Sales Tax — industrial exemption for compound rubber · F2J-C-2931
M/s MRF Ltd. v. State of Kerala & Ors.
VALIDATED · ACTUAL COURT DOCUMENTSource transparency: The local PDF is an actual court document retained from the complete public source. The official court portal is recorded separately. Verify the official record and subsequent history before reliance.
Holding (ratio)
Compound rubber did not fall within the negative list merely because MRF used it as an intermediate product in tyres; the earlier Division Bench construction controlled materially similar exemption notifications.
Operative order (extract)
The denial was set aside to that extent and consequential exemption orders were directed within two months.
Scope limits
The holding is confined to the issues actually decided in the retained judgment; no view is attributed to the court on questions expressly left open or remanded.
Sources and completeness
- PDF status
- Complete searchable public court copy, retained unchanged
- PDF origin
- Downloaded unchanged from the complete public court-copy source
- PDF pages
- 14
- Extracted words
- 2,396
- PDF SHA-256
748aeea525e799c265450e47f80f17b1f83764cdcea8b8874c0133704a7b15a5
Complete searchable judgment text
2026:KER:62870
CNR : KLHC010915982022
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE HARISANKAR V. MENON
FRIDAY, THE 14TH DAY OF AUGUST 2026 / 23RD SRAVANA, 1948
WP(C) NO. 42200 OF 2022
PETITIONER:
M/S. MRF LIMITED
P.B NO. 2, VADAVATHOOR P.O, KOTTAYAM-686 010;
REPRESENTED BY ITS CHIEF ACCOUNTS MANAGER MR.
MUKUL CHANDRA GOLE.
BY ADVS.
SRI.KURYAN THOMAS
SRI.M.GOPIKRISHNAN NAMBIAR
SHRI.K.JOHN MATHAI
SRI.JOSON MANAVALAN
SHRI.PAULOSE C. ABRAHAM
SHRI.RAJA KANNAN
RESPONDENTS:
1 STATE OF KERALA
REPRESENTED BY ITS SECRETARY TO GOVERNMENT, TAXES
DEPARTMENT, SECRETARIAT,
THIRUVANANTHAPURAM - 695 001
2 THE STATE LEVEL COMMITTEE ON SALES TAX EXEMPTION
(LARGE & MEDIUM INDUSTRIES)
REPRESENTED BY ITS MEMBER SECRETARY, VIKAS BHAVAN,
THIRUVANANTHAPURAM-695 033
W.P.(C) No.42200 of 2022
2026:KER:62870
CNR : KLHC010915982022
2
3 THE DIRECTOR
DIRECTORATE OF INDUSTRIES & COMMERCE, 3RD FLOOR,
VIKAS BHAVAN,
THIRUVANANTHAPURAM-695 033.
4 ADDITIONAL COMMISSIONER (GENERAL)
STATE GOODS & SERVICES TAX DEPARTMENT, 8TH FLOOR,
TAX TOWER, KILLIPPALAM, KARAMANA P.O,
THIRUVANANTHAPURAM-695 002
BY ADV. SMT. HARIMA HARIHARAN, GP
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD
ON 14.08.2026, THE COURT ON THE SAME DAY DELIVERED THE
FOLLOWING:
W.P.(C) No.42200 of 2022
2026:KER:62870
CNR : KLHC010915982022
3
JUDGMENT
The petitioner is a company engaged in running a Medium-
Scale Industrial Unit, stated to be engaged in the manufacture
and sale of “tyres, tubes, tread rubber”, etc. The petitioner
sought for the benefit of exemption from payment of tax as
provided under the provisions of S.R.O. No.1729/1993,
representing the “additional investments” carried out in its unit,
as well as “modernization”. As regards the additional
investment carried out in the unit, Ext.P2 is the eligibility
certificate issued by the Director of Industries and Commerce
(DIC) - 3rd respondent. As regards the modernization carried out,
Ext.P5 is the eligibility certificate issued by the DIC. On the
basis of Exts.P2 and P5 issued as above, the Deputy
Commissioner (General) sought to issue Exts.P3 and P6 orders
granting exemption. A reference to Ext.P3 would show that with
respect to “compound rubber” manufactured by the petitioner
among other items, the benefit of exemption is sought to be
restricted upto 14.01.1998, seeking to place reliance on the
W.P.(C) No.42200 of 2022
2026:KER:62870
CNR : KLHC010915982022
4
amendment to S.R.O. No.1729/1993 carried out pursuant to
S.R.O. No.38/1998 with effect from 15.01.1998. The orders of
the Deputy Commissioner (General) were further challenged by
the petitioner before the State Level Committee (SLC). The SLC
by the proceedings at Ext.P10 considered the appeal filed also
with reference to the judgment of a Division Bench of this Court
in State of Kerala v. M.R.F Limited., [(2016) 90 VST 304
(Ker)], seeking to reject the appeal filed as above. It is in the
afore circumstance, the petitioner has filed the captioned writ
petition seeking to challenge Ext.P10 order issued by the SLC.
