M/S. FALCON TYRES LTD.versusSTATE OF KARNATAKA AND ORS.

A                           MIS. FALCON TYRES LTD.
                                          v.
                       STA TE OF KARNA TAKA AND ORS.

                                   JULY 20. 2006

B                [ASHOK BHAN AND MARKANDEY KA TJU, JJ.]


          Taxation :

          Karnataka Tax on Entry of Goods Act, 1979-Sections 2(A)(I), 3(6)-
.C Second Schedule, Serial no.2-Rubber procured from neighbouring State-
    Entry Tax-Exemption from-Entitlement-Held : Rubber is not agricultural
    or horticulture produce hence not entitled to exemption from entry tax.

         Interpretation of Statute :

D          Legislative intention-While interpreting provisions of a Statute,
    legislative intention to be given effect to in consonance with the definition
    as contained in the statute.

          The question which has arisen for consideration in the present appeal
E   is whether rubber procured by appellant from the neighbouring State of Kerala
    for manufacture of tyres is entitled to exemption from entry tax leviable under
    the Karnataka Tax on Entry of Goods Act, 1979.•

         Dismissing the appeal, the Court

          HELD: I.I. The definition of the agriculture and horticulture produce
F   in S.2(A)(I) of the Karnataka Tax on Entry of Goods Act, 1979, includes all
    agriculture or horticulture produce but excludes, (I) tea, coffee, rubber,
    cashew, cardamom, pep11er and cotton and (2) "such produce as has been
    subject to any physical, chemical or other process for being made fit for
    consumption". The words "such produ\!e" in the second part do not refer to
G   the produce which has already been excluded from the agricultural or
    horticulture produce but refer to such other agricultural produce which has
    been subjected to any physical, chemical or other process for being made fit
    for human consumption. [740-A, B, D, E)


H                                        734
                FALCON TYRES LTD. v. STATE OF KARNATAKA                   735

      1.2. From the reading of the definition under Section 2(A)(l), it         A
unequivocally emerges that rubber and few other items enumerated therein
are excluded from being agricultural produce or horticulture produce. For
all intent and purposes as far as the present Act is concerned, it is the
definition given in the Act, which will govern the expression 'agricultural
produce'.1740-G-HI
                                                                                B
       2. Suh-section (6) of Section 3 provides for exemption in respect of goods
specified in the Second Schedule. At SI. No. 2 of the Second Schedule, only
tea, coffee and cotton (whether ginned or un-ginned) have been given exemption
from payment of Entry Tax and not other items such as rubber, cashew,
cardamom and pepper and such other agricultural produce which has been C
subjected to any process for making it fit for human consumption. Intention
of the legislature is that though tea, coffee and cotton have been excluded in
the definition clause from the agricultural produce but for the purposes of
the Entry Tax Act tea, coffee and cotton are exempted from payment of Entry
Tax. This is an exception created by the ler,islature. If the legislature intended
to create exception for rubber 1ilso it could have done it but it chose not to do D
it. Simply because the legislature has included tea, coffee and cotton in the
Second Schedule exempting it from payment of Entry Tax does not mean that
all other agricultural produce items which have been excluded from the
definition of the agricultural produce would stand included in the Second
Schedule to the Act exempting them from payment of Entry Tax. This would E
be doing violation to the Act as well as acting contrary to the intent of the
legislature. 1741-C-Fl

      Karnataka Forest Development Corporation Ltd. v. Can/reads Private
Limited and Ors., (199414 SCC 455, distinguished.
                                                                                F
     CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4408 of2001.

     From the Judgment dated 30.1.2001 of the High Court ofKarnataka at
Bangalore, in Civil Revision Petition No. 2588/2000.

     Dhruv Mehta, Harshvardhan Jha and Yashraj Singh Deora (for Mis. K.L.       G
Mehta & Co.) for the Appellant.

     Sanjay Hegde for the Respondents.

     The Judgment of the Court was delivered by
                                                                                H
    736                     SUPREME COURT REPORTS [2006] SUPP. 3 S.C.R.

A          BHAN, J. The appellant is a public limited company and a dealer
    registered under the Kamataka Tax on Entry of Goods Act, 1979 (hereinafter
    referred to as "the Entry Tax Act"). It is engaged in the manufacture of tyres
    of two wheeler motor vehicles. Appellant is located in Metagalli in Mysore
    and Metagalli is a local area within the definition of 'Local area' in Section
    2(A)(5) of the Entry Tax Act. The main input in the manufacture of tyres is
B   rubber which the appellant procures from the neighbouring State of Kerala.

