PETITIONER: KARNATAKA FOREST DEVLP. CORPN. LTD. Vs. RESPONDENT: CANTREADS PVT. LTD. DATE OF JUDGMENT15/04/1994 BENCH: SAHAI, R.M. (J) BENCH: SAHAI, R.M. (J) BHARUCHA S.P. (J) VENKATACHALA N. (J) CITATION: 1994 AIR 2218 1994 SCC (4) 455 JT 1994 (3) 357 1994 SCALE (2)594 ACT: HEADNOTE: JUDGMENT:
The Judgment of the Court was delivered by
R.M. SAHAI, J.- The short and the only question of law that
survives for consideration in these appeals directed against
the judgment and order of the High Court of Karnataka is
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.
2.Even though validity of sub-section (1) of Section 101-A,
which enabled the State Government to grant or supply forest
produce to any person on payment of seigniorage value as may
be fixed by the Chief Conservator of Forests, was
challenged, it does not appear to have been pressed in the
High Court either before the learned Single Judge or the
Division Bench nor was it pressed even in this Court to
support the order of the High Court. The dispute, thus,
centres round the question whether rubber sheets could be
regarded as ‘forest produce’. It may further not be out of
place to mention that the definition of ‘Forest Produce’ in
the Act was amended in 1989 and rubber latex was added as
one of the items in it. But the learned counsel for the
State did not rely on the amended definition as
clarificatory of what was included earlier. He based his
submission, rather on claim that the word ‘caoutchouc’ was
wide enough to include rubber sheets.
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3.The respondent, a private limited company, negotiated with
the State of Karnataka in 1979 for supply of 60 tonnes of
natural rubber of grades RMA 1 to V per month for a period
of five years. A year later State Forest Corporation was
constituted. The State, therefore, transferred the
liability of supply of the quota of rubber to the
Corporation. In the meantime the Chief Conservator of
Forest issued notification fixing seigniorage on raw smoked
rubber. The State Government informed the company, that the
supply of rubber from 9-1-1981 onwards would be at the rate
mentioned in the orders made by the Chief Conservator of
Forests under Section 101-A of the Act. The company
challenged that fixation of the seigniorage by the Chief
Conservator of Forests by a writ petition filed in the High
Court. The writ petition was allowed by the learned Single
Judge and it was held that the natural rubber, which has
been agreed to be purchased by the Company from the
Corporation or the State, being in the shape of RMA sheets,
was not forest produce. While the State filed appeal
against that order of the Single Judge, the Company filed
writ petition for refund of the amount paid by it. Since
the controversy in the appeal and the writ petition was the
same, the Division Bench decided both, the writ petition and
appeal, by a common order, agreeing with the learned Single
Judge that latex, which is the natural produce, hardened by
application of the sulphuric acid and given the shape or
form of sheets and thereafter dried with the help of smoke
and graded into grades of I to V could not be treated as
forest produce, for the process applied resulted in bringing
out a commodity which was different from latex, and
therefore, no tax could be levied on it.
4.’Caoutchouc’ is included as one of the forest produce
under subsection (7) of Section 2 of the Karnataka Forest
Act. In Chambers English Dictionary, ‘caoutchouc’ is
defined as ‘India-rubber, gum-elastic; the latex of rubber
trees’. In Random House Dictionary, ‘rubber’ is defined as
‘India rubber, natural rubber, gum-elastic caoutchouc – a
highly elastic, light cream or dark amber coloured, solid
substance polymerized by the drying and coagulation of the
latex or milky juice of rubber trees and plants’.
‘Caoutchouc’ is described in Encyclopedia Britannica as,
‘the principal constituent of natural rubber and therefore
sometimes called pure rubber. It occurs as a vegetable gum,
mixed with 1/20 to 8 times its own weight of other
substances. Caoutchouc is a white resilient solid; at 0-10
degree Celsius it is hard and opaque, but it becomes soft
and translucent above 20 degree Celsius’. In the same book
‘Rubber’ is described as, ‘an organic substance – obtained
from natural sources or synthesized artificially which has
the desirable properties of extensibility, stretchability,
and toughness. Previously known as caoutchouc, a term that
has become limited to the chemically pure form of the
substance’. In Encyclopedia of Social Sciences, Vol. XIII-
XIV it is described thus,
“Latex, which is not the sap of the tree but a
milky fluid contained in the bark, is obtained
by narrow incisions in the bark. During the
period of high prices trees were tapped once
or even twice a day. With lower
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prices it has become customary to tap less
frequently, but over a wider circumference of
the tree. The trees are ordinarily rested for
two months or more each year. After the latex
has been gathered it is brought to the
plantation warehouses and coagulated by acetic
acid or some other chemical. The resulting
rubber comes on the market as ‘crepe’ rubber
or, if it has gone through a smoking
process, as ‘smoked sheet’.”
5. ‘Caoutchouc’ is, thus natural rubber which includes
latex. The natural rubber or latex is milky fluid obtained
by incisions, in the bark of trees. It can not remain as
such for long therefore it needs processing.
6. In the Rubber Grower’s Companion 1991 it is mentioned
that the main crop for the rubber tree is latex, a milky
white dispersion of rubber in water which is harvested by
the process of tapping. The latex that flows out from the
rubber trees on tapping is channeled into a container
attached to them. The latex gets dried up on the tapping
panel (tree lace) and the collection cups (shell scrap) form
part of the crop and are collected by the tapper. The
different kinds of crops harvested from rubber plantations
are highly susceptible to bacterial action due to
contamination on keeping. Therefore, it is essential to
process them into forms that will allow safe storage and
marketing. One of the marketable items is ribbed sheet
rubber. It further discusses how the latex is converted
into ribbed sheets. Latex is coagulated in suitable
containers into thin slabs of a coagulum and sheet through a
set of smooth rollers followed by a grooved set and dried to
obtain ribbed sheet rubbers; depending upon the drying
method sheets rubbers are classified into two – ribbed
smoked sheets and the air dried sheets. It is further
mentioned that the ribbed sheets after 2 or 3 hours are put
in the smoke-house where the certain degree of temperature
is maintained. The completely dried sheets are removed to
the packing sheets where they are carefully inspected and
classified according to standards published by the Rubber
Manufacturers’ Association.
7. The High Court found that since what was sold by the
appellant was not rubber obtained from the trees but sheets
or blocks of rubber which were chemically and mechanically
processed it could not be held to be forest produce. The
High Court applied the test of commercial parlance and held
that where latex produced from the tree underwent processing
howsoever meager it was the resultant produce obtained by
addition of sulphuric acid could not be treated to be forest
produce. It was further found that since Government rubber
plantations itself treated grade rubber sheets as different
from wet latex while selling the same in auction it could
not claim that the latex after processing remained the same.
Neither reasoning appears to be well founded. The meaning
of the word ‘caoutchouc’ has been discussed. Latex is the
modem name for caoutchouc. It is nothing but natural
rubber. Caoutchouc or latex means not only milky substance
obtained from the trees but it included all milky 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 was caoutchouc or latex
when it was obtained from the trees,
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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.
8. The test of commercial parlance while considering
entries in Sales Tax Act was evolved as the tax under the
Sales Tax enactments is normally either on sale or purchase
or on manufacture or import etc. Therefore, it is the
understanding or the knowledge of the item by the common man
or persons dealing in it in the market and not in the
technical or botanical sense which was accepted by this
Court as the deciding factor. But that test cannot be
applied while considering the definition of forest produce.
9. In the result, these appeals succeed and are allowed.
The order passed by the High Court is set aside and the writ
petitions filed by the respondents shall stand dismissed.