Full Judgment Text
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CASE NO.:
Appeal (civil) 4408 of 2001
PETITIONER:
M/s. Falcon Tyres Limited
RESPONDENT:
State of Karnataka and Others
DATE OF JUDGMENT: 20/07/2006
BENCH:
ASHOK BHAN & MARKANDEY KATJU
JUDGMENT:
J U D G M E N T
BHAN, J.
The appellant is a public limited company and a
dealer registered under the Karnataka Tax on Entry
of Goods Act, 1979 (hereinafter referred to as "the
Entry Tax Act"). It is engaged in the manufacture
of tyres of two wheeler motor vehicles. Appellant
is located in Metagalli in Mysore and Metagalli is
a local area within the definition of ’Local area’
in Section 2 (A) (5) of the Entry Tax Act. The
main input in the manufacture of tyres is rubber
which the appellant procures from the neighbouring
State of Kerala.
Sub-section (1) of section 3 of Entry Tax Act
prescribes that there shall be levied and collected
tax on entry of any goods specified in the First
Schedule into a local area for consumption, use or
sale therein, at such rates not exceeding 5% of the
value of the goods, as may be specified
retrospectively or prospectively, by the State
Government by issuance of Notifications. Section
2 of the Entry Tax Act defines the various
expressions used in the Act. The expression
’Agriculture produce or horticulture produce’ is
defined in section 2 (A) (1). In substance, it
includes all agriculture or horticulture produce
excluding tea, coffee, rubber, cashew, cardamom,
pepper and cotton and such agricultural or
horticultural produce which has been subjected to
any physical, chemical or other process for being
made fit for consumption except merely cleaning,
grading, sorting or drying.
Sub-section (6) of Section 3 provides for total
exemption from entry tax on the goods specified in
the Second Schedule to the Entry Tax Act. The
exemption Schedule, i.e., Second Schedule in Sl.
No. 2, specifies agricultural produce including
tea, coffee and cotton (whether ginned or unginned)
as exempt from the Entry Tax.
Appellant claimed exemption from entry tax
before the assessing authority on the value of
rubber brought into the local area for the
assessment year 1996-97 in terms of the definition
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of agricultural produce or horticultural produce
read with Sl. No. 2 of the Second Schedule to the
Entry Tax Act. The assessing authority held that
rubber is not one of the agricultural produce
included in Sl. No. 2 in the Second Schedule and
consequently, disallowed the claim. Appellant
contested the assessment order before the first
appellate authority, i.e., Joint Commissioner of
Commercial Taxes (Appeals) Bangalore City Division.
The first appellate authority held that rubber
purchased by the appellant from outside the State
of Karnataka was subjected to treatment by
sulphuric acide and smoke to make it into sheets
and therefore such rubber sheets do not fit the
definition of agricultural produce under Section
2(A)(1) of the Entry Tax Act. The first
appellate authority held that Sl. No. 2 of Second
Schedule to the Act also clearly excluded rubber
from the purview of agricultural produce.
Consequently, the appeal was dismissed.
The appellant being aggrieved carried the
matter in second appeal before the Karnataka
Appellate Tribunal (for short "the Tribunal"). The
Tribunal applied the judgment of this Court in the
case of M/s Karnataka Forest Development
Corporation Ltd., Vs. Cantreads Pvt. Ltd. , 1994
(4) SCC 455, and allowing the appeal held, that
latex is a modern name for caoutchouc. It is
nothing but natural rubber. Caoutchouc or latex
means not only the milky substance obtained from
the trees but it included all milk substance
processed, till it is made marketable. 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 continues to be caoutchouc or latex
when it is treated by sulphuric acide and continued
to be so even after it is dried with smoke to
obtain the shape of sheets.
State of Karnataka being aggrieved by the
judgment of the Tribunal filed statutory civil
revision petition in the High Court of Karnataka.
By the impugned judgment the High Court has allowed
the civil revision petition and quashed and set
aside the judgment of the Tribunal. The High Court
conceded that raw rubber is an agricultural produce
but held that in view of the definition of
’agricultural produce or horticultural produce’ in
section 2(A)(1) of the Entry Tax Act, which clearly
excludes rubber, rubber brought in the local area
by the appellant could not be considered as
agricultural produce for the purposes of the Entry
Tax Act. That Sl. No. 2 of the Second Schedule
specified agricultural produce, does not exempt
rubber from payment of entry tax and therefore when
the definition of agriculture produce in Section
2(A)(1) and enumeration of agriculture produce in
Sl. No. 2 of the Second Schedule are taken together
and construed, there could be no ambiguity that raw
rubber is not an agriculture produce for the
purposes of the Act. In repelling this contention,
the High Court held that it will have to be guided
by the provisions of the definition under Section
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2(A)(1) which clearly excludes rubber and not by
the enumeration in Sl. No. 2 of the Second
Schedule.
