KOTTAYAM M/S.KAILAS RUBBER COMPANY LTD., P.O. BOX NO. 1, KOTTAYAM v. MENON MEERA V.MENON SREEJITH R.NAIR K.KRISHNA

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR & THE HONOURABLE DR. JUSTICE KAUSER EDAPPAGATH FRIDAY, THE 19TH DAY OF JANUARY 2024 / 29TH POUSHA, 1945 OT.REV NO. 109 OF 2021 AGAINST THE ORDER OF TAVAT 276/2014 OF KERALA VALUE ADDED TAX /AGRL.INCOME TAX & SALES TAX APPELLATE TRIBUNAL ADDL. BENCH, REVISION PETITIONER/APPELLANT/APPELLANT/ASSESSEE: KOTTAYAM M/S.KAILAS RUBBER COMPANY LTD., P.O. BOX NO. 1, KOTTAYAM, REPRESENTED BY ITS DIRECTOR, G.J. ANCHERIL. BY ADVS. HARISANKAR V. MENON MEERA V.MENON R.SREEJITH K.KRISHNA RESPONDENT/RESPONDENT/REVENUE: STATE OF KERALA, REPRESENTED BY ITS SECRETARY , TAXES DEPARTMENT, GOVT. SECRETARIAT, THIRUVANANTHAPURAM-695 001 BY SR.GP-V.K.SHAMSUDHEEN THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR ADMISSION ON 19.01.2024, ALONG WITH OT.REV.107/2021 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: OT.REV NO. 107 OF 2021 & Cont. Cases 4 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR & THE HONOURABLE DR. JUSTICE KAUSER EDAPPAGATH FRIDAY, THE 19TH DAY OF JANUARY 2024 / 29TH POUSHA, 1945 OT.REV NO. 110 OF 2021 AGAINST THE ORDER OF TAVAT 277/2014 OF KERALA VALUE ADDED TAX /AGRL.INCOME TAX & SALES TAX APPELLATE TRIBUNAL ADDL. BENCH, REVISION PETITIONER/APPELLANT/APPELLANT/ASSESSEE: KOTTAYAM M/S.KAILAS RUBBER COMPANY LTD., P.O. BOX NO. 1, KOTTAYAM, REPRESENTED BY ITS DIRECTOR, G.J. ANCHERIL. BY ADVS. HARISANKAR V. MENON MEERA V.MENON R.SREEJITH K.KRISHNA RESPONDENT/RESPONDENT/REVENUE: STATE OF KERALA, REPRESENTED BY ITS SECRETARY , TAXES DEPARTMENT, GOVT. SECRETARIAT, THIRUVANANTHAPURAM-695 001 BY SR.GP-V.K.SHAMSUDHEEN THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR ADMISSION ON 19.01.2024, ALONG WITH OT.REV.107/2021 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: OT.REV NO. 107 OF 2021 & Cont. Cases 5 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR & THE HONOURABLE DR. JUSTICE KAUSER EDAPPAGATH FRIDAY, THE 19TH DAY OF JANUARY 2024 / 29TH POUSHA, 1945 OT.REV NO. 111 OF 2021 AGAINST THE ORDER OF TAVAT 275/2014 OF KERALA VALUE ADDED TAX /AGRL.INCOME TAX & SALES TAX APPELLATE TRIBUNAL ADDL. BENCH, REVISION PETITIONER/APPELLANT/APPELLANT/ASSESSEE: KOTTAYAM M/S.KAILAS RUBBER COMPANY LTD., P.O. BOX NO. 1, KOTTAYAM, REPRESENTED BY ITS DIRECTOR, G.J. ANCHERIL. BY ADVS. HARISANKAR V. MENON MEERA V.MENON RESPONDENT/RESPONDENT/REVENUE: STATE OF KERALA, REPRESENTED BY ITS SECRETARY , TAXES DEPARTMENT, GOVT. SECRETARIAT, THIRUVANANTHAPURAM-695 001 BY SR.GP-V.K.SHAMSUDHEEN THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR ADMISSION ON 19.01.2024, ALONG WITH OT.REV.107/2021 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: OT.REV NO. 107 OF 2021 & Cont. Cases 6 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR & THE HONOURABLE DR. JUSTICE KAUSER EDAPPAGATH FRIDAY, THE 19TH DAY OF JANUARY 2024 / 29TH POUSHA, 1945 OT.REV NO. 113 OF 2021 AGAINST THE ORDER OF TAVAT 274/2014 OF KERALA VALUE ADDED TAX /AGRL.INCOME TAX & SALES TAX APPELLATE