IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE ACTING CHIEF JUSTICE MRS.MANJULA CHELLUR, THE HONOURABLE MR.JUSTICE T.R.RAMACHANDRAN NAIR , & THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON THURSDAY, THE 15TH DAY OF DECEMBER 2011/ 24TH AGRAHAYANA 1933 ST.Rev..No. 486 of 2004 ( ) --------------------------- TA.15/1998 dated 04.01.2002 of STAT ADDL.BENCH, KOTTAYAM REVISION PETITIONER/RESPONDENT/REVENUE:: ----------------------------------------------------- STATE OF KERALA, REP. BY THE DEPUTY COMMISSIONER (LAW), COMMERCIAL TAXES, ERNAKULAM. BY SPECIAL GOVERNMENT PLEADER FOR TAXES MR. SOJAN JAMES RESPONDENT/APPELLANT/ASSESSEE:: ------------------------ M/S.OPPOOTTIL AGENCIES, FERTILIZERS AGRO CHEMICAL, PRESTICIDES ETC. KOLARICKAL BAZAR, KOTTAYAM R,R1 BY SRI.M.PATHROSE MATTHAI (SR.) R,R1 BY SRI.JOHN RAMESH K.I.JOHN THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 15-12- 2011, ALONG WITH STRV. 560/2004, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: S.T.Rev. No. 486 of 2004 APPENDIX REVISION PETITIONER'S ANNEXURES : ANNEXURE A : A TRUE COPY OF THE ASSESSMENT ORDER FOR THE YEAR 1991 - '92 ANNEXURE B : A TRUE COPY OF THE ORDER OF THE FIRST APPELLATE AUTHORITY ANNEXURE C : A TRUE COPY F THE ORDER OF THE TRIBUNAL /TRUE COPY/ P.A. TO JUDGE (CR.) MANJULA CHELLUR, Ag. C.J. , T.R. RAMACHANDRAN NAIR J. & P.R. RAMACHANDRA MENON J. ~~~~~~~~~~~~~~~~~~~~~~~ S.T. Rev. Nos. 486 and 560 Of 2004 ~~~~~~~~~~~~~~~~~~~~~~~ Dated, this the 15th day of December, 2011 ORDER Manjula Chellur, Ag.C.J. These two revision petitions are before us by way of reference dated 12.09.2006. The reference reads as follows : “ The issue raised, that is classification of the item polystik compound is squarely covered by the decision of this court reported in State of Kerala v. Shaji Joseph (2003)11 KTR 210). In the said decision, this court has considered the nature and use of the product and held that the item is essentially an adhesive as its main purpose is to fix the rain guard to the rubber tree. The other purpose, such as prevention of leakage to the cut portion of the bark which protests the tree is found to be incidental. However, counsel for the respondent assessee has relied on an unreported decision of this court in T.R.C 448 of 2002, wherein this court has held that the item is a plant protection chemical. We find from the judgment that the later decision does not refer to S.T. Rev. Nos. 486 & 560 of 2004 :2: earlier judgment. Moreover, this court just followed the certificates issued by two authorities to hold that the item is a plant protection chemical. None of the experts who issued the certificates had stated that the item is plant protection chemical and what they have stated is that the item is chemical. We do not know what is the basis to hold that the chemical has plant-protection property. In fact, the other words used in the entry are pesticides and fungicides. It is common knowledge that polystik compound is essentially derived from bitumen, which is a petroleum product and it in no way is used as a chemical to protect plants. We are of the view that persons, who issued the certificates, based on which judgment is rendered by this court, are not competent to talk about chemicals protecting plants. We therefore do not approve the later decision of this court. We are of the view that since there is conflict of views expressed by two Division Benches, the matter should be referred to Full Bench. Accordingly, we refer this matter to Full Bench for decision by it. Registry will place the matter before the Honourable The Chief Justice for appropriate orders on posting”. 2. The controversy in these revision petitions is, whether the item polystik compound or the rain guard compound can be classified as an adhesive or a rain guard coat or a chemical for the protection of plants. S.T. Rev. Nos. 486 & 560 of 2004 :3: 3. According to the learned Government Pleader, the Rubber Board has published material, how rain guarding has to be processed. Literature on rain guarding process indicates what exactly the purpose for which rain guard compound is used i.e. only as an adhesive and not as a chemical. In other words, the learned Government Pleader contends, the property contained in this particular material has a great adhesive quality. Because of this quality to protect the tapping portion of the plant, so as to protect water entering when it is tapped, a guard is put around the trunk just above the place where the rubber is tapped. In order to put the rain guard as such, polythene material, kora cloth, stapler pin and rain guard compound are used. After putting the polythene cloth and a piece of kora cloth, stapler pin is used to attach the kora cloth and polythene material. A thin layer of rain guard compound is applied to the bark of the rubber plant, then a polythene cover is put around S.T. Rev. Nos. 486 & 560 of 2004 :4: the trunk, where it is cut. Then around the polythene, a kora cloth is tied up and again whole area is covered with rain guard compound as an adhesive. Twice this compound is used to protect the area from rain, in order to see that, the polythene sheets and kora cloth put around the trunk of the rubber plant does not come off during rainy season. 