The Judgment of the Court was delivered by

RAGHAVAN, J. - The Deputy Commissioner of Agricultural Income-tax and Sales Tax, Kerala State, North Zone, Kozhikode, has filed this revision petition against the order of the Kerala Sales Tax Appellate Tribunal, Trivandrum. The respondent is a landlord having extensive cocoanut gardens and agricultural lands. He sold cocoanut fibre made out of the husks of the cocoanuts plucked from his own gardens in the year 1954-55 for Rs. 10,784-4-11. The Assistant Commercial Tax Officer proposed to levy sales tax on this amount. The respondent objected to the levy on two grounds, firstly, that he was not a dealer within the meaning of the Madras General Sales Tax Act and secondly, that the cocoanut fibre sold by him constituted agricultural or horticultural produce grown by him on his own land and hence the sales of such produce were not liable to tax under the proviso to section 2(i) of the Act. The Assistant Commercial Tax Officer negatived both these contentions and assessed the respondent. The respondent appealed to the Commercial Tax Officer, Malabar South, who agreeing with the Assistant Commercial Tax Officer, dismissed the appeal. On further appeal by the respondent before the Appellate Tribunal, the Tribunal reversed the decision of the Commercial Tax Officer and allowed the appeal holding that cocoanut fibre was a horticultural produce falling within the exclusion of the proviso under section 2(i). The further question, whether the respondent was a dealer coming within the meaning of the Act was not decided by the Tribunal as a decision on that question was not necessary for the disposal of the appeal. Hence the Tribunal left that question open. The Revenue has, as stated already, preferred the present revision petition.

It may be stated that the only question before us is whether cocoanut fibre, in the circumstances of the present case, is agricultural or horticultural produce.

The learned Government Pleader contends that the test in such cases should be to see whether the article, the sale of which is sought to be taxed, is something different from agricultural or horticultural produce, that is, whether it has changed its agricultural or horticultural nature at the time of sale and not to see whether the process to which the article is put before such sale is a manufacturing process. According to him the cocoanut husks in the present case have changed their agricultural or horticultural nature and have assume the character of fibre, a produce different from the original horticultural produce, cocoanut husks. He however urges further that the process undergone by the husks in the present case to reach the state of fibre is really a manufacture and hence the fibre is a manufactured article. He has invited our attention to two decisions of the Madras High Court dealing with the question whether jaggery was an agricultural produce within section 2(i) of the Act. The first case is K. P. Vaidyanatha Iyer v. The State of Madras ([1954] 5 S.T.C. 94). In that case their Lordships of the Madras High Court held that the conversion of sugarcane into jaggery was a process of manufacture and hence the exemption contained in the proviso to section 2(i) did not apply to the sale of jaggery. The second case is The State of Madras v. V. R. B. Gopalaratnam Gupta ([1957] 8 S.T.C. 16). In this case Krishnaswami Nayudu, J., followed the Division Bench ruling in the previous case and held that jaggery was not an agricultural or horticultural produce. On the other hand, the learned counsel for the respondent referred us to a recent decision of the Bombay High Court in R. B. N. S. Borawake v. The State of Bombay ([1960] 11 S.T.C. 8). In this case Shah and S. T. Desai, JJ., held that though gur could not be regarded as an agricultural produce "grown on land", it was still agricultural produce in a form in which it was converted for the purpose of transportation to the market or for preventing determi