TRIBUNAL ADDL. BENCH, REVISION PETITIONER/APPELLANT/APPELLANT/ASSESSEE: KOTTAYAM M/S.KAILAS RUBBER COMPANY LTD., P.O. BOX NO. 1, KOTTAYAM, REPRESENTED BY ITS DIRECTOR, G.J. ANCHERIL. BY ADVS. HARISANKAR V. MENON MEERA V.MENON RESPONDENT/RESPONDENT/REVENUE: STATE OF KERALA, REPRESENTED BY ITS SECRETARY , TAXES DEPARTMENT, GOVT. SECRETARIAT, THIRUVANANTHAPURAM-695 001 BY SR.GP-V.K.SHAMSUDHEEN THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR ADMISSION ON 19.01.2024, ALONG WITH OT.REV.107/2021 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: OT.REV NO. 107 OF 2021 & Cont. Cases 7 O R D E R Dr. A.K.Jayasankaran Nambiar, J. As all these O.T. Revisions involved a common issue, they are taken up for consideration together and disposed of by this common judgment.

2. The brief facts necessary for disposal of these O.T. Revisions are as follows: The revision petitioner is a company holding rubber plantations. During the assessment years from 2005-06 to 2010-11, the petitioner had entered into an agreement with a third party by which the third party was granted a right to tap and remove rubber crop (latex) from approximately 7000 rubber trees standing in an area of approximately 60 acres of the petitioner's land. The agreement envisaged a consideration of Rs.7,00,000/- to be paid to the petitioner in 4 instalments spread over the year in question, and permitted the third party licensee to extract the rubber latex from the rubber trees during the period of the licensee.

3. The assessing authority under the Kerala Value Added Tax Act, 2003 (for short 'the KVAT Act') issued notice under Section 25(1) of the KVAT Act, proposing to assess the turnover covered by the agreement under the KVAT Act by treating the transaction as a sale of latex by the petitioner. Although the petitioner filed a detailed reply to the said notice, the demand for tax on the consideration received by the petitioner company was confirmed by the assessing authority who found inter alia that the petitioner had actually sold the latex that could be procured from the standing rubber trees for a consideration. It was in particular found that the petitioner had effected a sale of latex and OT.REV NO. 107 OF 2021 & Cont. Cases 8 disguised the sales turnover as licence fee with the ulterior motive of evading tax legitimately due on the sale proceeds. Reliance was placed on the definition of 'Agriculturist' under Section 2(ii) and 'turnover' under Section 2(lii) of the KVAT Act, to find that the petitioner company would not come under the definition of 'Agriculturist' for the purposes of excluding the turnover pertaining to the agricultural or horticultural produce grown by it, from the definition of 'turnover' for the purposes of levy of tax. The contention of the petitioner that the agreement entered into with the third party collector of the latex from the trees was more in the nature of a grant of a profit a prendre was also rejected by the assessing authority, who, as stated above, proceeded to confirm the demand of tax on the petitioner under the KVAT Act.

