State Of Kerala vs Madras Rubber Factory LTD.

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1997 Supreme(SC) 1701

1998(1) Supreme 74
Supreme Court of India
(From Kerala High Court)
S.C. Agrawal, B.N. Kirpal and D.P. Wadhwa, JJ.
State of Kerala -Appellant
versus
Madras Rubber Factory Ltd. -Respondent
Civil Appeal Nos. 4596-98 of 1989
With
Civil Appeal Nos. 3435-36/91, 69/92, 659/93, 820/93, 657/93, 4963/91, 5656-57/94, 5594-95/95, 5759/95, 5760-61/95, 5762, 5763-64, 5765, 5766, 5767, 5768- 72, 6226, 8014, 9132 of 1995, 4869/91, 7230/93, 5296/93, 2193/96, 9183/95, 4742/91, 3442-43/91, 10386-89/96, 2253/93, 2254/93, 2355-56/93, 11027, 11769, 11626, 11029-30, 11028, 9518 of 1996, 4300/93, 1699-1704/83, 4593/89 and
Civil Appeal Nos. 8874-75 of 1997 (Arising out of SLP (C) Nos. 9649-50 of 1997)
Decided on 19-12-1997
Counsel for the Parties :
For the Appearing Parties : K.N. Bhat, Additional Solicitor General, A.S. Nambiar, John Mathew, Harish N. Salve, R.F. Nariman, Joseph Vellapally, Sr. Advocates, G. Prakash, Dhruv Agarwal, Ms. Suman Khaitan, Gouri Rasgotra, K.R. Nambiar, Ravinder Narain, Ashok Sagar, Amit Bansal, Sonu Bhatnagar, Vineet Kumar, Yakesh Anand Sanjeev Anand, B.V. Desai, Shashi Soharu, P.J. Mehta, P. N. Ramalingam, K. K. Bhaduri, M. P. Vinod, Advocates.

Headnote:Sales Tax-Kerala General Sales Tax Act, 1963-Section 5-Rubber Act, 1947-Section 12 and Rule 33D framed under the Act-Imposition of rubber cess-Incidence of duty of excise relatable to production of rubber-Manner of collection of duty-After amendment of sub-section (2) of Section 12-Duty to be collected by Board in accordance with rules either from owner of estate or from manufacturer-Element of cess payable would be one of the factors in determining the price payable in respect thereof-Whether cess payable under the provisions of Rubber Act will form part of purchase turnover of the dealers under Kerala Sales Tax Act ?-(Yes)-Decision of Sales Tax Authorities restored.
       Held : Like the Mohan Breweries case the excise duty under Section 12(1) is levied on the production or manufacture of rubber at the rate specified thereunder. It is only by Rule 33(1), similar to Rule 22 of TNIMFL that the cess had to be paid at a stage subsequent to the production. Merely because for the sake of convenience the excise duty, which would essentially be payable at the time of production of rubber is realised at a latter point of time it cannot mean that the excise duty, in the form of cess, was not part of the sales turnover of the producer and, correspondingly, be the purchase turnover of the purchaser of rubber. (Para 19)
       In our opinion, therefore, the incidence of duty is directly relatable to the production of rubber. The character of levy is not altered merely because the payment of duty is deferred till the purchase of the rubber by the manufacturer. The character of levy is on the production of the rubber and the duty paid should, therefore, be deemed to be part of the price that the producer had paid for the goods purchased. Neither a provision for deferred payment nor the liability cast on the manufacturer of rubber goods for payment of the duty to facilitate easy collection, can alter the duty as being one on the production of rubber as provided by Section 12 (1) of the Rubber Act and such duty even though paid later, will be a part of the price of goods purchased and would, therefore, form part of the producers turnover. (Para 20)

Judgment

Kirpal, J.-Special leave granted in SLP (Civil) Nos. 9649-50 of 1997.

2. The only question which arises for consideration in this batch of cases is whether the cess payable under the provisions of the Rubber Act, 1947 will form part of the purchase turnover of the respondents under the Kerala General Sales Tax, 1963.

3. M/s. M.R.F. Ltd., Ceat Tyres of India Ltd., Bata India Ltd., Good Year India Ltd. etc., hereinafter referred to as the dealers, are the respondents in these cases. They purchased rubber in Kerala. This rubber was purchased either from the producer or from the dealers. The rubber so purchased was either used in the manufacture within the State of Kerala or was sent out of the State for use elsewhere.

4. Under the provisions of Section 5 of the Kerala General Sales Tax Act, 1963 (hereinafter referred to as ‘the Sales Tax Act’) the tax on rubber is a single point tax. According to the said section read with the schedule thereto the tax is leviable on the last producer of rubber within the State. The liability to pay tax on the purchases so made under the Sales Tax Act is not in dispute but what has been contended by the dealers is that in computing the turnover on which the tax is to be paid, the quantum of cess payable under the provisions of the Rubber Act, 1947 (hereinafter referred to as the “Rubber Act”) could not be included in the purchase turnover. The contention of the dealers, before the Sales Tax Authority, was that the said cess was not a part of the purchase price and, therefore, not includible in their turnover. The assessing authority did not agree and following the decision of the Kerala High Court in the case of Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes) v. Bata India Ltd. and Others1, it included the cess in the purchase turnover of the dealers. This order was confirmed in appeal by the Deputy Commissioner and thereafter by the Appellate Tribunal.

5. The revision petition filed by the dealers came up for hearing before the Kerala High Court. A Division Bench of that Court was of the opinion that there was conflict between two decisions of that High Court and, therefore, the case was referred to a Full Bench.

6. By judgment dated 29th March, 1989 the Full Bench, by majority, allowed the revision petition holding that the earlier decision in Bata’s case (supra) was wrongly decided and the cess payable and paid under the Rubber Act and the Rules could not form part of the dealers’ purchase turnover. In view of the importance of the point in issue the High Court granted certificate for leave to appeal this Court. Hence these appeals.

7. In order to examine the rival contentions it is necessary to refer to the relevant provisions of the Sales Tax Act and the Rubber Act and the Rules framed thereunder. In respect of MRF the assessment years in question are 1972-73, 1976-77 and 1977-78. At that time under Schedule I Entry 71 of the Sales Tax Act rubber was taxable at the point of last purchase in the State, by a dealer, who was liable to pay under Section 5 of the Act. The relevant provisions of the said Act and the Rules are as follows:

“Section 2 (xxvii) :

“Turnover” means the aggregate amount for which goods are either bought or sold, supplied or distributed 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, provided that the proceeds of the sale by a person of agricultural or horticultural produce, grown by himself or grown on any land in which he has an interest whether as owner, unsufructuary mortgagee, tenant or otherwise, shall be excluded from his turnover.”

Section 2 (xxv) :

“Taxable Turnover” means the turnover on which a dealer shall be liable to pay tax as determined after making such deductions from his total turnover and in such manner as may be prescribed, but shall not include the turnover of purchase or sale in the course of inter-state trade or comme

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1997 Supreme(SC) 1701

Cases Referred (10)