4. According to the learned counsel for the assessees/respondents, though the product in question has an adhesive quality, the purpose for which it is used is, no seepage occurs so far as the rubber plant is concerned. Therefore, it is only a rain proof material used to prevent seepage of water so as to obstruct any damage to the property, like fungus etc. According to him, due to heavy water getting in contact with the said portion of the rubber tree the possibility of decay or fungus to the trunk can occur during the rainy season, therefore, the rain guarding is done and this rain guard compound is one of the S.T. Rev. Nos. 486 & 560 of 2004 :5: items of the entire process of rain guarding, so as to see it acts as a water proof element above the trunk of the rubber plant. 5. The learned Government Pleader brings to our notice various decisions, including the literature on rain guarding process, explained by the Rubber Board. According to him, even if a product has more than one quality or purpose, the predominant use of the material, in other words, how it is marketed, is the criterion to decide what is the classification of the product rather than the actual use, a particular purchaser makes use of it. 6. As against this learned counsel for the respondents contends, the product how in common parlance is understood is nothing but how a common man understands, therefore, the certificate issued by the farmer/common man is the criterion to decide what is the predominant use of the product and not based on the technical terms or technical analysis of a S.T. Rev. Nos. 486 & 560 of 2004 :6: particular product. Hence, the certificates relied upon by assessees would indicate how the material is used as a protection chemical on the plants, therefore these certificates must be taken into consideration while considering the property of the chemical as such. According to him, the product in question is nothing but a chemical, which is used as a leak proof, protecting the plant from the rain water. The learned counsel for the assessees/respondents, Mr. John Ramesh, in support of his contentions relies upon the following citations, which would be referred to later; 1.(1999) 237 ITR 1 (Saraswathi Industrial Syndicate Ltd. Vs. Commissioner of Income Tax). 2.(2000) 243 ITR 855 (Commissioner of Income Tax Vs. D.L.F. United) 3.CDJ 1981 SC 221 (M/s Indo International Industries Vs. Commissioner of Sales Tax, Uttar Pradesh) S.T. Rev. Nos. 486 & 560 of 2004 :7: 4.(CDJ 1987 SC 372) = (1988) 68 STC 324) M/s Mukesh Kumar Aggarwal and Others Vs. State of Madhya Pradesh and 5.(2000) 118 STC 514 (State of A.P Vs. General Electronics Corporation) and As against this the learned Government Pleader relies upon the following citations which would also be referred to later: 1.(1992) 86 STC 95 (State of Gujarat Vs. Indian Petrochemicals Corporation Ltd.) 2.(1984) 55 STC 354 (State of Tamil Nadu Vs. Indian Eyelets Industries), 3.[2011] 39 VST 387 (P & H) (Excise and Taxation Officer Vs. T.R. Solvent Oil Pvt. Limited and another). 7. The genesis for the present reference are two judgments of this Court reported in State of Kerala Vs. S.T. Rev. Nos. 486 & 560 of 2004 :8: Shaji Joseph [(2003) 11 KTR 210 (Ker.)] and the latter unreported decision in the case of State of Kerala Vs. M/s Well Worth Engineers & Polymers Industrial Estate, Ettumanoor and connected matters (TRC No. 359 of 2002 and connected cases) dated 29.10.2004. 