2. Sri. Kuryan Thomas, the learned counsel for the
petitioner, sought to rely on the notification issued under S.R.O.
No.1729/1993, as well as the negative list introduced pursuant
to S.R.O. No.38/1998, and would point out that even with
respect to a similar interdiction contained under S.R.O.
No.642/1981, as amended by S.R.O. No.1516/1990, a Division
Bench of this Court had considered the issue specifically with
reference to the product in question and found that “compound
rubber”, manufactured by the petitioner, could not be
W.P.(C) No.42200 of 2022
2026:KER:62870
CNR : KLHC010915982022
5
considered to be a product which is only subjected to a
processing activity so as to deny the benefit of exemption.
Therefore, according to him, the principles laid down by the
Division Bench in MRF (supra) has to apply as regards the claim
under S.R.O. No.1729/ 1993 also.
3. Per contra, Smt.Harima Hariharan, the learned
Government Pleader for the respondents, would point out that
the notification considered by the Division Bench in MRF (supra)
and the notification on the basis of which exemption is claimed
by the petitioner in the case at hand are, different. Hence, the
principles laid down would not have any application to the facts
of the case at hand, according to her.
4. I have considered the rival contentions, as well as the
connected records.
5. It is not in dispute that S.R.O. No.1729/1993, was
sought to be amended by S.R.O. No.38/1998, including a
negative list with respect to certain processes which shall not be
deemed as “manufacture” for the purpose of notification so as
to avail the benefit. Clause (h) is added by S.R.O. No.38/1998
W.P.(C) No.42200 of 2022
2026:KER:62870
CNR : KLHC010915982022
6
and the same reads as under:-
“(h) conversion of rubber latex into centrifugal
latex, raw rubber sheet, ammoniated latex, crepe
rubber, crumb rubber, or any other item falling
under entry 110 of the First Schedule to the
Kerala General Sales Tax Act, 1963 or treating
the raw rubber in any form with chemicals to
form a compound of rubber by whatever name
called.”
6. Straight away, reference may also be made to the
provisions of S.R.O. No.1516/1990, which sought to amend
S.R.O. No.642/1981 by explaining what is “finished rubber
product” in the following lines:-
“Explanation – Finished rubber product for the
purpose of the notification shall mean any goods
manufactured, utilising rubber in any form
coming under entry 161 of the First Schedule to
the Act as one of the raw materials and includes
tread rubber coming under entry 200 of the First
Schedule of the Act, but shall not include any
form or rubber taxable at the point of last
purchase in the State or which are subjected to
processing by mixing with chemicals, gas,
fumigation or any other similar process to make
any compound of rubber”
W.P.(C) No.42200 of 2022
2026:KER:62870
CNR : KLHC010915982022
7
It is with reference to these negative clause and the explanation,
the question as to whether the product manufactured-
compound rubber- is to be extended the benefits of exemption
requires to be considered.
