Madras High Court
Tvl. P. Samiyaappan & Co. vs Tamil Nadu Taxation Special Tribunal ... on 10 December, 2002
Equivalent citations: [2003]130STC44(MAD)
Author: K. Raviraja Pandian
Bench: K. Raviraja Pandian
ORDER K. Raviraja Pandian, J.
1. In this case, the learned counsel appearing for the petitioner Mr.Ramani put in issue the correctness of the order dated 12.9.2000 passed by the Special Tribunal in Tax Case Appeal No.2390 of 1997, whereby the Special Tribunal rejected the petitioner's claim of exemption from tax on a turnover of Rs.6,02,140/- on the basis of the notification No.II(1)/Rev/386(g)/74 dated 4.3.1974 issued under Section 17(1) of the Tamil Nadu General Sales Tax Act, 1959, which granted exemption in respect of the tax payable by any dealer under the said Act on the sales turnover of firewood.
2. Mr.Ramani, learned counsel appearing for the petitioner attacked the order on the ground that "Karuvelan wood" sold by the petitioner pursuant to its agreement dated 31.3.1988 is nothing but firewood and as such the petitioner is entitled to the exemption under the above notification. Though the user theory adopted by the Special Tribunal and the authorities below to non-suit the benefit of the notification dated 4.3.1974 to the petitioner is logical, but inconclusive, as held by the Supreme Court in MUKESH KUMAR AGGARWAL & CO., VS. STATE OF MADHYA PRADESH AND OTHERS reported in (1988) 68 S.T.C. 324. The petitioner's sale of "Karuvelan wood" to the Tamil Nadu News Print and Papers Limited, a paper manufacturing industry for making pulp wood, would not alter the character of the wood sold by the petitioner from "firewood". Hence, the order of the Tribunal has to be quashed by this Court. He further contended that the decision on which reliance has been placed by the Special Tribunal dated 16.2.2000 made in T.C.R.Nos.1467 and 1468 of 1997 to negative the claim of exemption to the petitioner, has been held to be not correct by the Division Bench of this Court in the case of WEST COAST PAPER MILLS LTD. VS. COMMERCIAL TAX OFFICER AND OTHERS reported in (2002) 127 STC 53. Following the said judgment, the order of the Special Tribunal, which is questioned in this writ petition, has also be set aside and the exemption should be granted to the petitioner. Mr.Ramani further contended that the unreported judgment of the Supreme Court dated 27.11.1996 made in Civil Appeal No.1500 of 1986 (A.SUBRAMANYAM VS. STATE OF TAMIL NADU) has not taken into consideration of the ratio laid down by the Supreme Court in (1988) 68 STC 324 referred supra. Hence, the unreported decision of the Supreme Court cannot be put against the petitioner.
3. The learned Special Government Pleader (Taxes) appearing for the respondents has contended that the very same notification was the subject matter of consideration before the Supreme Court in the unreported decision of A.SUBRAMANYAM VS. STATE OF TAMIL NADU and the Supreme Court has held that "Karuvelan wood" supplied by the appellant therein to Seshasayee Paper and Boards Limited, a paper manufacturing unit as that of the Tamil Nadu News Print and Papers Limited, has been held to be not entitled to the benefit of the notification in the said case. He further contended that the copy of the unreported decision was not made available to the revenue when this Court decided the matter in (2002) 127 STC 53 referred above. IF that decision was brought to the notice of the Division Bench, the Division Bench would not have granted the benefit of the notification to the petitioner therein. He further submitted that the revenue has filed a review application before this Court to review the decision made in WEST COAST PAPER MILLS LTD. VS. COMMERCIAL TAX OFFICER AND OTHERS reported in (2002) 127 STC 53. He further submitted that the ratio laid down in (1988) 68 STC 324 is not applicable to the facts of the present case since the exemption notification under which the petitioner claims benefit has not been considered in that case.
4. We have heard the arguments of the learned counsel on either side and perused the materials on record.
5. In order to appreciate the controversy, the basic facts, which are necessary, are as follows:
The petitioner being a Forest Coupe Contractor and dealer on the file of the fourth respondent herein had supplied "Karuvelan wood" to Tamil Nadu News Print and Papers Limited pursuant to an agreement in agreement No.6148 dated 31.3.1988. As per the agreement, the price of the wood per Metric Tonne was fixed at Rs.250/- and quantity of 2257.79 Metric tones were supplied during the assessment year 1988-89. The agreement further implied that the material should be supplied at buyer's factory site at Kakithapuram. On such supply, a sum of Rs.550/- per Metric Tonne would be reimbursed to the petitioner towards cost of transportation.