        Sub-section ( 1) of section 3 of Entry Tax Act prescribes that there shall
  be levied and collected tax on entry of any goods specified in the First
  Schedule into a local area for consumption, use or sale therein, at such rates
C not exceeding 5% of the value of the goods, as may be specified
  retrospectively or prospectively, by the State Government by issuance of
  Notifications. Section 2 of the Entry Tax Act defines the various expressions
  used in the Act. The expression 'Agriculture produce or horticulture produce'
  is defined in section 2(A)(l). In substance, it includes all agriculture or
  horticulture produce excluding tea, coffee, rubber, cashew, cardamom, pepper
D and cotton and such agricultural or horticultural produce .vhich has been
  subjected to any physical, chemical or uther process for being made fit for
  consumption except merely cleaning, grading, sorting or drying.

          Sub-section (6) of Section 3 provides for total exemption from entry tax
    on the goods specified in the Second Schedule to the Entry Tax Act. The
E   exemption Schedule, i.e., Second Schedule in SI. No. 2, specifies agricultural
    produce including tea, coffee and cotton (whether ginned or unginned) as
    exempt from the Entry Tax.

         Appellant claimed exemption from entry tax before. the assessing
  authority on the value of rubber brought into the local area for the assessment
F
  year 1996-97 in terms of the definition of agricultural produce or horticultural
  produce read with SI. No. 2 of the Second Schedule to the Entry Tax Act. The
  assessing authority held that rubber is not one of the agricultural produce
  included in SI. No. 2 in the Second Schedule and consequently, disallowed
  the claim. Appellant contested the assessment order before the first appellate
G authority, i.e., Joint Commissioner of Commercial Taxes (Appeals) Bangalore
  City Division. The first appellate authority held that rubber purchased by the
  appellant from outside the State of Kamataka was subjected to treatment by
  sulphuric acide and smoke to make it into sheets and therefore such rubber
  sheets do not fit the definition of agricultural produce under Section 2(A)(l)
H of the Entry Tax Act. The first appellate authority held that SI. No. 2 of Second
                    FALCON TYRES LTD. v. STATEOFKARNATAKA [BHAN,J.]                  737
'"\
          Schedule to the Act also dearly excluded rubber from the purview of agricultural   A
          produce. Consequently, the appeal was dismissed.

                   The appellant being aggrieved carried the matter in second appeal
          before the Kamataka Appellate Tribunal (for short "the Tr.ibunal"). The Tribunal
          applied the judgment of this Court in the case of Mis Karnataka Forest
          Development Corporation Ltd. v. Cantreads Pvt. Ltd., [1994] 4 SCC 455, and B
          allowing the appeal held, that latex is a modern name for caoutchouc. It is
          nothing but natural rubber. Caoutchouc or latex means not only the milky
          substance obtained from the trees but it included all milk 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 C
          marketed, it does not change its character. It continues to be caoutchouc or
          latex when it is treated by sulphuric acide and continued to be so even after
          it is dri~d with smoke to obtain the shape of sheets.

                 State of Karnataka being aggrieved by the judgment of the Tribunal
          filed statutory civil revision petition in the High Court of Karnataka. By the D
          impugned judgment the High Court has allowed the civil revision petition and
          quashed and set aside the judgment of the Tribunal. The High Court conceded
          that raw rubber is an agricultural produce but held that in view of the
          definition of 'agricultural produce or horticultural produce' in section 2(A)(l)
          of the Entry Tax Act, which clearly excludes rubber, rubber brought in the
          local area by the appellant could not be considered as agricultural produce E
          for the purposes of the Entry Tax Act. That SI. No. 2 of the Second Schedule
          specified agricultural produce, does not exempt rubber from payment of entry
          tax and therefore when the definition of agriculture produce in Section 2(A)( I)
          and enumeration of agriculture produce in SI. No. 2 of the Second Schedule
          are taken together and construed, there could be no ambiguity that raw rubber F
          is not an agriculture produce for the purposes of the Act. In repelling this
          contention, the High Court held that it will have to be guided by the provisions
          of the definition under Section 2(A)( I) which clearly excludes rubber and not
          by the enumeration in SI. No. 2 of the Second Schedule.