7. At the first blush, from a reading of clause (h)
introduced by S.R.O. No.38/1998 in S.R.O. No.1729/1993, the
contention raised by the revenue appears to be attractive.
8. At the same time, this Court notices that the Division
Bench in MRF (supra) had elaborately considered the question
as to whether the compound rubber manufactured by the
petitioner could be considered to be a “finished product” with
specific reference to the exclusion pursuant to the explanation
added under S.R.O. No.1516/1990. The Division Bench,
considered the certificates issued by various persons in the
industry as also the manufacturing process carried out by the
petitioner, for the manufacture of “compound rubber” and found
as under:-
“Having regard to the materials produced by
both the sides after the order of remand, it
cannot but be said that the overwhelming
W.P.(C) No.42200 of 2022
2026:KER:62870
CNR : KLHC010915982022
8
scientific opinion coming through the experts in
the field of rubber and polymer technology is that
compound of rubber or rubber compound, which
is the product of the assessee’s unit in question,
is a finished rubber product. It is a product made
by bringing together all of the ingredients
required to make a component, according to the
required properties. The component is essentially
a finished rubber product and is not merely one
which is a result of mixing with chemicals, gas,
fumigation, etc., or any other process similar to
mixing with chemicals, gas, fumigation, etc. As
would be reflected from the affidavit filed on
behalf of the Department after remand and
referred to in paragraph No.11 above, what the
Department appears to suggest is that whatever
comes out of the process in the assessee’s unit
within the State is only an intermediary product
to be ultimately utilised in the manufacturing
process of the assessee in its business of
production of tyres and tubes, which activity is
carried out outside the State. If this suggestion
is to be accepted, we have to dispel the
credibility and evidentiary value of the view of
the experts that the processing of rubber in such
manner as is noted in those affidavits is a
process of manufacture and such activity need
W.P.(C) No.42200 of 2022
2026:KER:62870
CNR : KLHC010915982022
9
not by itself conclude in the production of tyres
and tubes. The product that comes out of the
process in the assessee’s unit in Kerala is itself a
rubber product which has to be treated as
finished one for the purpose for which it is put to
use, including by person who purchase it as such.
The evidence by way of affidavits of experts
tendered on behalf of the assessee corroborates
each other and the evidentiary value of such
evidence of experts clearly outweighs the views
in annexure A5 certificate. When evidence of
experts are tendred and when the expertise of
the persons tendering such evidence is also
established, such materials can be rebutted only
through such contra evidence as could be held to
be of more evidentary value on comparison by
competitive evaluation by a duly informed
adjudicator. See for support, the decision of the
honourable Supreme Court of India in Collector of
Central Exercise, Baroda v. Ambalal Sarabhai
Enterprise (P.) Ltd. [1990] 77 STC 190 (SC);
[1990] 185 ITR 87 (SC); [1989] 43 ELT 214. There
is no rebuttal evidence from the side of the State
discharging its burden which it carried following
the clear terms of the order of remand made by
the apex court.”
Thus, it is categorically found by the Division Bench that
W.P.(C) No.42200 of 2022
2026:KER:62870
CNR : KLHC010915982022
10
“compound rubber” is essentially a finished rubber product and
is not merely one which is a result of mixing with chemicals, gas,
fumigation etc., or any other similar process so as to take it out
of the benefit of exemption under S.R.O. No.1516/1990. It is
categorically found that compound rubber in itself is a finished
product, which can be used by the petitioner herein or similarly
placed persons in the manufacture of other products.
9. Thus, with reference to S.R.O. No.1516/1990, this
Court categorically found that compound rubber cannot be
considered to be covered by the negative clause introduced by
S.R.O. No.1516/1990.
10. As already noticed the explanation introduced under
S.R.O. No.1516/1990 and the negative list introduced as per
clause (h) pursuant to S.R.O. No.38/1998 are more or less
worded similarly.