Aggrieved against the aforesaid order the
present appeal has been filed. Shri Dhruv Mehta,
learned counsel appearing for the appellant
strenuously contended that the High Court erred in
construing the definition of ’agricultural produce
or horticultural produce’ in Section 2 (A) (1) of
the Entry Tax Act as excluding rubber, whereas the
definition properly construed makes it clear that
what is excluded is only such tea, coffee, rubber
etc. which are subjected to any physical, chemical
or other process for making them fit for
consumption. It is submitted that the semicolon
after the word cotton does not mean that the first
part of the Section is disjunctive from ’such
produce’ as has been subjected to any physical,
chemical or other process. It is further submitted
that punctuation is not a safe tool in construction
of statute and if the first part of the Section is
read as disjunctive from the other part it
conflicts with Sl. No. 2 in the Second Schedule.
It is also submitted that definition Section which
is the interpretation clause to the statute begins
with the expression "unless the context otherwise
requires". That reading of Section 3 (6) read with
Sl. No. 2 in the Second Schedule before and after
the amendment in 1992 would lead to the conclusion
that rubber which is an agricultural produce is
exempt from Entry Tax. Assuming for the sake of
argument that agricultural produce excludes rubber
which is not subjected to any chemical process,
does not necessarily mean that it is not an
agricultural produce if the context requires
otherwise.
As against this Shri Sanjay Hegde, counsel
appearing for the State of Karnataka submitted
that the clear cut decision as emerges in Section
2(A)(1) of the Entry Tax Act unequivocally excludes
rubber from all other items that come under the
head of ’agriculture produce’ along with a few of
the others that are enumerated therein. It is his
submission that for all intent and purposes as far
as the present Act is concerned, it is this
definition that will govern the expression
’agriculture produce’. He, therefore, contends
that while reading Entry No. 2 of the Second
Schedule to the Entry Tax Act there is absolutely
no scope to include in the entry ’rubber’ which has
been specifically excluded in the defining section.
That the Tribunal appears to have been influenced
by some of the earlier judicial decisions which
relate to the definition of ’agriculture produce’
under the Karnataka Sales Tax Act. It was pointed
out by him that as far as the present Act is
concerned, the Legislature has deliberately
included and excluded certain items and therefore
while interpreting the provisions of the present
Act, the legislative intention will have to be
given effect to inconsonance with the definition as
contained in the statute.
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Definition of the expression ’agricultural
produce or horticultural produce’ in Section
2(A)(1), sub-section (6) of Section 3 providing for
exemption in respect of goods specified in the
Second Schedule and Sl. No. 2 of Second Schedule
specifying "Agricultural produce including tea,
coffee and cotton (whether ginned or unginned)" as
relevant are extracted below:
Section 2(A)(1):
"’agricultural produce or
horticultural produce’ shall not
include tea, coffee, rubber,
cashew, cardamom, pepper and
cotton; and such produce as has
been subjected to any physical,
chemical or other process for
being made fit for consumption,
save mere cleaning, grading,
sorting or drying."
Sub-section (6) of Section 3:
"6). No tax shall be levied
under this Act on any goods
specified in the Second Schedule
on its entry into a local area for
consumption, use or sale therein."
Sl. No. 2 of Second Schedule:
"2. agriculture produce including
tea, coffee and cotton (whether
ginned or un-ginned).
We would have readily accepted the submissions
advanced by the learned counsel for the appellant
without any difficulty under normal circumstances
but for the fact that in the present Act as
indicated by us earlier, term ’agricultural
produce’ as defined by the legislature specifically
excludes rubber from agricultural produce. Under
the law governing the principles of interpretation
of a statute, this Court is necessarily restricted
while construing the expression ’agricultural
produce’ in relation to the present Act by the
definition that is incorporated in the Act itself.
Under these circumstances it is not possible to
accept the submission of the learned counsel for
the appellant. The expression ’agricultural
produce’ as it appears in the Second Schedule has
to given its normal and ordinary interpretation.
Sl. No. 2 of the Second Schedule which reads
"Agricultural produce including tea, coffee and
cotton is an inclusive definition and not an
exhaustive definition. What is excluded from the
definition of the ’agricultural produce’ in the Act
cannot be held to be an agricultural produce unless
the same find mentions in the Second Schedule.