6. A revised assessment order was passed on the basis of check of account on 15.12.1989 treating the sale of "Karuvelan wood" supplied to Tamil Nadu News Print and Papers Limited as timber and assessed to tax at 8 percent on the sales turnover of Rs.6,02,140/-. The first appellate authority allowed the appeal following the decision of the Supreme Court in MUKESH KUMAR AGGARWAL & CO., VS. STATE OF MADHYA PRADESH AND OTHERS reported in (1988) 68 S.T.C. 324. The Joint Commissioner of Commercial Taxes, Ezhilagam, Chennai by exercising his suo motu power of revision revised the order of the appellate authority by holding that the assessing authority was right in bringing the sales turnover of "Karuvelan wood" to tax. The petitioner filed appeal before the Special Tribunal, which following its earlier decision dated 16.2.2000 in T.C.R.Nos.1467 and 1468 of 1997 dismissed the appeal. The correctness of the said order is put in issue in the writ petition.
7. There is no dispute about the agreement dated 31.3.1988 and the supply of "Karuvelan wood" made by the petitioner to the Tamil Nadu News Print and Papers Limited. "Karuvelan" is a tree of the family of leguminosia. As per the Kalaikalanjiam (Tamil Encyclopedia), "Karuvelan" is a tree of medium height, occasionally, it also grows to six to eight feet radius and 50 to 60 feet height. It grows in several parts of India, Ceylon, Arabia, Egypt and Africa. It is used for the manufacture of bullock cart wheel, chekku, and for the purpose of manufacturing boat and it also have some medicinal value. Its skin (pattai) is used for manufacturing arrack and also used (wattle bark) for the purpose of tanning leather. It is also used as firewood. The Tamil version as stated in page 283 of Part III of "Kalaikalanjiam" published by the Department of Tamil Development, University of Chennai reads as follows:
fUnty;:
"rpwpa my;yJ eLj;jukhd kuk;/ mUikahfr; rpy ku';fs; 6-8 mor; Rw;wst[k;. 50-60 mo cauKk; tsh;tJz;L/ ,J ,e;jpahtpd; gy ghf';fspYk; ,y';if. mnugpah. Vfpg;J mad Mg;hpf;fh Kjypa ,l';fspYk; tsh;fpd;wJ/ kuk; kpft[k; gaDilaJ. fodkhdJ/ gjg;gLj;jpdhy; beLehs; ciHf;Fk;/ tz;or;rf;fuk;. brf;F. cyf;fif cHt[f;fUtpfs;. Ma[jg;gpofs; bra;at[k;. rpy ,l';fspy; glF fl;lt[k; gadhfpwJ/ ey;y tpwF/ gl;il epuk;gt[k; Jth;g[s;sJ/ rhuhak; bra;at[k; njhy; gjsplt[k; cjt[k;"
8. The notification No.II(1)/Rev/386(g)/74 dated 4.3.1974, reads as follows:
"In exercise of the powers conferred by sub-section (1) of Section 17 of the Tamil Nadu General Sales Tax Act, 1959 (Tamil Nadu Act 1 of 1959), the Governor of Tamil Nadu hereby makes an exemption in respect of the tax payable by any dealer under the said Act on the sale of -
1.Bangles (other than those made wholly or partly or any metal)
2.Cattle fee, and
3.Firewood."
Subsequently, there was an amendment carried out to the notification from 12.4.1979 in respect of item (2), which is not relevant for this case.