                Aggrieved against the aforesaid order the present appeal has been filed. G
          Shri Dhruv Mehta, learned counsel appearing for the appellant strenuously
          contended that the High Court erred in construing the definition of 'agricultural
          produce or horticultural produce' in Section 2(A)(l) of the Entry Tax Act as
          excluding rubber, whereas the definition properly construed makes it clear that
          what is excluded is only such tea, coffee, rubber etc. which are subjected to H
    738                     SUPREME COURT REPORTS [2006] SUPP. 3 S.C.R.
                                                                                         r
A any physical, chemical or other process for making them fit for consumption.
    It is submitted that the semicolon after the word cotton does not mean that
    the first part of the Section is disjunctive from 'such produce' as has been
    subjected to any physical, chemical or other process. It is further submitted
    that punctuation is not a safe tool in construction of statute and if the first
B   part of the Section is read as disjunctive from the other part it conflicts with
    SI. No. 2 in the Second Schedule. It is also submitted that definition Section
    which is the interpretation clause to the statute begins with the expression
    "unless the context otherwise requires". That reading of Section 3(6) read
    with SI. No. 2 in the Second Schedule before and after the amendment in 1992
    would lead to the conclusion that rubber which is an agricultural produce is
C   exempt from Entry Tax. Assuming for the sake of argument that agricultural
    produce excludes rubber which is not subjected to any chemical process,
    does not necessarily mean that it is not an agricultural pro9uce if the context
    requires otherwise.

          As against this Shri Sanjay Hegde, counsel appearing for the State of
D Karnataka submitted that the clrar cut decision as emerges in Section 2(A)(l)
    of the Entry Tax Act unequivocally excludes rubber from all other items that
    come under the head of 'agriculture produce' along with a few of the others
    that are enumerated thi~rein. It is his submission that for all intent and
    purposes as far as the present Act is concerned, it is this definition that will
E   govern the expression 'agriculture produce'. He, therefore, contends that
    while reading Entry No. 2 of the Second Schedule to the Entry Tax Act there
    is absolutely no scope to include in the entry 'rubber' which has been
    specifically excluded in the defining section. That the Tribunal appears to
    have been influenced by some of the earlier judicial decisions which relate to
    the definition of 'agriculture produce' under the Karnataka Sales Tax Act. It
F   was pointed out by him that as far as the present Act is concerned, the
    Legislature has deliberately included and excluded certain items and therefore
    while interpreting the provisions of the present Act, the legislative intention
    will have to be given effect to inconsonance with the definition as contained
    in the statute.

G         Definition of the expression 'agricultural produce or horticultural produce'
    in Section 2(A)( 1), sub-section (6) of Section 3 providing for exemption in
    respect of goods specified in the Second Schedule and SI. No. 2 of Second
    Schedule specifying "Agricultural produce including tea, coffee and cotton
    (whether ginned or unginned)" as relevant are extracted below:
H
                 FALCON TYRES LTD. v. STATE OF KARNATAKA [BHAN, J.]              739
'\
              Section 2(A)( /):                                                         A
 •'
              '"agricultural produce or horticultural produce' shall not include tea,
              coffee, rubber, cashew, cardamom, pepper and cotton; and such
              produce as has been subjected to any physical, chemical or other
              process for being made fit for consumption, save mere cleaning,
              grading, sorting or drying."                                              B
              Sub-section (6) of Section 3:

              "6). No tax shall be levied under this Act on any goods specified in
              the Second Schedule on its entry into a local area for consumption,
              use or sale therein."
                                                                                        c
              SI. No. 2 of Second Schedule:

              "2. agriculture produce including tea, coffee and cotton (whether
              ginned or un-ginned).

              We would have readily accepted the submissions advanced by the D
       learned counsel for the appellant without any difficulty under normal
       circumstances but for the fact that in the present Act as indicated by us
       earlier, term 'agricultural produce' as defined by the legislature specifically
       excludes rubber from agricultural produce. Under the law governing the
       principles of interpretation of a statute, this Court is necessarily restricted E
       while construing the expression 'agricultural produce' in relation to the present
      Act by the definition that is incorporated in the Act itself. Under these
      circumstances it is not possible to accept the submission of the learned
      counsel for the appellant. The expression 'agricultural produce' as it appears
       in the Second Schedule has to given its normal and ordinary interpretation.
      SI. No. 2 of the Second Schedule which reads "Agricultural produce including F
      tea, coffee and cotton is an inclusive definition and not an exhaustive definition.
      What is excluded from the definition of the 'agricultural produce' in the Act
      cannot be held to be an agricultural produce unless the same find mentions
      in the Second Schedule. Since the legislature provided tea, coffee and cotton
      in SI. No. 2 of the Second Schedule and not the rubber, rubber cannot be
      taken to be agricultural produce within the meaning of 'agricultural produce' G
      as defined under the Act.

             We do not find any substance in the submission of the learned counsel
      for the appellant that the semicolon after the word cotton does not mean that
      the first part of the Section is disjunctive from 'such produce' as has been H
    740                    SUPREME COURT REPORTS [2006] SUPP. 3 S.C.R.

