before the Supreme Court while reserving the orders in the batch of cases relating to K.A.K. Anwar & Co. [1998] 108 STC 258 the matter relating to M.S. Mohamed Siddique and Co. [1993] 91 STC 336 (Mad.), in C.A. No. 2046 of 1996 was remanded back to the Appellate Assistant Commissioner for fresh disposal with the following observations : "We, therefore do not pass any orders. Let the Appellate Assistant Commissioner dispose of the case in accordance with law". This direction does not mean that the Supreme Court has approved the decision of the Madras High Court in M.S. Mohamed Siddique and Company v. State of Tamil Nadu [1993] 91 STC 336. But the direction means that the Appellate Assistant Commissioner has to dispose of the case in accordance with the law as declared by the Supreme Court on the subject, thereby meaning the law declared by the Supreme Court in the case of K.A.K, Anwar's case which was subsequently reported in [1998] 108 STC 258. Therefore we find no substance in the plea of the petitioner that the remand order of the Supreme Court in C.A. No. 2046 of 1996 indicated that the decision in the case of K.A.K. Anwar & Co. [1998] 108 STC 258 (SC), would not apply to exemption under Section 5(3) of the CST Act.

22. As regards Supreme Court's decision in the case of Mahi Traders reported in [1989] 73 STC 228, it was categorically observed by the Supreme Court in [1998] 108 STC 258 (K.A.K. Anwar & Co. v. State of Tamil Nadu) that the decision of the Constitution Bench in A. Hajee Abdul Shukoor reported in [1964] 15 STC 719 (SC) was not brought to the notice of the learned Supreme Court Judges while they made observations that raw hides and skins and tanned hides and skins are a single commodity in the course of deciding the issue whether splits and coloured leather continued to be hides and skins entitled for special treatment under CST Act or they fall outside the declared goods.

23. As already dealt elaborately while discussing the Supreme Court decision in K.A.K. Anwar's case [1998] 108 STC 258, it is well-settled law now that raw hides and skins and tanned hides and skins are commercially different commodities. Further, Section 14(iii) of the CST Act has not regarded raw hides and skins and tanned hides and skins as a single commodity as decided by various High Courts though on such decisions the learned Senior Counsel for the petitioner relied on. Though in the S.L.Ps. reported in [1998] 108 STC FRSC, page 5 and [1998] 111 STC FRSC, page 4, the claim of exemption allowed on raw hides and skins under Section 5(3) of the Act was upheld by the Supreme Court by dismissing the S.L.Ps., it cannot be said that the Supreme Court overruled the decision reported in [1998] 108 STC 258 (K.A.K. Anwar & Co. v. State of Tamil Nadu) wherein it was held that raw hides and skins and tanned hides and skins are different commercial commodities. In fact, it is a case of the attention of the learned Judges not being drawn to the observations of the Supreme Court in K.A.K. Anwar's case [1998] 108 STC 258 and that of the Constitution Bench in A. Hajee Abdul Shukoor's case [1964] 15 STC 719. Similarly, the decision of the Karnataka High Court in [1992] 84 STC 133 (Farida Prime Tannery v. State of Karnataka), wherein the raw hides and skins and tanned hides and skins have been held as the same goods for the purpose of exemption under Section 5(3) of the CST Act also is not relevant in the light of the decision of the Supreme Court in K.A.K. Anwar & Co. v. State of Tamil Nadu [1998] 108 STC 258. As regards, the circular dated July 18, 1994 of the Commercial Tax Department relied on by the petitioner, it is relevant to refer to the following passage in the headnote in the decision of the Supreme Court reported in [1993] 90 STC 47 in the case of Bengal Iron Corporation v. Commercial Tax Officer which reads as follows :

"Clarifications/Circulars issued by the Central Government and/or the State Government represent merely their understanding of the statutory provisions. They are not binding upon the courts. It is true that those clarifications and circulars were communicated to the concerned dealers but even so nothing prevents the State from recovering the tax, if in truth such tax was leviable according to law. There can be no estoppel against the statute. The understanding of the Government, whether in favour or against the assessee, is nothing more than its understanding and opinion. It is doubtful whether such clarifications and circulars bind the quasi-judicial functioning of the authorities under the Act. While acting in a quasi-judicial capacity, they are bound by law and not by any administrative instructions, opinions, clarifications or circulars."

24. Thus, we have no hesitation in holding that raw hides and skins purchased by the assessee were not "those goods" which were exported so as to allow exemption under Section 5(3) of the CST Act, in the light of the categorical decision of the Supreme Court in [1998] 108 STC 258 (K.A.K. Anwar's case) that raw hides and skins are different commercial commodities even under Section 14(iii) of the CST Act read with Section 15 of the CST Act. We have no hesitation in holding that the disallowance of exemption under Section 5(3) of the CST Act by the Appellate Tribunal is quite in order. As regards the suppression with reference to excess stock found during inspection and last purchase of raw skins for a sum of Rs. 81,920, it is seen that the Appellate Tribunal has given valid and cogent reasons by stating that the records did not disclose that these goods related to job-works or goods received for reference or accounting of the transactions subsequently. Further, considering the stock variation and misclassification in the accounts, the Appellate Tribunal added 50 per cent towards probable suppression. Thus, the suppression of Rs. 4,61,730 refixed by the Appellate Tribunal is on appreciation of facts only and we find no case to interfere. Regarding penalty levied under Section 12(3)(b) of the Act, we find that the assessment was made to the best judgment for various suppression found in the accounts and for claiming exemption under Section 5(3) of the Act when no such exemption is allowable. In such circumstances as rightly held by the Appellate Tribunal, the penalty is a corollary to the assessment made under Section 12(2) of the Act and the quantum of penalty is in the slab with reference to difference in tax determined and tax paid by the dealer. Thus, the quantum of penalty fixed by the Appellate Tribunal having regard to the re-determination of the taxable turnover and tax payable by the dealer and tax paid by the dealer is in accordance with the law and no interference is called for.

25. In fine, the Appellate Tribunal has neither decided erroneously nor failed to decide any question of law involved in this case and in such circumstances, we find that there is no case to interfere and accordingly the tax revision case is dismissed at the admission stage itself.

And this Tribunal doth further order that order on being produced be punctually observed and carried into execution by all concerned.

Issued under my hand and the seal of this Tribunal on the 28th day March, 2000.