The main legal point established in the judgment is that the rubber cess paid is taxable and includible in the purchase turnover of rubber for the purpose of purchase tax under the Kerala General Sales Tax Act.

P. SHANMUGAM, J. –

Petitioner is engaged in the manufacture of tyres, tubes and flaps for motor vehicles and is having the factory for the manufacture of these items in Tamil Nadu State. Petitioner purchases raw rubber from Kerala State and transfer it to their factory at Madurai for manufacturing tyres, tubes, etc.

2. The original assessment of the petitioner for the year 1993-94 was completed on July 31, 1997 in which the rubber cess paid amounting to Rs. 11,52,000 on the purchase turnover of rubber was not taken into account for arriving the total taxable turnover. In the light of the Supreme Court decision in State of Kerala v. Madras Rubber Factory Ltd. [1998] 108 STC 583; 6 KTR 118 holding that rubber cess paid is taxable and includible in the purchase turnover of rubber, exhibit P1 assessment order was reopened and exhibit P2 assessment was completed for the year 1993-94 including the cess in the turnover.

3. The original petition is filed to quash exhibit P2 assessment order. Petitioner has also challenged exhibit P3 notification which has granted exemption to dealers in respect of goods purchased for the period up to and including 18th December, 1997.

4. In the light of the decision of the Supreme Court in State of Kerala v. Madras Rubber Factory Ltd. [1998] 108 STC 583, the issue that rubber cess was to be included in the purchase turnover of rubber for the purpose of purchase tax under the Kerala General Sales Tax Act, is concluded against the petitioner. The judgment of the Supreme Court is declaratory in nature and is applicable on the date on which the Kerala General Sales Tax Act has come into force or the date on which the provisions relating to cess were incorporated in the Act, whichever is earlier.

5. In Kil Kotagiri Tea and Coffee Estates Co. Ltd. v. Income-tax Appellate Tribunal [1988] 174 ITR 579; 1988 (2) KLT 271 this Court held that when the court decides a matter it does not make the law in any sense, but all it does is that it interprets the law and states what the law has always been and must be understood to have been. Hence the petitioner is liable on the purchase turnover of rubber including the cess paid.

6. The next contention is that there is discrimination between the dealers and the manufacturers in exhibit P3 notification. Section 10 of the Kerala General Sales Tax Act empowers the Government to grant exemption. The entry in exhibit P3 notification is as follows :

"41. Dealers other Part of the turnover 1. The rubber purchased was than being the element of sold inter-State or manufacturers cess payable under the transferred to the and planters. Rubber Act, in the principal outside the purchase turnover of State or to a branch rubber. outside not being a manufacturing unit of the consignor.

2. The exemption shall be in respect of goods purchased for the period up to and including 18th December, 1997.

3. Tax, if any, already paid shall not be refunded."

Dealers on the one hand and manufacturers and planters on the other form separate class. The Explanatory note to the notification states that in respect of traders in rubber, Government had not taken any steps so far to include the amount of cess payable as per the Rubber Act in the purchase turnover or in the sales turnover of such dealers/traders and so they were not anticipating any liability. The dealers had therefore no occasion at any time to belie