8. When the question arose before the Division Bench of this Court in (2003) 11 KTR 210 (Ker.) under which Entry of the Kerala General Sales Tax Act, the product polystick compound has to fall, their lordships after referring to the main purpose for which the rain guard compound is used, opined that, the purpose of the item in question was to use as an adhesive material in fixing rain guard on rubber tree for tapping during rainy reason. Therefore, the process involved is; clear the round surface of the tree, apply to it polystik adhesive, over which cloth is stitched, which is attached to the rain guard either in the form of a paper or a shade with the help of a stapler and over and above, a binding material may also be used to S.T. Rev. Nos. 486 & 560 of 2004 :9: prevent water leakage. Therefore, the item polystik compound is essentially an adhesive, going by its use and purpose but other purpose of preventing leakage of water is only an additional feature. Therefore, the assessing authority was justified in giving a finding, that the manufacturer and dealer knew well for what purpose it was purchased while transporting the classified item as “adhesive” in the transport document namely delivery note and Form 27B. In other words, their lordships held that, the item 3 of the First Schedule to the Act provides a general item as “adhesive” and the item in question “polystik compound” falls under the said general items. 9. In the latter decision of the Division Bench of this Court, there were two items, which came up consideration of the Bench, one is rubber coat and rain guarding compound. The contention of the State before the Bench was that the rubber coat is entirely different from a rain guard compound, because rain S.T. Rev. Nos. 486 & 560 of 2004 :10: guard compound is used as a material for fixing the rain guard on patta of a rubber during rainy season, whereas rubber coat though is applied, but it is applied as a chemical to protect the plants from fungicide.. etc. Hence, both the items are having different purposes. The Division Bench after referring to the certificates issued by the Director of Common Facility Service Centre, Department of Industries, Government of Kerala, which had the opportunity to see the sample of the rain guarding compound sent by M/s Wellworth Engineers & Polymers and by one Mr. K.T. Antony B.Sc (Eng.), M.Tech (Chemical Engineer), Enviro Designs & Equipments, Kochi, ultimately opined that, the rain guard compound is a chemical as per the certificates issued by the above Department, therefore opined that the rain guard compound is only a chemical like rubber coat. 10. When the controversy arose before Division Bench, whether rain guarding compound was a chemical or S.T. Rev. Nos. 486 & 560 of 2004 :11: otherwise, unfortunately, the earlier decision of this Court reported in (2003) 11 KTR 210 (Ker.) was not brought to the notice of the Division Bench. If only the said decision was brought to the notice of the lordships, the conflicting views would not have been there. However, the fact remains, because of these two conflicting views, later on, as stated above, this reference came to be made to a larger Bench. 11. It is pertinent to mention, subsequent to reference order, when matter came up before the Full Bench, on earlier occasions, two orders came to be made on different dates. The first order is dated 03.08.2009, wherein the Bench opined that the appellate Tribunal did not enter a finding on the fact that, whether polystik compound is used essentially as an adhesive or as a rain guard or as a plant protection chemical, and if there are more than one user, which is the predominant use to which the product is put to. Therefore, their lordships held, since the law has to S.T. Rev. Nos. 486 & 560 of 2004 :12: be decided on the basis of the facts established, and as it is a mixed question of fact and law, directed the Tribunal to give the parties an opportunity to adduce the evidence and enter a finding as to what is the predominant use of the product and six months time was granted to the Tribunal so as to enable the Tribunal to give a fact finding opinion. Later the matter came to be adjourned on two or three occasion, awaiting report from the Tribunal. 12. By order dated 26.11.2010, the Tribunal ultimately opined that, the polystik compound is used essentially as a sealant for the purpose of preventing water from leaking through the plastic rain guard into the tapping panel. With this fact finding, the matter was placed before us. 13. Though direction was to identify the product in question, whether a chemical or an adhesive, the Tribunal opined that, it was mainly used for preventing water from leaking through the plastic rain guard into S.T. Rev. Nos. 486 & 560 of 2004 :13: the tapping panel. There is no definite opinion, whether it is a chemical or an adhesive. We note from paragraph 3 of the orders of Tribunal; that the letter dated 05.03.2007 of the Chairman, Rubber Board addressed to the Secretary (Taxes), Government of Kerala, was one of the base for the opinion of the Tribunal, wherein it is noted that, the Chairman in the said letter has stated that rain guarding is a compound used not for its adhesive properties on the trees, but to act as a protectant fungicide. It