2006 (7) TMI 316 - SC - VAT and Sales Tax

Whether rubber is an agricultural produce? Held that - Appeal dismissed. If the Legislature intended to create exception for rubber also it could have done it but it chose not to do it. Simply because the Legislature has included tea coffee and cotton in the Second Schedule exempting it from payment of entry tax does not mean that all other agricultural produce items which have been excluded from the definition of the agricultural produce would stand included in the Second Schedule to the Act exempting them from payment of entry tax. This would be doing violation to the Act as well as acting contrary to the intent of the Legislature. The meaning assigned to the agricultural produce in the present Act is different from what was assigned to it in the Karnataka Forest Act 1963. The same is not relevant.

Summary

Issues Involved:
1. Definition and interpretation of "agricultural produce" under the Karnataka Tax on Entry of Goods Act, 1979.
2. Exemption from entry tax for rubber under the Entry Tax Act.
3. Legislative intent and statutory interpretation concerning the exemption list in the Second Schedule of the Entry Tax Act.

Detailed Analysis:

1. Definition and Interpretation of "Agricultural Produce":
The core issue revolves around the definition of "agricultural produce" as per Section 2(A)(1) of the Entry Tax Act. The appellant, a public limited company engaged in the manufacture of tyres, contended that rubber should be considered agricultural produce and thus exempt from entry tax. However, the definition explicitly excludes "tea, coffee, rubber, cashew, cardamom, pepper and cotton" from being classified as agricultural produce. The court emphasized that the term "agricultural produce" must be interpreted based on the statutory definition, which excludes rubber. The definition clause also excludes any produce subjected to physical, chemical, or other processes for making it fit for consumption, except for mere cleaning, grading, sorting, or drying.

2. Exemption from Entry Tax for Rubber:
The appellant argued for exemption from entry tax on rubber under Sl. No. 2 of the Second Schedule, which lists "agricultural produce including tea, coffee and cotton (whether ginned or unginned)" as exempt. The assessing authority, first appellate authority, and subsequently the High Court, held that rubber does not fall under this exemption. The High Court clarified that while raw rubber may be considered agricultural produce in general terms, the specific exclusion in Section 2(A)(1) of the Entry Tax Act overrides this general understanding. The court upheld that rubber is not exempt from entry tax as it is not listed in the Second Schedule.

3. Legislative Intent and Statutory Interpretation:
The court analyzed the legislative intent behind the Entry Tax Act, emphasizing that the Legislature's deliberate exclusion of rubber from the definition of agricultural produce must be respected. The court noted that while tea, coffee, and cotton are explicitly mentioned in the Second Schedule for exemption, rubber is not, indicating a clear legislative intent to exclude rubber from such exemptions. The court rejected the appellant's argument that punctuation in the statute should alter this interpretation, affirming that the statutory language and legislative intent are clear and unambiguous.

Conclusion:
The Supreme Court dismissed the appeal, affirming the High Court's decision that rubber is not exempt from entry tax under the Karnataka Tax on Entry of Goods Act, 1979. The court concluded that the statutory definition in Section 2(A)(1) and the specific exclusions therein must govern the interpretation, and legislative intent must be given effect in consonance with the statute. The court held that the inclusion of tea, coffee, and cotton in the Second Schedule does not imply that all excluded agricultural produce items are exempt from entry tax. The appeal was dismissed with costs.