STATE OF KERALA versus MADRAS RUBBER FACTORY

Citation: [1997] SUPP. 6 S.C.R. 698 · Decided: 19-12-1997 · Supreme Court of India · Bench: S.C. AGRAWAL

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Judgment (excerpt)

A 
B 
STATE OF KERALA 
v. 
MADRAS RUBBER FACTORY 
DECEMBER 19, 1997 
[S.C. AGRAWAL, B.N. KIRPAL AND D.P. WADHWA, JJ.] 
Sales Tax-Kerala General Sales Tax Act, 1963, Rubber Act, 1947-Sec-
tion 2 (.xxvii), Sec. 2(.u:v ), Section 5, Schedule I Entry 71/Section 12-Purchase 
tu111ove1~omputation of----Collection of excise duty under Section 12(2) of 
C the Rubber Act in the from of cess either from the owner of the estate or from 
the manufacturer by whom the mbber is used--Character of levy-Held, cess 
is a duty of excise on all 1ubberproduced in India--!ncidence of duty is directly 
relatable to the production of 111bber-Merely because the excise duty, which 
would essentially be payable at the time of production of ntbber is realised at 
D a later point of time it cannot mean that the excise duty, in the fonn of cess 
was not palt of the sales tumover of the producer or the purchase twnover of 
the purchaser of mbber. 
Taxing Statute----<:harge-Held, A charge under a taxing statute can only 
be under the Act and not under the Rules-The Rules nonnally pmvide for 
E the procedure to be followed for the realisation of the statutory dues. 
The respondents, who were the purchasers of rubber in Kerala, 
hereinafter called the dealers, unsuccessfully challenged the action of the 
State Govt. in including the cess payable under the provisions of the 
Rubber Act, 1947 in their purchase turnover under the Kerala General 
F 
Sales Tax, 1963 before the Sales Tax Authority. The order of the Sales Tax 
Authority was confirmed in appeal by the Deputy Commissioner and 
thereafter by the Appellate Tribunal. The said order was, however reversed 
by the Full Bench of the Kerala High Court in Revision Petition. Aggrieved, 
the State of Kerala filed. the present appeal. 
G 
On behalf of the appellant, it was submitted that the incident of cess, 
being in the nature of duty of excise, continued to be related to the 
production of rubber even after the amendment in 1960 of Section 12 of 
the Rubber Act; that after the amendment, the Rubber Board is em-
powered to collect the cess either from the owner of the estate or from the 
H manufacturer by whom the rubber is used; and that the definition of 
698 
STATE v. MADRAS RUBBER FACTORY LTD. 
699 
turnover in section 2(xxvii) of the Sales Tax Act was wide enough to include A 
the liability to pay Cess under the Rubber Act as being part of the purchase 
turnover. 
On behalf of the Respondents it was contended that after the amend-
ment of Sec. 12 in 1960 and with the promulgation of Rule 33-D of the 
Rubber Rules neither producer nor the dealer was rec1uired to pay the 
cess under Sec. 12 at any point of time; that since there was no statutory 
liability on either the producer or the dealer to pay the cess, the quantum 
of cess payable on the ·goods purchased by the dealer, could not be 
regarded as part of the purchase price or turnover; and that the liability 
B 
to pay tax was only of the manufacturer and it arose not by reason of C 
purchase of rubber but it arose when the manufacturer used the same. 
Allowing the appeals, this Court 
HELD : 1.1. The incidence of duty is directly relatable to the produc-
tion of rubber. The character of levy is not altered merely because the D 
payment of duty is deferred till the purchase of rubber by the manufacturer. 
The character of levy is on the production of 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 duty 
to facilitate easy collection, can alter the duty as being one on the produc-
tion of rubber as provided by Section 12(1) of the Rubber Act and such duty 
even though paid later, will be part of price of good~ purchased and would, 
therefore, form part of the producer's turnover. [716-B-D] 
E 
1.2. By reason of Section 12(1) of the Rubber Act a cess at the r<l!.e 
F 
prescribed is statutorily levied on the rubber so produced and the liability 
to pay the said amount of cess gets attached to the rubber so produced. If 
the rules do not provide for the excise duty to be paid by the producer then 
whoever purchases the said rubber would be purchasing goods to which is 
attached the liability of payment of duty. Thus the duty element would be G 
inherent in the price which is for the purchase of the said goods. [709-C] 
2.1. Excise duty being a levy on

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