4. Although the petitioner preferred further appeals before the 1st Appellate Authority and thereafter before the Kerala Value Added Tax Appellate Tribunal, the said appeals did not meet with any degree of success and they were dismissed by the said authorities. It is against the order of dismissal by the Kerala Value Added Tax Appellate Tribunal that the petitioner is before us through these revision petitions wherein the following questions of law are raised: A) Whether on the facts and circumstances of the case, is not findings of the learned tribunal perverse? B) Whether on the facts and in the circumstances of the case, has not the appellate tribunal erred in finding that as regards the income received by the revision petitioner from out of the rubber trees provided for slaughter tapping to third parties, is taxable under the provisions of the KVAT Act? Ought not the learned tribunal have held that the receipts of the revision petitioner from out of the slaughter tapping agreements is only a licensee fee and there is no sales tax liability under the provisions of the KVAT Act? C) OT.REV NO. 107 OF 2021 & Cont. Cases 9

5. We have heard Sri.Harisankar V. Menon, the learned counsel for the revision petitioner in all these revision petitions and Sri.V.K.Shamsudheen, the learned Government Pleader on behalf of the Revenue.

6. On a consideration of the facts and circumstances of the case and also the submission made across the bar, we find ourselves unable to accept the contention of the Sri.Harisankar V. Menon, the learned counsel for the revision petitioner that the agreement entered into with the third party must be viewed as the grant of a profit a prendre. While the terms of the agreement are specific when it states that the permission given to the 3rd party is to undertake a processes of tapping of the rubber trees and thereafter appropriate the latex obtained thereby to himself, it is also significant that there is no provision in the agreement which deals with how any part of the latex so extracted should be dealt with after the expiry of the licence period. We are of the view that for the purposes of the Kerala Value Added Tax Act, there is a transfer of the property in the latex that is extracted from the rubber trees from the petitioner to the third party. It is also relevant that the consideration that flowed from the third party to the petitioner was for the latex that was obtained by him and not merely for the right to collect the latex. The reliance placed by the learned counsel on the decision of the Karnataka High Court in Muninagalah v. State of Karnataka and Others [1997 (106) STC 294] also cannot come to his aid since we find that, that was a case that concerned the grant of a right to collect tamarind from specified forest areas which was conferred on the forest contractor through a public auction as per the provisions of the Karnataka Forest Act, 1964. While the contractor in the said case was given a permission to collect, remove and dispose tamarind, the court found on a perusal of the agreement that it was not one for the sale of tamarind but more in the nature of the grant of a right of profit a OT.REV NO. 107 OF 2021 & Cont. Cases 10 prendre and hence there was no authority for the Karnataka State Government to levy sales tax on the said transaction. We find the agreement in the instant case to be wholly different in nature, more so when it is not in dispute that unlike a Government grant over forest land the right granted in these cases was to collect latex (goods) from rubber trees owned and cultivated by the petitioner Company. The only reason why the petitioner was called upon to pay tax on the sale of latex, despite being an