IN THE HIGH COURT OF KERALA AT ERNAKULAM
WA.No. 878 of 2007()
1. M/S MEENACHIL RUBBER MARKETING &
... Petitioner
Vs
1. THE COMMERCIAL TAX OFFICER,
... Respondent
2. THE COMMISSIONER OF COMMERCIAL TAXES,
3. THE STATE OF KERALA REPRESENTED BY THE
For Petitioner :SRI.V.P.SUKUMAR
For Respondent :GOVERNMENT PLEADER
The Hon'ble MR. Justice C.N.RAMACHANDRAN NAIR
The Hon'ble MR. Justice K.SURENDRA MOHAN
Dated :06/03/2009
O R D E R
C.N.RAMACHANDRAN NAIR & K.SURENDRA MOHAN, JJ.
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W.A NO: 878 OF 2007
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Dated this the 6th March, 2009.
JUDGMENT
RAMACHANDRAN NAIR, J.
The appellant is a member society engaged in processing of
rubber latex to centrifuged latex and selling the same.
Centrifuging is a process by which substantial portion of water is
removed from field latex to make it thick cream of rubber and
preservatives are added to it. Centrifuged latex is nothing but a
raw material used for making rubber gloves, automobile tubes
clincial examination gloves etc. The original entries in the Sales
Tax Act providing for sales tax on various forms of rubber are the
following:-
“38. Rubber excluding At the point of last purchaser in
synthetic rubber the State by a dealer who is liable
to tax under Section 5.39. Rubber products At the point of first sale in the other than those state by a dealer who is liable to specifically tax under Section 5. mentioned in this Schedule.Entry 38 was later substituted covering rubber in all forms under
one single entry all of which were made taxable at the point of last
purchase in the State. These are:
W.A.878/2007 2
“Raw rubber, latex, dry ribbed sheet of all RMA
grades, tree lace, earth scrap, ammoniated latex,
preserved latex, latex concentrate, centrifugal latex,
dry crepe rubber, dry block rubber, crumb rubber,
skimmed rubber and all other qualities and grades of
latex.”
The assessments of the appellant for the assessment years 1976-
77 to 1986-87 were completed by granting exemption on the field
latex purchased and also on the sale of centrifuged latex made by
them treating both as rubber falling under entry 38 of the first
schedule to the KGST Act. Centrifuged latex is sold to industrial
units for manufacture of rubber products. Since the department
treated centrifuged latex also as rubber taxable at last purchase
the purchasers from the appellant were liable to pay tax. In order
to ensure assessment and collection of tax from the purchasers the
sellers were required to produce form No:25 prescribed under Rule
32(14) of the KGST Rules obtained from the purchasers.
Appellants produced form No:25 on the sale of centrifuged latex
and based on the same they were granted exemption. Even though
the original assessment completed was modified by the assessing
officer under Section 19 for other purposes, still exemption
originally granted was retained. Further though original
assessments were revised once after remand in appeal, exemption
W.A.878/2007 3
granted in the original assessments were retained. This Court in
the decision reported in Padinjarekkara Agencies Ltd. v. Asst.
Commissioner {1996(2) KLT 641} held that producers of
centrifuged latex are entitled to purchase drums by availing
concessional rate under Section 5(3) of the KGST Act as centrifuged
latex is different from field latex. Based on this decision the Deputy
Commissioner set aside the assessments of the petitioners for all
the years vide Ext. P26 and remanded the case for fresh
assessment. Even though petitioner challenged the orders of the
Deputy Commissioner before the Tribunal the Tribunal referred to
Circular 16/98 issued by the Board of Revenue and remanded the
case for re-assessment based on circular. In the revision petition
filed by the appellant before this Court and in the review filed
against the judgment in the said revision case this Court did not
interfere with the orders of the Tribunal. We are told that pursuant
to the Tribunal’s order confirmed by this Court, assessments were
again revised raising demand of tax on the appellant on the
purchase turnover of field latex and the revised assessments are
now pending in second appeal before the Tribunal. In between
writ petition was filed by the appellant challenging Circular No:
W.A.878/2007 4
16/98. Besides challenging the circular the appellants have
challenged the notices for revision of assessments which have
ceased to exist now as revised assessments are already completed.
The learned Single Judge rejected the writ petition on the ground
that once Tribunal’s orders are confirmed by this Court relegating
the appellants to face assessment, there is no justification to
challenge the circular in writ proceedings. It is against this
judgment the appellants have filed the writ petition.