9. The notification does not define "firewood". In the absence of a statutory definition, it is well settled principle of interpretation that the word should be interpreted by giving a meaning, which would not offend the common speech of commercial men and the consuming public, for sales tax is a commercial tax on sales turnover of a dealer in the course of business. The proper classification would be, what meaning an article has in the market, and in commerce between dealers and customers. If the above said principle is applied, "Karuvelan wood" cannot be classified as "firewood". It would certainly burn if set on fire. But every wood that burns is not "firewood". Even the valuable logs of wood like teak wood or Magogany or for that purpose, even the sandal wood logs are also burnt in various occasions, which cannot be determinative and considered those woods as "firewood". Even in the contract entered into by the petitioner with the Tamil Nadu News Print and Papers Limited, it is not stated as "firewood". The contract was very specific for "Karuvelan wood". The wood sold are treated as firewood, because they are used as firewood and hence, the user as firewood is also relevant. If the same commodity is sold for erection of pandal, then it is not regarded as firewood, though ultimately after the commodity is used by the contractor for erection of pandal, he may sell them as firewood to somebodyelse. The user of the goods by him in such a case is not firewood. Therefore, it is necessary for the assessee to prove with certain materials to show that the goods sold by the assessee were sold as firewood, especially when the "karuvelan wood" can be used for multiple purposes. It can be used as a pulp wood or as pointed out earlier to more than one use. In the absence of any proof from the assessee that the goods sold were fire-wood, the assessee is not entitled for exemption by merely claiming that they are "karuvelan wood".
10. Mr.Ramani made much argument based on the decision of the Supreme Court in MUKESH KUMAR AGGARWAL & CO., VS. STATE OF MADHYA PRADESH AND OTHERS reported in (1988) 68 S.T.C. 324 to the effect that the user theory, though logical, cannot be conclusive. In that case, while considering the question as to "whether the subsidiary parts of the tree sold in heaps after the "ballies" and "poles" are separated can be called "imarathi-lakdi" or "timber" under entry 32A of Part II of Schedule to the Madhya Pradesh General Sales Tax Act, 1958, the Supreme Court has held that it would be somewhat of a strain on the popular meaning of the expression "timber" with the sense, size and utility implicit in the idea, to call those wood-heaps "timber", meant or fit for building purposes. Persons conversant with the subject-matter would not call those wood-heaps "timber" whatever else the goods might, otherwise, be. While holding so, the Supreme Court also cautioned that no tests of general validity applicable to or governing all cases can at all be laid down. The Supreme Court further observed that the point to note and emphasise was that all parts or portions of even a timber-tree need not necessarily be "timber". Some parts are timber, some parts merely "fire-wood" and yet others merely "wood". Having regard to the nature and description of the wood in that case, the Supreme Court has held that the "wood-heaps" were not susceptible to be or admit of being called "timber" with all the concomitants and associations of that idea. The subject matter of the goods in that case was "eucalyptus wood-heaps", which were left-over after extraction of "poles" and "ballies", which was not the goods before us. The specific contract in the present case was for "Karuvelan wood", which is not predominantly a firewood, however be used as firewood.
11. The Division Bench of this Court in the case of WEST COAST PAPER MILLS LTD. VS. COMMERCIAL TAX OFFICER AND OTHERS reported in (2002) 127 STC 53 has considered the question as to "whether the "casuarina wood" purchased by the paper manufacturer from unregistered dealer and used for making pulp are liable to pay purchase tax under Section 7-A of the Tamil Nadu General Sales Tax Act. After taking into consideration the materials placed before it, the Division Bench held that the term "firewood" can be used only when the part suitable for use as firewood is used for that purpose, and such user is its primary user. If such wood is put to other use, such other use would not render firewood into something other than firewood, unless wood is classified in the statute with reference to its actual use, such as wood used for making pulp. The size of the casurina purchased in that case was suitable for use as firewood and the Division Bench further held that when the exemption notification merely uses the term firewood without any condition or qualification, it must necessarily follow that all goods which answer the description, and fall within the scope of that term were entitled to exemption. The fact that the goods which fall within that exemption are used for a purpose other than that for which the goods generally belonging to that class are used, would not took those goods out of that class, in the absence of any other requirement in the statute. In paragraph No.16 of the said judgment, the Division Bench has stated thus:
"What is taxed under the Act are transactions of sale or purchase involving goods. The purposes for which the transaction is entered into is not material except to the extent taken note of while granting the concession in the rate of tax. Goods have to be identified for being what they are. The same goods cannot be described at different points differently and varying rates of tax levied, unless a proper classification is made by the Legislature itself or by the authority properly delegated with such power if such delegation is permissible."
