Case: Karnataka Forest Devlp. Corporation Limited Vs. Cantreads Private Limited &amp; Others

3.The respondent, a private limited company, negotiated with the State of Karnataka in 1979 for supply of 60 tonnes of natural rubber of grades RMA 1 to V per month for a period of five years. A year later State Forest Corporation was constituted. The State, therefore, transferred the liability of supply of the quota of rubber to the Corporation. In the meantime the Chief Conservator of Forest issued notification fixing seigniorage on raw smoked rubber. The State Government informed the company, that the supply of rubber fromonwards would be at the rate mentioned in the orders made by the Chief Conservator of Forests under Sectionof the Act. The company challenged that fixation of the seigniorage by the Chief Conservator of Forests by a writ petition filed in the High Court. The writ petition was allowed by the learned Single Judge and it was held that the natural rubber, which has been agreed to be purchased by the Company from the Corporation or the State, being in the shape of RMA sheets, was not forest produce. While the State filed appeal against that order of the Single Judge, the Company filed writ petition for refund of the amount paid by it. Since the controversy in the appeal and the writ petition was the same, the Division Bench decided both, the writ petition and appeal, by a common order, agreeing with the learned Single Judge that latex, which is the natural produce, hardened by application of the sulphuric acid and given the shape or form of sheets and thereafter dried with the help of smoke and graded into grades of I to V could not be treated as forest produce, for the process applied resulted in bringing out a commodity which was different from latex, and therefore, no tax could be levied on it.

Reasoning:
7. The High Court found that since what was sold by the appellant was not rubber obtained from the trees but sheet s or blocks of rubber which were chemically and mechanically processed it could not be held to be forest produce. The High Court applied the test of commercial parlance and held that where latex produced from the tree underwent processing howsoever meager it was the resultant produce obtained by addition of sulphuric acid could not be treated to be forest produce. It was further found that since Government rubber plantations itself treated grade rubber sheets as different from wet latex while selling the same in auction it could not claim that the latex after processing remained the same.Neither reasoning appears to be well founded. The meaning of the word caoutchouc has been discussed. Latex is the modem name for caoutchouc. It is nothing but natural rubber. Caoutchouc or latex means not only milky substance obtained from the trees but it included all milky substance processed, till it is made marketable. Since the processing does not result in bringing out a new comm odity but it preserves the same and renders it fit for being marketed, it does not change its character. It was caoutchouc or latex when it was obtained from the trees, it continued to be caoutchouc or latex when it was treated by sulphuric acid and continued to be so even after it is dried with smoke to obtain the shape of sheets.8. The test of commercial parlance while considering entries in Sales Tax Act was evolved as the tax under the Sales Tax enactments is normally either on sale or purchase or on manufacture or import etc. Therefore, it is the understanding or the knowledge of the item by the common man or persons dealing in it in the market and not in the technical or botanical sense which was accepted by this Court as the deciding factor. But that test cannot be applied while considering the definition of forest produce.