11. When that be so, I am of the opinion that the
principles laid down by the Division Bench in MRF (supra)
though with reference to S.R.O. No.1516/1990 would have to
apply as regards the eligibility of the petitioner for the benefit of
W.P.(C) No.42200 of 2022
2026:KER:62870
CNR : KLHC010915982022
11
exemption under S.R.O. No.1729/1993 also.
12. Though the State Level Committee had also taken
into account the principles laid down by the Division Bench in
MRF (supra), the issue has not been addressed with specific
reference to the wordings of these two notifications as noticed
above.
13. Therefore, I am of the opinion that that the petitioner
is entitled to succeed. Hence, this writ petition would stand
ordered as under:-
i. Ext.P10 proceedings of the State Level
Committee, to the extent, the benefit of exemption
claimed as regards “compound rubber”
manufactured by the petitioner is denied, is set
aside.
ii. it is held that the petitioner would also be entitled
for the benefit of exemption pursuant to S.R.O.
No.1729/1993 as regards “compound rubber” and
the said claim is not to be curtailed with reference
to negative list at clause (h) introduced by S.R.O.
W.P.(C) No.42200 of 2022
2026:KER:62870
CNR : KLHC010915982022
12
No.38/ 1998.
iii. Consequential orders to be issued by the
competent authority on the basis of the afore
directions, as expeditiously as possible, at any rate,
within a period of two months from today.
Sd/-
HARISANKAR V. MENON
JUDGE
SRJ
W.P.(C) No.42200 of 2022
2026:KER:62870
CNR : KLHC010915982022
13
APPENDIX OF WP(C) NO. 42200 OF 2022
PETITIONER’S EXHIBITS
Exhibit P1 TRUE COPY OF THE SRO 1729/93 AS
AMENDED.
Exhibit P2 A TRUE COPY OF THE ELIGIBILITY
CERTIFICATE NO. FC4/19132/01 DATED
04.04.2003 (ALONG WITH ITS TYPED COPY)
ISSUED BY THE OFFICE OF THE 3RD
RESPONDENT.
Exhibit P3 A TRUE COPY OF ORDER NO. C4.2121/01/CT
DATED 13.01.2005 (ALONG WITH ITS TYPED
COPY) ISSUED BY THE OFFICE OF THE 4TH
RESPONDENT.
Exhibit P4 A TRUE COPY OF THE APPEAL (WITHOUT
ANNEXURES) (ALONG WITH ITS TYPED COPY)
DATED 24.02.2005 FILED BY THE
PETITIONER BEFORE THE 2ND RESPONDENT.
Exhibit P5 A TRUE COPY OF ELIGIBILITY CERTIFICATE
NO. FC4/19072/01 DATED 19.11.2003
ISSUED BY THE 3RD RESPONDENT TO THE
PETITIONER.
Exhibit P6 A TRUE COPY OF ORDER NO. C4.9410/05/CT
DATED 27.06.2005.
Exhibit P7 A TRUE COPY OF THE APPEAL (WITHOUT
ANNEXURES) DATED 01.08.2005 FILED BY
THE PETITIONER BEFORE THE 2ND
RESPONDENT.
Exhibit P8 A TRUE COPY OF THE JUDGMENT DATED
23.11.2021 IN W.P.(C). NO. 33079/2019.
W.P.(C) No.42200 of 2022
2026:KER:62870
CNR : KLHC010915982022
14
Exhibit P9 A TRUE COPY OF THE ARGUMENT NOTE (ALONG
WITH ANNEXURES) DATED 07.03.2022.
Exhibit P10 A TRUE COPY OF THE ORDER/PROCEEDINGS OF
THE 2ND RESPONDENT DATED 05.10.2022
ALONG WITH ITS COVERING LETTER DATED
14.10.2022 AND THE MINUTES OF THE
MEETING HELD ON 15.09.2022.
Exhibit P11 A TRUE COPY OF THE SRO 1728/93, AS
AMENDED.
Disclaimer: Educational and research material only; not legal, tax, investment or professional advice. Verify the controlling court record, statutory version, jurisdiction and subsequent history.