Agricultural produce exemption must avoid territorial discrimination, and ordinary preservation processing does not change rubber's character.

A sales tax exemption for agricultural produce must be read consistently with the constitutional prohibition on discriminatory taxation, so produce grown outside the State could not be denied the benefit merely because it was sold within the State. Rubber also remained agricultural produce where only ordinary preservation and marketing processes were applied, such as hardening latex, shaping sheets, and drying by smoke, because those steps did not change its essential character into manufactured goods. The commentary therefore states that both the territorial distinction and the processing argument failed, and the tax demand could not be sustained on either basis.

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Issues: (i) Whether the expression "land" in the sales tax exemption for agricultural produce was confined to land within the enacting State so as to deny the benefit to produce grown outside the State but sold within it; (ii) whether rubber subjected to ordinary processing for preservation and marketing ceased to be agricultural produce and became liable to sales tax.

Issue (i): Whether the expression "land" in the sales tax exemption for agricultural produce was confined to land within the enacting State so as to deny the benefit to produce grown outside the State but sold within it.

Analysis: The exemption had to be construed in the light of the presumption that a legislature intends to act within constitutional limits. A territorial reading that limited "land" only to land within the State would create discrimination between similar goods produced locally and those produced in adjoining States, contrary to the prohibition against discriminatory taxation on imported goods. The constitutional command against such discrimination required the provision to be read broadly enough to include produce grown on land outside the State as well.

Conclusion: The expression "land" was not confined to land within the State, and the sales tax could not be sustained on that territorial distinction.

Issue (ii): Whether rubber subjected to ordinary processing for preservation and marketing ceased to be agricultural produce and became liable to sales tax.

Analysis: Rubber was treated as agricultural produce in related agricultural income-tax legislation enacted by the same Legislature. The processing described, namely hardening latex with sulphuric acid, shaping it into sheets, and drying it by smoke, was only a minimum process ordinarily employed to preserve the produce and make it marketable. Such processing did not change the essential character of the commodity from agricultural produce to manufactured goods.

Conclusion: Rubber remained agricultural produce and was outside the sales tax net.

Final Conclusion: The tax demand could not be upheld on either ground, and the revision petitions failed.

Ratio Decidendi: A sales tax exemption for agricultural produce must be construed consistently with constitutional non-discrimination, and ordinary processing undertaken merely to preserve a crop or make it marketable does not alter its character as agricultural produce.

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