http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 3  

CASE NO.: Appeal (civil)  5700-5712 of 2007

PETITIONER: M/s Padinjarekara Agencies Limited

RESPONDENT: State of Kerala

DATE OF JUDGMENT: 08/02/2008

BENCH: S. H. Kapadia & B. Sudershan Reddy

JUDGMENT: J U D G M E N T

CIVIL APPEAL NOS. 5700-5712 OF 2007 with Civil Appeal Nos. 5699/07 and 5713-5726/07  

KAPADIA, J.

       For the sake of convenience we state the facts occurring in Civil  Appeal Nos. 5700-5712/07.  

2.      This batch of civil appeals is filed by the assessee. It is directed  against common judgment dated 8.6.2007 in Sales Tax Revision Nos. 177- 189/07 decided by the Division Bench of the High Court of Kerala. By the  impugned judgment, the High Court dismissed revisions filed by the  appellant-assessee in limine at the admission stage. 3.      These matters are a sequel to the lead matter  in which we have  delivered our judgment in the case of State of Kerala & Ors.  v.  M/s  Kurian Abraham Pvt. Ltd. & Anr. (Civil Appeal Nos. 7965-7966/2004).

4.      Assessee, M/s Padinjarekara Agencies Ltd., is engaged in production  of sale of centrifuged latex. It is a registered dealer under Kerala General  Sales Tax Act, 1963 ("KGST Act") and Central Sales Tax Act, 1956 ("CST  Act"). The assessee’s unit is registered as a SSI Unit.

5.      In this batch of civil appeals we are concerned with assessment years  1982-83 to 1996-97. Assessee is the processor of centrifuged latex from  field latex (raw-rubber).           6.      Assessee herein claimed the benefit of exemption provided in the  Government Notification SRO No. 1003/91 which was subsequently  replaced by Government Notification SRO No. 1727/93. Under Government  Notification SRO 1003/91, the conditions for availing exemptions were that  rubber should be used for manufacture of "goods" and that tax was leviable  on the products manufactured by such rubber.

7.      The Assessing Authority did not allow the benefit of exemption to the  assessee under the above Government Notifications on the ground that  centrifuged latex and field latex were one and the same commodity. It may  be noted that in the earlier case of Kurian Abraham Pvt. Ltd. (supra) the  Department had taken the view that field latex and centrifuged latex were  two different and distinct commodities whereas, in the present case, the  Department has taken the view that they were one and the same commodity.  Therefore, in the matter of exigibility to tax, the Department took the stand  that field latex and centrifuged latex were different commodities and when it  came to the question of exemption/concession, the same Department  contended that the two commodities were same.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 3  

8.      To continue the narration of events, it may be stated that, aggrieved by  the decision of the AO, the matter was carried in appeal by the assessee to  the first appellate authority, who took the view that the centrifuged latex  satisfied the definition of "goods" in the Government Notification SRO No.  1003/91 and, therefore, concessional rate was admissible to the assessee.  (see page 96 of the Paper Book in Civil Appeal Nos. 5700-5712/07).

9.      The above Government Notification SRO No. 1003/91 was  superseded by Government Notification SRO No. 1727/93, which came into  effect w.e.f. 1.1.1994. Here, the AO once again did not allow the claim of  exemption on the ground that field latex and centrifuged latex were one and  the same commodity falling under Entry 110 of the First Schedule to the  KGST Act. The AO relied on circular No. 16/98 dated 28.5.1998. This time,  in appeal, the first appellate authority held that, field latex is not a rubber  product and, therefore, the assessee was not entitled to exemption vide  Notification SRO NO. 1727/93. (see page 98 of the Paper Book in Civil  Appeal Nos. 5700-5712/07).

10.     In the appeals relating to assessment years 1988-89 to 1993-94, the  assessee contended before the Tribunal that they were entitled to  concessional rate of 3%, which was rejected by the Tribunal on the ground  that field latex and centrifuged latex were two separate and distinct  commodities by placing reliance on the judgment of the Kerala High Court  in the case of Padinjarekara Agencies Ltd.  v.  Asst. Commissioner  reported in 1996 (2) KLT 641.