acts as sealant, which protects the plant from the seepage of water on to the tapping panel. There is another letter, which was taken into consideration by the Tribunal, dated 06.09.1999 of the Rubber Protection Commissioner, who opined that, this is a plant protection compound, though is having bituminous base but is essentially a material used for protecting the tapping panel from infection due to fungus and other microbes and hence it should be classified as a plant S.T. Rev. Nos. 486 & 560 of 2004 :14: protection chemical. According to him rain guarding compound is used not for its adhesive properties on the trees but to act as a sealant to prevent seepage of water. The Tribunal has also referred to the method of rain guarding, described as per the book published Rubber Research Institute of India - a book on Natural Rubber. 14. With the above material, we have to decide, whether the product in question is a rain guard compound used as an adhesive or as a plant protection chemical or a sealant i.e. water proof to prevent the water seepage into the rubber tapping area. 15. The learned counsel for the assessee relies on several decisions. To contend that the High Court is not entitled to make statements on technical matter, without any material on record, he relied upon (1999) 237 ITR 1 (Saraswathi Industrial Syndicate Ltd. Vs. Commissioner of Income Tax). He also refers to (2000) 243 ITR 855 (Commissioner of Income Tax Vs. D.L.F. S.T. Rev. Nos. 486 & 560 of 2004 :15: United) to contend that the High Court has no power to reconsider the evidence and arrive at a conclusion contrary to that of the Tribunal. 16. He refers to CDJ 1981 SC 221 (M/s Indo International Industries Vs. Commissioner of Sales Tax, Uttar Pradesh). In this case controversy was, whether hypodermic clinical syringes could be regarded as “glassware” under Entry No. 39 of the First Schedule to the U.P. Sales Tax Act 1948 ? The lordships, after referring to the purpose for which hypodermic clinical syringes were used, opined that, though the expression 'glassware', dictionary meaning means 'articles made of glass', however, in commercial sense, glassware would never comprise articles like clinical syringes, thermometers, lactometers and the like which have specialised significance and utility. Therefore in popular or commercial parlance a general merchant dealing in “glassware” does not ordinarily deal in articles like clinical syringes, thermometers, S.T. Rev. Nos. 486 & 560 of 2004 :16: lactometres etc., which articles though made of glass are normally available in medical stores or with the manufacturers thereof like the assessee in that case. Ultimately, their lordships held that, the clinical syringes, which the assessee manufactured and sold cannot be considered as “glassware” falling under Entry 39 of the First Schedule of the Act. 17. He relies on (CDJ 1987 SC 372) M/s Mukesh Kumar Aggarwal and Others Vs. State of Madhya Pradesh, to contend that in a taxing statute words which are not technical expressions or words of art, but are words of everyday use, must be understood and given a meaning, not in their technical or scientific sense, but in a sense as understood in common parlance i.e. “that sense which people conversant with the subject matter with which the statute is dealing, would attribute to it”. In other words, their lordships opined, the words must be used in popular sense and not in a technical or scientific sense. In the above case, S.T. Rev. Nos. 486 & 560 of 2004 :17: timber was the article, which came up for consideration. While referring to the timber, though the timber has two meanings, ultimately, their lordships held the popular meaning of the same has to be taken into consideration and not technical sense. 18. He places reliance upon (2000) 118 STC 514 (State of A.P Vs. General Electronics Corporation), wherein their lordships had an occasion to consider what exactly M-seal means, whether, it is an adhesive or not. Ultimately, it was held M-seal is not an adhesive and it is not covered by Entry 191 of the First Schedule to the Andhra Pradesh General Sales Tax Act of 1957. According to them, it was used as a blocking agent to block the leakages of liquids and is covered by Entry general goods. 19. He also relies upon (1988) 68 STC 324 (Mukesh Kumar Agarwal & Co. Vs. State of Madhya Pradesh and Others), to contend that common parlance test is to be applied and not user test. S.T. Rev. Nos. 486 & 560 of 2004 :18: 20. As against this, the learned Government Pleader relies upon (1992) 86 STC 95 (State of Gujarat Vs. Indian Petrochemicals Corporation Ltd.). In this case, the question was whether linear alkyl benzene (LAB) is a petroleum product or not. Their lordships held that though linear alkyl benzene is manufactured from kerosene and benzene, both petroleum products, has to be treated as a petroleum product, unless it can be shown that it ceased to be one after manufacture, especially since persons dealing in the commodity treat (LAB) as a petroleum product. 