A subjected to any physical, chemical or other process. Section 2(A) {I) is in
    two parts, it excludes two types of food from agricultural produce. According
    to us, the definition of the agriculture and horticulture produce does not say
    as to what would be included in the agriculture or horticulture produce, in
    substance it includes all agriculture or horticulture produce but excludes, (I)
    tea, coffee, rubber, cashew, cardamom, pepper and cotton from the definition
B   of the agriculture or horticulture produce though all these products as per
    dictionary meaning or in common parlance would be understood as agricultural
    produce and (2) "such produce as has been subject to any physical, chemical
    or other process for being made fit for consumption", meaning thereby that
    the agricultural produce other than what has been excluded, which has been
C   subjected to any physical, chemical or other process for making it fit for
    consumption would also be excluded from the definition of the agriculture or
    horticulture produce except where such agricultural produce is merely cleaned,
    graded, sorted or dried. For example, if the potatoes are cleaned, graded,
    sorted or dried, they will remain agricultural produce but in case raw potato
    is subjected to a process and converted into chips for human consumption
D   it would cease to be agricultural produce for the purposes of the Entry Tax
    Act. The words "such produce" in the second part does not refer to the
    produce which has already been excluded from the agricultural or horticulture
    produce but refers to such other agricultural produce which has been subjected
    to any physical, chemical or other process for being made fit for human
E   consumption.

           We do not agree with the submission of the learned counsel for the
    appellant that what is excluded is only such tea, coffee, rubber etc., which are
    subjected to any physical, chemical or other process for making them fit for
    consumption. In our opinion, the definition of the agriculture and horticulture
F   produce does not say as to what would be included in the agriculture or
    horticulture produce, in substance it includes all agriculture or horticulture
    produce but excludes tea, coffee, rubber, cashew, cardamom, pepper and
    cotton from the definition of the agriculture or horticulture produce though
    all these products as per dictionary meaning or in common parlance would
G   be understood as agricultural produce.

          From the reading of the definition under Section 2(A){l), it unequivocally
    emerges that rubber and few other items enumerated therein are excluded from
    being agricultural produce or horticulture produce. For all intent and purposes
    as far as the present Act is concerned, it is the definition given in the Act
H   which will govern the expression 'agricultural produce'. While reading Entry
          FALCON TYRES LTD. v. STATE OF KARNATAKA [BHAN, J.]            741
2 in the Second Schedule to the Act there is no scope to include rubber from A
being exempt from payment of entry tax. Entry 2 of Second Schedule creates
exceptions regarding few of the excluded items from payment of Entry Tax but
not all excluded items. The items for which an exception has been created in
Entry 2 of the Second Schedule would only be exempt from payment of entry
tax and not all the items, which have been excluded from being agricultural
produce in the definition clause. While interpreting the provisions of present B
Act the legislative intention will have to be given effect to inconsonance with
the definition as contained in the statute.

       In the definition clause of Section 2(A)( I) rubber is excluded form the
agricultural produce, sub-section (6) of Section 3 provides for exemption in C
respect of goods specified in the Second Schedule. At SI. No. 2 of the Second
 Schedule, only tea, cotfoe and cotton (whether ginned or un-ginned) have
been given exemption from payment of Entry Tax and not other items such
as rubber, cashew, cardamom and pepper and such other agricultural produce
which has been subjected to any process for making it fit for human
consumption. Intention of the legislature is that though tea, coffee and cotton D
have been excluded in the definition clause from the agricultural produce but
for the purposes of the Entry Tax Act tea, coffee and cotton are exempted
from payment of Entry Tax. This is an exception created by the legislature.
If the legislature intended to create exception for rubber also it could have
done it but it chose not to do iq Simply because the legislature has included E
tea, coffee and cotton in the Second Schedule exempting it from payment of
Entry Tax does not mean that all other agricultural produce items which have
been excluded from the definition of the agricultural produce would stand
included in the Second Schedule to the Act exempting them from payment of
Entry Tax. This would be doing violation to the Act as well as acting contrary
tc the intent of the legislature.                                               F
      Learned counsel for the appellant relied upon Karnataka Fores!
Development Corporation Ltd v. Cantreads Private limited and Ors., [1994]
4 SCC 455, to contend that rubber is an agricultural produce. This was a case
under the Kamataka Forest Act, 1963 for the purposes of levy of the Forest
Development Tax. The meaning assigned to the agricultural produce in the G
present Act is different from what was assigned to it in the Kamataka Forest
Act, 1963. The same is not relevant. Similarly, he cited two other judgments
which are not germane to the point and need not even be noticed.

     The Legislature has deliberately excluded certain items from being H
    742                   SUPREME COURT REPORTS (2006) SUPP. 3 S.C.R.

A agricultural produce and therefore while interpreting the provisions of the
    present Act, the legislative intention will have to be given effect to in
    consonance with the definition as contained in the statute.

         For the reasons stated above, we do not find any merit in this appeal
    and dismiss the same with costs.
B
    D.G.                                                    Appeal dismissed.



                                                                                 ,.