1960 (11) TMI 100 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Applicability of sales tax on rubber sold at Fort Cochin under the Madras General Sales Tax Act.
2. Definition and scope of "turnover" under Section 2(i) of the Madras General Sales Tax Act.
3. Interpretation of "agricultural produce" and its exclusion from sales tax.
4. Constitutionality of the tax imposition with respect to Article 304(a) of the Indian Constitution.
5. Determination of whether rubber is considered agricultural produce.

Issue-wise Detailed Analysis:

1. Applicability of Sales Tax on Rubber Sold at Fort Cochin:
The Deputy Commissioner of Agricultural Income Tax and Sales Tax filed revision petitions to challenge the Appellate Tribunal's orders, which sustained the dealers' objections to being assessed to sales tax for the year 1953-54 on rubber sold at Fort Cochin. The Tribunal upheld the objection on the grounds that the rubber was agricultural produce and thus excluded from the definition of "turnover" under the Madras General Sales Tax Act.

2. Definition and Scope of "Turnover" under Section 2(i) of the Act:
Section 2(i) of the Madras General Sales Tax Act defines "turnover" as the aggregate amount for which goods are sold by a dealer but excludes the proceeds from the sale of agricultural or horticultural produce grown by the seller. The Tribunal held that the sales of rubber by the estates, which grew the rubber, were excluded from "turnover" and thus not liable for sales tax under Section 3(1).

3. Interpretation of "Agricultural Produce" and its Exclusion from Sales Tax:
The Tribunal concluded that rubber, being an agricultural produce, was excluded from the definition of "turnover." The petitioners argued that rubber, having undergone a manufacturing process, should not be considered agricultural produce. However, the court referred to the Madras Plantations Agricultural Income-tax Act, 1955, which includes rubber as agricultural income, thereby reinforcing that rubber is agricultural produce.

4. Constitutionality of the Tax Imposition with Respect to Article 304(a):
The petitioners contended that the Act's territorial limits implied that "land" in Section 2(i) referred only to land within the Madras State. The court, however, emphasized the constitutional provision under Article 304(a), which prohibits discrimination between goods imported from other states and those produced locally. The court held that interpreting "land" to mean only land within the Madras State would result in unconstitutional discrimination against goods from other states, violating Article 304(a).

5. Determination of Whether Rubber is Considered Agricultural Produce:
The court examined whether the processes applied to rubber (such as hardening latex with sulphuric acid and drying with smoke) altered its character from agricultural produce to a manufactured article. The court concluded that these processes were minimal and intended to make the latex marketable, thereby maintaining its status as agricultural produce. This view was supported by previous case law and the concession by the Government Pleader in related cases.

Conclusion:
The court dismissed all four revision petitions, affirming that rubber is agricultural produce and thus excluded from the definition of "turnover" under the Madras General Sales Tax Act. Consequently, the sales of rubber at Fort Cochin were not subject to sales tax, and the Tribunal's orders were upheld. The petitions were dismissed without costs.