Minimal processing of horticultural produce does not change its character, preserving sales tax exemption for marketable arecanuts.

Arecanuts that were peeled, sliced, boiled and dried remained horticultural produce for the sales tax exclusion, because the processing was only the minimum necessary to make them marketable and did not amount to manufacture or alter their essential character. The proviso to section 2(1) was construed to protect agricultural or horticultural produce grown by the assessee, and a narrow reading would defeat that purpose. The court therefore treated the curing process as preservative and consistent with local agricultural practice, and the Government's challenge failed, leaving the assessee entitled to the statutory exclusion from taxable turnover.

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Issues: Whether arecanuts that were peeled, sliced, boiled and dried before sale remained horticultural produce within the proviso to section 2(1) of the Madras General Sales Tax Act.

Analysis: The exclusion from turnover under the proviso was intended for agricultural or horticultural produce grown by the assessee, and a narrow reading would defeat that object. The processing applied to the arecanuts was the minimum necessary to make them marketable and did not amount to manufacture or change the real character of the commodity. The produce remained the same horticultural produce despite curing, since the process was only preservative and consistent with local agricultural practice.

Conclusion: The processed arecanuts continued to be horticultural produce within the meaning of the proviso to section 2(1), and the Government's challenge failed.

Final Conclusion: The petition was dismissed, and the assessee retained the benefit of the statutory exclusion from taxable turnover.

Ratio Decidendi: Where agricultural or horticultural produce undergoes only the minimum processing necessary to render it marketable, without amounting to manufacture or altering its essential character, it retains its character as agricultural or horticultural produce for the purpose of the sales tax exclusion.

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