Since the legislature provided tea, coffee and
cotton in Sl. No. 2 of the Second Schedule and not
the rubber, rubber cannot be taken to be
agricultural produce within the meaning of
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’agricultural produce’ as defined under the Act.
We do not find any substance in the submission
of the learned counsel for the appellant that the
semicolon after the word cotton does not mean that
the first part of the Section is disjunctive from
’such produce’ as has been subjected to any
physical, chemical or other process. Section 2
(A) (1) is in two parts, it excludes two types of
food from agricultural produce. According to us,
the definition of the agriculture and horticulture
produce does not say as to what would be included
in the agriculture or horticulture produce, in
substance it includes all agriculture or
horticulture produce but excludes, (1) tea, coffee,
rubber, cashew, cardamom, pepper and cotton from
the definition of the agriculture or horticulture
produce though all these products as per dictionary
meaning or in common parlance would be understood
as agricultural produce and (2) "such produce as
has been subject to any physical, chemical or other
process for being made fit for consumption",
meaning thereby that the agricultural produce other
than what has been excluded, which has been
subjected to any physical, chemical or other
process for making it fit for consumption would
also be excluded from the definition of the
agriculture or horticulture produce except where
such agricultural produce is merely cleaned,
graded, sorted or dried. For example, if the
potatoes are cleaned, graded, sorted or dried, they
will remain agricultural produce but in case raw
potato is subjected to a process and converted
into chips for human consumption it would cease to
be agricultural produce for the purposes of the
Entry Tax Act. The words "such produce" in the
second part does not refer to the produce which has
already been excluded from the agricultural or
horticulture produce but refers to such other
agricultural produce which has been subjected to
any physical, chemical or other process for being
made fit for human consumption.
We do not agree with the submission of the
learned counsel for the appellant that what is
excluded is only such tea, coffee, rubber etc.,
which are subjected to any physical, chemical or
other process for making them fit for consumption.
In our opinion, the definition of the agriculture
and horticulture produce does not say as to what
would be included in the agriculture or
horticulture produce, in substance it includes all
agriculture or horticulture produce but excludes
tea, coffee, rubber, cashew, cardamom, pepper and
cotton from the definition of the agriculture or
horticulture produce though all these products as
per dictionary meaning or in common parlance would
be understood as agricultural produce.
From the reading of the definition under
Section 2 (A) (1), it unequivocally emerges that
rubber and few other items enumerated therein are
excluded from being agricultural produce or
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horticulture produce. For all intent and purposes
as far as the present Act is concerned, it is the
definition given in the Act which will govern the
expression ’agricultural produce’. While reading
Entry 2 in the Second Schedule to the Act there is
no scope to include rubber from being exempt from
payment of entry tax. Entry 2 of Second Schedule
creates exceptions regarding few of the excluded
items from payment of Entry Tax but not all
excluded items. The items for which an exception
has been created in Entry 2 of the Second Schedule
would only be exempt from payment of entry tax and
not all the items, which have been excluded from
being agricultural produce in the definition
clause. While interpreting the provisions of
present Act the legislative intention will have to
be given effect to inconsonance with the definition
as contained in the statute.
In the definition clause of Section 2 (A) (1)
rubber is excluded form the agricultural produce,
sub-section (6) of Section 3 provides for
exemption in respect of goods specified in the
Second Schedule. At Sl. No. 2 of the Second
Schedule, only tea, coffee and cotton (whether
ginned or un-ginned) have been given exemption from
payment of Entry Tax and not other items such as
rubber, cashew, cardamom and pepper and such other
agricultural produce which has been subjected to
any process for making it fit for human
consumption. Intention of the legislature is that
though tea, coffee and cotton have been excluded in
the definition clause from the agricultural produce
but for the purposes of the Entry Tax Act tea,
coffee and cotton are exempted from payment of
Entry Tax. This is an exception created by the
legislature. 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.
Learned counsel for the appellant relied upon
Karnataka Forest Development Corporation Ltd. Vs.
Cantreads Private Limited and Others, 1994 (4) SCC
455, to contend that rubber is an agricultural
produce. This was a case under the Karnataka
Forest Act, 1963 for the purposes of levy of the
Forest Development Tax. 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. Similarly, he cited two other judgments
which are not germane to the point and need not
even be noticed.
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The Legislature has deliberately excluded
certain items from being agricultural produce and
therefore while interpreting the provisions of the
present Act, the legislative intention will have to
be given effect to in consonance with the
definition as contained in the statute.
For the reasons stated above, we do not find
any merit in this appeal and dismiss the same with
costs.
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