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TMI Blog1998 (2) TMI 559X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment of Karnataka. Petitioner is a dealer in raw rubber, latex, etc., and sells the same in the State and in other States also. For the assessment year 1988-89, the petitioner-assessee filed its return showing the turnover before the assessing authority. The assessee contended that, as the rubber being an agricultural produce, it is exempted from sales tax, under the Karnataka Sales Tax Act, 1987 (hereinafter referred to as the Act ). Hence they are not liable to pay sales tax. It is contended that, in case their contention is not accepted the sales being inter-State sales, they are not taxable under the Karnataka Sales Tax Act. The assessing authority after considering the entire material on record, held that the rubber is not agricultu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods are bought or sold, or supplied or distributed or delivered or otherwise disposed of in any of the ways referred to in clause (t) by a dealer either directly or through another, on his own account or on account of others, whether for cash or for deferred payment or other valuable consideration. Proviso to section 2(1)(v) reads: Provided that the proceeds of the sale by a person of agricultural or horticultural produce grown within the State by himself or on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, other than the proceeds of the sale by a company relating to pepper, cardamom or rubber grown within the State by such company, shall be excluded from his turnover. Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 1994 SC 2218 considered the question: Whether rubber sheets of various grades supplied by the State of Karnataka or the Karnataka Forest Plantation Corporation to the private limited companies, were forest produce within the meaning of the Karnataka Forest Act, 1963 (hereinafter referred to as the Act ) and hence liable to payment of forest development tax under section 98-A thereof. This Court held that rubber sheets are forest produce as they remain natural rubber in spite of processing and in this connection, commercial parlance test is not to be applied. The Supreme Court reversed the said finding by considering whether the liquid rubber extract from the trees when made into sheets whether it retains the character of rubber or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turers Association. and further held in para 6 as follows (at page 565 of STC): Since the processing does not result in bringing out a new commodity but it preserves the same and renders it fit for being marketed, it does not change its character. It was caoutchouc or latex when it was obtained from the trees, it continued to be caoutchouc or latex when it was treated by sulphuric acid and continued to be so even after it is dried with smoke to obtain the shape of sheets. Thus, the Supreme Court has categorically laid down that even after the latex rubber obtained from trees were made to sheets after putting the sulphuric acid treated with smoke to make it sheet, it continues to be rubber and therefore, the rubber obtained from the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inction between raw rubber and rubber products. The latex in liquid form or sheet form is a raw rubber according to entry (ii). Thus the sheet form of rubber has also been treated as raw rubber by Legislature itself. Therefore, it cannot be said that, in common parlance, the sheets or rubber will be treated as some other thing than raw rubber. Therefore, we are not able to accept the contention of the learned Government Advocate. 8.. Learned Government Advocate secondly contended that, the proviso to section 2(1)(v) was inserted by Act No. 23 of 1983 on November 18, 1983 which exclude the agricultural produce except rubber, pepper and cardamom, etc. Once that is excluded it is no more an agricultural produce. It is to be noticed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose their elasticity with use, change markedly in physical properties with temperature, and are degraded by air and sunlight. Consequently, it is necessary to transform the crude rubbers by compounding and vulcanization procedures into products which can better fulfil a specific function. 10.. Relying on this, learned Government Advocate contended that, even mixing of chemical or acid forms part of processing and the character of the article changes. Therefore, rubber by adding acids and drying with smoke for making rubber sheets will change it from agricultural produce to non-agricultural produce. There is no dispute in the meaning of the processing given in the dictionary. But the Supreme Court considered the same and held that this ch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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