agriculturalist in the general sense of the term, is because the definition of 'agriculturalist' and 'turnover' respectively under the KVAT Act excluded Companies. In the result, we see no reason to interfere with the well reasoned order of the assessing authority as affirmed by the 1st Appellate Authority and the Tribunal. These OT revisions are therefore disposed by answering the questions of law raised by the petitioner against the assessee and in favour of the revenue. DR. A.K.JAYASANKARAN NAMBIAR JUDGE Sd/- Sd/- DR. KAUSER EDAPPAGATH JUDGE AS OT.REV NO. 107 OF 2021 & Cont. Cases 11 APPENDIX OF OT.REV 107/2021 PETITIONER'S ANNEXURES: ANNEXURE A ANNEXURE B ANNEXURE C ANNEXURE D COPY OF AGREEMENT ENTERED BETWEEN THE PETITIONER AND MR. M.C. JOSEPH. COPY OF ASSESSMENT ORDER ISSUED BY THE COMMERCIAL TAX OFFICER, KOTTAYAM FOR THE YEAR 2005-06. COPY OF APPELLATE ORDER OF THE DY. COMMISSIONER (APPEALS), KOTTAYAM, ON DEPUTATION TO ERNAKULAM. COPY OF ORDER IN TA (VAT) NO. 273/2014 ISSUED THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, KOTTAYAM. OT.REV NO. 107 OF 2021 & Cont. Cases 12 APPENDIX OF OT.REV 108/2021 PETITIONER'S ANNEXURES ANNEXURE A ANNEXURE B ANNEXURE C ANNEXURE D COPY OF AGREEMENT ENTERED BETWEEN THE PETITIONER AND MR.M.C.JOSEPH. COPY OF ASSESSMENT ORDER ISSUED BY THE COMMERCIAL TAX OFFICER, KOTTAYAM FOR THE YEAR 2010-11. COPY OF APPELLATE ORDER OF THE DY.COMMISSIONER (APPEALS), KOTTAYAM, ON DEPUTATION TO ERNAKULAM. COPY OF ORDER IN TA (VAT) NO.278/2014 ISSUED THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, KOTTAYAM. OT.REV NO. 107 OF 2021 & Cont. Cases 13 APPENDIX OF OT.REV 109/2021 PETITIONER'S ANNEXURES ANNEXURE A ANNEXURE B ANNEXURE C ANNEXURE D COPY OF AGREEMENT ENTERED BETWEEN THE PETITIONER AND MR. M.C.JOSEPH DATED 1.4.2008. COPY OF ASSESSMENT ORDER ISSUED BY THE COMMERCIAL TAX OFFICER, KOTTAYAM FOR THE YEAR 2008-09 COPY OF APPELLATE ORDER OF THE DY. COMMISSIONER (APPEALS), KOTTAYAM, ON DEPUTATION TO ERNAKULAM. COPY OF ORDER IN TA(VAT) NO.276/2014 ISSUED THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, KOTTAYAM. OT.REV NO. 107 OF 2021 & Cont. Cases 14 APPENDIX OF OT.REV 110/2021 PETITIONER'S ANNEXURES ANNEXURE A ANNEXURE B ANNEXURE C ANNEXURE D COPY OF AGREEMENT ENTERED BETWEEN THE PETITIONER AND MR.M.C.JOSEPH DATED 1.4.2008. COPY OF ASSESSMENT ORDER ISSUED BY THE COMMERCIAL TAX OFFICER, KOTTAYAM FOR THE YEAR 2009-10 DATED 7.2.2013. COPY OF APPELLATE ORDER OF THE DY. COMMISSIONER (APPEALS), KOTTAYAM, ON DEPUTATION TO ERNAKULAM DATED 30.11.2013. COPY OF ORDER IN TA(VAT) NO.277/2014 ISSUED THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, KOTTAYAM. OT.REV NO. 107 OF 2021 & Cont. Cases 15 APPENDIX OF OT.REV 111/2021 PETITIONER'S ANNEXURES ANNEXURE A ANNEXURE B ANNEXURE C ANNEXURE D COPY OF AGREEMENT ENTERED BETWEEN THE PETITIONER AND MR. M. C. JOSEPH. COPY OF ASSESSMENT ORDER ISSUED BY THE COMMERCIAL TAX OFFICER, KOTTAYAM FOR THE YEAR 2007-08. COPY OF APPELLATE ORDER OF THE DY. COMMISSIONER (APPEALS), KOTTAYAM, ON DEPUTATION TO ERNAKULAM. COPY OF ORDER IN TA(VAT) NO.275/2014 ISSUED THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, KOTTAYAM. OT.REV NO. 107 OF 2021 & Cont. Cases 16 APPENDIX OF OT.REV 113/2021 PETITIONER'S ANNEXURES ANNEXURE A ANNEXURE A1 ANNEXURE B ANNEXURE C ANNEXURE D COPY OF AGREEMENT ENTERED BETWEEN THE PETITIONER AND MR. M. C. JOSEPH. COPY OF AGREEMENT ENTERED BETWEEN THE PETITIONER AND MR. M. C. JOSEPH. COPY OF ASSESSMENT ORDER ISSUED BY THE COMMERCIAL TAX OFFICER, KOTTAYAM FOR THE YEAR 2006-07. COPY OF APPELLATE ORDER OF THE DY. COMMISSIONER (APPEALS), KOTTAYAM, ON DEPUTATION TO ERNAKULAM. COPY OF ORDER IN TA(VAT) NO.273/2014 ISSUED THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, KOTTAYAM.