11.     Aggrieved by the decision of the Tribunal, the matter was carried in  revision to the High Court being Sales Tax Revision Nos. 177-189/07. The  High Court took the view that it had limited revisional powers under Section  41 of the KGST Act. By the impugned judgment, it was held that there was  no error committed by the Appellate Tribunal in its judgment nor had the  Tribunal failed to decide any question of law. The High Court further held  that the AO was right in denying the benefit of exemption/concession to the  assessee in view of the clarification issued by the Board/Commissioner,  which was binding on him, to the effect that there was no manufacturing  activity involved in conversion of raw-rubber into centrifuged latex as both  the commodities were same. According to the High Court, since raw-rubber  and centrifuged latex are one and the same commodity under Entry 110  (preceded by Entry 161) the assessee was not entitled to claim concessional  rate of duty under Government Notification SRO 1727/93, hence these civil  appeals by the assessee.

12.     Exigibility to tax is a concept which is different from the concept of  exemption/concession. As stated above, when it came to exigibility, the  Department contended that after 1.4.1988, field latex and centrifuged latex  were two distinct and separate commodities and, at the same time, when it  came to exemption, the same Department contended that field latex and  centrifuged latex are one and the same commodities, hence, assessee was not  entitled to claim concessional rate of duty under circular No. 16/98 dated  28.5.1998. Exigibility to tax is different from the concept of  exemption/concession. The rules of interpretation which apply to  classification of items in a taxing statute can differ in appropriate cases from  the terms and conditions of exemption notification. Interpretation adopted in  a classification dispute need not be the same as interpretation of Exemption  Notification under the same Act. Every Exemption Notification has to be  read on its own terms. One cannot confuse the terms used in the Notification  by comparing the language of the Notification with the language of the  taxing statute. In the present case, the Government Notification SRO No.  1003/91 (preceded by Government Notification SRO No. 585/80) uses the  word "goods". Because of the use of the word "goods" the first appellate  authority came to the conclusion that centrifuged latex can be considered as  an item of "goods" for the purposes of SRO No. 1003/91. According to the  first appellate authority, there was no difference of opinion on the point that  centrifuged latex satisfied the definition of the word "goods" in the KGST  Act. According to the first appellate authority, centrifuged latex as an item

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 3  

of goods stood manufactured from field latex and, therefore, the assessee  was entitled to claim the benefit of exemption.

13.     In our view, the High Court has failed to consider the question of law,  which arose for determination before it in Sales Tax Revision Nos. 177- 189/07. As stated above, in this case, we are concerned with interpretation of  various Exemption Notifications. We are not concerned with interpretation  of circular No. 16/98 dated 28.5.1998. We do not wish to express our views  at this stage on the interpretation of the Exemption Notification(s). Suffice it  to state that, in this case, we are not concerned with classification. In this  case, we are concerned with the words and expressions used in the  Notification(s). This point has been missed by the High Court in its  impugned judgment. It is no doubt true that, the AO is bound by the  directions issued by the Commissioner even with regard to the terms used in  the exemption Notification(s). However, as held in our earlier judgment in  the case of Kurian Abraham Pvt. Ltd. (supra), circulars/orders issued by  the Commissioner are not binding on the assessee. Therefore, de hors  the  directives given by the Commissioner, it is open to the assessee to claim the  benefit of exemption/concession on the basis of various exemption  Notification(s) issued by the Government from time to time. We express no  opinion on the interpretation of those Notification(s). Suffice it to state that,  the assessee was not bound by the orders/directions issued by the  Commissioner to the AO, therefore, on the scope and effect of each of the  above exemption Notifications, the matter needs to be remitted to the AO for  fresh decision in accordance with law. In other words, if the assessee  satisfies the terms and conditions mentioned in the Exemption Notification,  the assessee would be entitled to the benefit thereunder notwithstanding the  circular issued by the Board/Commissioner. This is on the principle  mentioned hereinabove that such Circular does not bind the assessee if the  assessee demonstrates that it fulfils the conditions mentioned in the  Exemption Notification.

14.     For the reasons given hereinabove, we set aside the impugned  judgments of the High Court in Sales Tax Revision Nos. 177-189/07,  192/2007, 117/07 and 126-138/07 and remit the matters to the AO for de  novo consideration in accordance with law. AO will look into the  contentions of the assessee uninfluenced by the observations of the High  Court and decide the claim for exemption on the basis of the words used in  the Exemption Notification(s) and the terms and conditions mentioned  therein.

15.     Accordingly, the civil appeals filed by the assessee are allowed with  no order as to costs.