21. He relies upon (1984) 55 STC 354 (State of Tamil Nadu Vs. Indian Eyelets Industries), wherein the question arose before their lordships was whether Fiksol - S.69 is a chemical, which attracts expression “dyes and chemicals” in Entry 138 of First Schedule to Tamil Nadu General Sales Tax Act . Their lordships held that Fiksol - S.69 is an all purpose adhesive used S.T. Rev. Nos. 486 & 560 of 2004 :19: for binding various surfaces such as leather, rubber etc. though made of certain ingredients which are in the form of chemicals, cannot be treated to be a chemical by itself since the use of the product was adhesive for binding purpose, therefore any chemical effect or result in any change cannot be the criterion, ultimately held that, it would not attract the expression “dyes and chemicals”. 22. He also relied upon [2011] 39 VST 387 (P & H) (Excise and Taxation Officer Vs. T.R. Solvent Oil Pvt. Limited and another). The question therein was what exactly the “de-oiled cake or castor, neem and mahua” means. Their lordships ultimately held that different commodities are classified on the basis of their use and denomination. Generally, a tariff entry is construed by applying common parlance test by considering what sense is to be attributed to an entry in its popular sense by people conversant with the subject matter. S.T. Rev. Nos. 486 & 560 of 2004 :20: 23. Among these arguments and decisions, we also have Rubber Board literature on rain guarding. As per rain guarding literature, rain guarding is essential for regular tapping and during rainy season tapping can be carried out by fixing polythene rain guard to the trunk above the tapping cut. It says this process is undertaken to prevent the loss of tapping days during the rainy season. A detailed method of rain guarding as stated in the literature reads as under : Method of rainguarding The different steps involved in polythene skirt rainguarding are (Plate 34.b) given below: ●Frill the polythene at equal distance using a sewing machine, ensuring 40 percent reduction in length. ● Using a scraper, lightly scrape the dry bark 10 cm above the tapping cut and parallel to it (Plate 35.a). The scraped brand should extend a minimum of 15 cm from front and back end of the tapping cut. ● After removing the dust, firmly smear a thin film (roughly 2 mm thick and 4 cm wide) of rainguard compound on the scraped band (Plate 35.b) S.T. Rev. Nos. 486 & 560 of 2004 :21: ● Fix the frilled polythene on this, ensuring that only the lower half (2 cm) of the rainguard compound is covered by the polythene. ●Fix the “kora” cloth ribbon of around 2 cm width firmly using suitable stapler pins over the cut end of the polythene in such a that 1 cm width of the cloth will be over the polythene and the remaining portion over the compound (Plate 35.c). It is desirable to use medium- quality cloth, as it ensures infiltration of the rainguard compound and thereby proper binding. ●Then apply the second coat of the compound to completely cover the cloth ribbon (Plate 35.d) 24. Apart from this, we also have the benefit of literature of products i.e. well coat, stick well, well stick and fix well under the brand name of infomark, manufactured by Well Worth Engineers & Polymers Industrial Estate, Ettumanoor, who was the respondent in TRC No. 359 of 2002 & connected cases (latter judgment of this Court), wherein their lordships held the product as a chemical. The information given by the manufacturing company as per S.T. Rev. Nos. 486 & 560 of 2004 :22: the literature shows, well coat is a protection compound and stick well is a high quality economic and easy to use rain guarding compound, which is a paste used when fixing the plastic sheets to rubber trees to facilitate the tapping during rainy days. Well stick is also their product with a high quality of rain guarding compound. Fix well is another rain guarding compound meant for a customer, who looks primarily for best effect. As a matter of fact, both stick well and well stick are used for the same purpose i.e. for pasting the plastic sheets to rubber sheet, as per this literature. The rain guarding literature given by the Rubber Board refers to rain guard compound mainly containing bituminous chemical. Bitumen is a non- crystalline viscous material, black or dark