12. However, the very same argument was raised before the Supreme Court in the unreported judgment in the case of A.SUBRAMANYAM VS. STATE OF TAMIL NADU (Civil Appeal Nos.1500 of 1985 and 3118-19 of 1985), to the effect that the goods sold by the petitioner therein were indisputably of the character of fire-wood, and would have to be treated as "firewood", regardless of the use to which the goods has been put. Even though the firewood was sold for the purpose of manufacturing rayon, the firewood would not by that process lose its essential character of firewood. The Supreme Court rejected the contention and held that "the wood sold by the assessee might be used and described as firewood. The exemption could not be extended to sales of wood for manufacture of rayon even though such wood was capable of being used as firewood and was generally used as such. The exemption was obviously for the benefit of people, who buy or sell firewood for the purpose of using the same as firewood. That exemption was not for the benefit of persons who sell wood for manufacture of rayon pulp". Incidentally, the goods involved in the Civil Appeal No.1500 of 1985 is also "Karuvelan wood" supplied by the assessee to a paper manufacturing Industry viz., Seshasayee Paper and Boards Limited, in which case also, the very same notification, which is the subject matter in issue in the present case, has been considered. When the Supreme Court declared the law in respect of the very same goods involved in the present case, by construing the very same notification on which reliance has been placed for exemption as said above, we are bound to follow the same.
13. For the purpose of completion, the other judgments cited at bar are also considered as under:
The case of A.H.K. AND COMPANY VS. THE STATE OF TAMIL NADU reported in (1980) 46 STC 117 was one wherein the petitioner entered into an agreement with a rayon manufacturing company for selling certain quantities of approved firewood as per the specifications agreed to between the parties. The petitioner claimed that what was sold to the manufacturing company was only firewood which was exempt from sales tax under the Tamil Nadu General Sales Tax Act, 1959, and the fact that the buyer utilized the same as raw material for the manufacture of rayon would not in any way alter the character of the goods sold by him. The Division Bench of this Court held that "even though the agreement entered into between the parties described the goods as "approved firewood", still the specifications for the supply of the goods clearly indicated that neither party intended that the goods should be sold or bought only as firewood. Therefore, those goods could not be called firewood at all and were not exempt from tax."
14. The other decision is MALAYALEE STORES VS. THE STATE OF TAMIL NADU reported in (1983) 52 STC 3. In that case also, the Eucalyptus trees were sold by the assessee, a forest coupe contractor describing it as "fuel coupe" to one P.R.Lakshmi, a pulpwood contractor. The trees so purchased by her were then cut into X size and also debarked. The timber pieces so fashioned were sold by her to Gwalior Rayons, describing the pieces as "pulpwood". Gwalior Rayons used those shaven chips of eucalyptus wood as raw material to manufacture rayon in their mills. The question in that case was, "whether the sale by the coupe contractor to Lakshmi was a sale of "firewood" within the meaning of the notification for exemption". The Division Bench of this Court has held that the sale of eucalyptus is not exempt from sales tax under the notification. In the case of P.R.LAKSHMI VS. THE STATE OF TAMIL NADU reported in (1983) 52 STC 5, the very same Division Bench held that the wood sold by P.R.Lakshmi were eucalyptus blue-gum and wattle wood which as commercial commodities were only pulpwood, and therefore the exemption relating to firewood under the notification dated 4.3.1974 could not be extended to those sales. The Division Bench further observed as follows:
"Apart from the particular specification in a sale agreement, regard should be had for the colloquy of commerce and the common vocabulary of the market for distinguishing between firewood and other kinds of wood. Firewood, in common parlance and as understood by the trade as well as by the consuming public, is not just any wood that can be used as logs of fuel. Firewood is wood of a kind which has attained notoriety as fuel. Where the wood is not, in the normally accepted commercial practice, firewood, and more especially, where the wood is sold and purchased subject to specifications which conduce the wood to particular purposes other than fuel, the goods sold cannot be regarded as firewood."
In view of the above discussion and in the light of the binding decision of the Supreme Court in Civil Appeal Nos.1500 of 1985 and 3118-19 of 1985, the Order of the Special Tribunal requires no interference and the writ petition is liable to be dismissed and the same is accordingly dismissed. However, there is no order as to costs. Consequently, the connected W.M.P is closed.