2. We have heard Shri. V.P.Sukumar appearing for the
appellant and Special Govt. Pleader appearing for the respondent.
3. We are unable to uphold the view taken by the learned
Single Judge because the appellants were not entitled to challenge
the circular in revision filed before this Court under Section 41 of
the KGST Act against orders of the Tribunal. In fact in the later
order issued by this Court in the review petitions this Court
observed that the appellants are free to challenge the circular. The
circular as held by the Supreme Court in the decision reported in
State of Kerala and others v. Kurian Abraham Pvt. Ltd & another
{(2008) 13 VST 1 (SC)} may not bind the Tribunal or the High Court
and de hors the circular the Tribunal and High Court are free to
W.A.878/2007 5
decide validity of assessments. However, this does not mean that
the parties aggrieved cannot challenge a circular if it is otherwise
not tenable. This is a case where appellants are in perpetual
contest against sales tax assessment pertaining to a period which
is 20 to 30 years back. Therefore, if challenge against circular can
achieve finality certainly court should entertain the writ petition and
put a quietus to the matter. We are therefore of the view that the
writ petition is maintainable and therefore, we proceed to decide
the appellant’s challenge against Ext.P33 circular.
4. The basis of the circular is decision of this Court in
Padinjarekkara Agencies’ case referred above which was not dealing
with question of liability for sales tax on rubber in any of the forms.
What is stated in the circular is that centrifuged latex produced out
of field latex will not fall within the description of rubber under
entry 38 until 1.4.1988. But from 1.4.1988 field latex and
centrifuged latex will be treated as one and the same commodity.
The question to be considered is whether this circular is tenable or
not. Writ petition has to be allowed for the simple reason that the
very same department treated centrifuged latex also as rubber and
collected sales tax from the purchasers of the item from the
W.A.878/2007 6
appellant based on form No: 25 issued by purchasers furnished by
the appellant. In other words the department treated centrifuged
latex at the hands of the purchaser from the appellant as rubber
taxable at last purchase point under entry 38 and at the same time
they want to treat the same centrifuged latex as “rubber product” in
the hands of the appellant that too not for the purpose of levy of
tax on sale point but to justify levy of purchase tax on field latex
out of which the centrifuged latex is produced. Admittedly
centrifuged latex is nothing but preserved latex in concentrate form
again used as a raw material by manufacturing industries for
production of tyre tubes, gloves, threads etc. It is to be noted that
the position is clarified by later amendment by which natural rubber
in all its forms are made taxable at the point of last purchase in the
state. Rubber latex obtained from the tree is a highly perishable
commodity and for marketing the produce various processes are
engaged by planters and rubber processors. Even though there is
value addition in centrifuging, it is nothing but a process of
preservation and concentration of field latex. When rubber is
converted from one form to another, it does not become a rubber
product and so much so even prior to the amendment, the word
W.A.878/2007 7
“rubber” used in entry 38 meant to cover rubber in all its forms. In
fact the department has accepted this position and that is the
reason why appellant was originally granted exemption on field
latex purchased and centrifuged latex produced and sold by them
subject to tax at the hands of the purchaser treating it also as
“rubber” taxable at last purchase point under entry 38. We do not
find any justification to uphold circular which interferes with the
scheme of assessment and exemption granted to large dealers in
the State. The circular cannot be applied uniformly because if
circular is upheld and assessment is held in the hands of the
appellant the department will be compelled to grant refund of tax
collected from purchasers on centrifuged latex at last purchase
point. Moreover in appellant’s case strangely the department has
no case that centrifuged latex is a rubber product which is taxable
at sale point at entry 39. Therefore, going by the department’s
own stand the appellant is not liable to pay sales tax on centrifuged
latex as it is not a rubber product. As already found by us above
centrifuged latex continues to be rubber taxable at last purchase
point. So much so the conversion of field latex into centrifuged
latex cannot be treated as manufacture of a rubber product for the
W.A.878/2007 8
purpose of levy of tax under entry 39 of the first schedule. Since
the department has not treated centrifuged latex as a rubber
product at the hands of either the seller or purchaser there is no
justification to demand tax at the purchase point of field latex. In
view of the findings above we allow the writ appeal and quash
Ext.P33 circular to the extent it says that centrifuged latex is a
rubber product up to 31.3.1988.
C.N. RAMACHANDRAN NAIR
Judge
K. SURENDRA MOHAN
Judge
jj
K.K.DENESAN & V. RAMKUMAR, JJ.
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M.F.A.NO:
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JUDGMENT
Dated: