Patna High Court
Western India Match Co. Ltd. vs Deputy Collector, Cess, Bettiah And ... on 31 March, 1981
Equivalent citations: AIR1981PAT309, 1981(29)BLJR657, (1981) BLJ 603, AIR 1981 PATNA 309
JUDGMENT P.S. Sahay, J.
1. This application is for quashing the letter of respondent No. 1, Deputy Collector, Cess, dated 27-3-1977, a copy of which has been filed along with this application and marked Annex. 4, passed under the provisions of the Cess Act (hereinafter to be referred as the Act).
2. The petitioner is a public limited company and manufactures Matches having its factory at Calcutta. Semul wood is required for the purpose of making match boxes and match sticks and the company takes on lease trees from the various departments of the State where semul trees are available and pays royalty for the exploitation of such trees. The petitioner company took a lease from the State of Bihar for a period of eight years on 16th March, 1972 in order to exploit the semul trees (which included the following terms : conversion, collection, extraction, removal, transport and all other acts to be performed in the realisation of the benefits conferred therein). A copy of the deed has been filed along with this application and marked Anne-xure 1. Under Clause (6) of the aforesaid lease the exploitation of those trees has to be done under the supervision of the Divisional Forest Officer and under Clause (7) if the trees marked by the Forest Department are not cut and removed the company forfeits its right to cut and remove those trees and they become the properties of the State. The royalty charged was at the rate of Rs. 170 per tree which was raised to Rs. 232.90 and all those formalities and cutting and removal had to be done under the supervision and guidance of the Forest Department. The petitioner company was served with a notice issued under Section 72 of the Act to lodge, within two months, return of the net annual profits calculated on the average as annual net profits for the last three years in order to make an assessment under the Act, a copy of the notice is Annex. 2 to this application. Objection was filed denying its liability on behalf of the petitioner company, a copy of the same has been filed and marked Annex. 3. Thereafter the petitioner received another notice from respondent No. 1 by which he was directed to pay cess in advance and to submit return of the accounts, a copy of the letter dated 27-6-1977 is Annex. 4 to this application. The petitioner has moved this court for quashing Annex. 4.
3. Mr. S. N. Mishra, learned counsel for the petitioner has contended that the trees standing are not immovable property and, therefore, the provisions of the Cess Act will not be attracted. He has, further contended that the petitioner company is neither owner nor occupier of the forest in question and has no interest in the land, and thus is not: liable to pay cess. He has also urged that from the terms and conditions embodied in the lease the company was a bare licensee having no interest in the land, and, therefore, there was no question of payment of cess. Learned Additional Advocate-General, appearing on behalf of the State, has, submitted that the words 'Immovable property' should take its true colour and meaning from the Cess Act which includes land and benefits accruing from the land and does not include crop and, thus even standing timber will come within the definition of immovable property. He has, further submitted that the petitioner is a licensee and the agreement is with regard to immovable property and therefore, the provisions of the Act will be attracted. Alternatively, it has also been urged that if the petitioner is a licensee then he is a licensee with a grant with regard to specified area of land for a specified period in order to go upon the land and use the tree or the timber and in that view of the matter it will amount to profits a prendre (a benefit that arises out of land which will amount, in other words, to an interest in the immovable property) and in that view of the matter, the petitioner was liable to pay cess and the notice was rightly issued.
4. This case was formerly placed before a Division Bench of which I was a member. It was submitted on behalf of the learned counsel, appearing on behalf of the petitioner that the case of Someshwar Prasad v. State of Bihar, (1974 BLJR 348) on a similar point under the same Act and similar set of facts has been decided against him but he has relied on a subsequent decision of the Supreme Court in the case of State of Madhya Pradesh v. Orient Paper Mills Ltd. (AIR 1977 SC 687) and has submitted thai in view of the aforesaid decision the case of Someshwar Pd. requires reconsideration. By order dated 29-3-1979 the case was referred to a larger Bench and that is how the matter has come before us. 'therefore, it has to be seen whether Someshwar Pd. case still holds the field or not.
5. Before considering the submissions made at the Bar it will be necessary to refer to some of the relevant provisions of the Act. Section 4 defines immovable property and runs as follows:--
"Immovable property' includes land and all benefits to arise out of land and things attached to the earth, or permanently fastened to anything which is attached to the earth, but does not include crops of any kind, or houses, shops or other buildings."
Section 5, which is a charging section, is as follows.-
"All immovable property to be liable to local cess:-- From and after the commencement of this Act in any district or part of a district all immovable property situate therein except as otherwise in Section 2 provided, shall be liable to the payment of local cess."
Section 6 of the Act lays down how cess is to be assessed. It makes an exception in the case of notified mines. Ss. 6A and 6B were inserted in the Act by the Bihar Cess Amendment Act 2 of 1936 providing for assessment of local cess on the annual despatches of coal and coke even from notified mines and the rate at which such assessment was to be made. Sections 12 to 71 deal with the mode of payment of cess on lands and provide for valuation of lands. Section 72, under which the offending Annex. 4 has been issued, is as follows :--
"72. Notice to return profits:
(1) On the commencement of this Act in any district and thereafter before the close of each year, the Collector of the district shall cause a notice to be served upon the owner, chief agent, manager or occupier of every mine or quarry other than a notified mine and of every tramway, railway and other immovable property not included within the provisions of Chapter II, and not being a tramway or railway on which local cess is not leviable, Such notice shall be in the forms in Schedule E contained, and shall require such owner, chief agent, manager or occupier to lodge in the office of such Collector within two months a return of the net annual profits of such property, calculated on the average of the annual net profits thereof for the last three years for which accounts have been made up.
(2) omitted, not relevant for this case.' (3) The Collector may in his discretion extend the time allowed for lodging any return referred to in this section."
Learned counsel has also referred to different provision of the Act and Section 3 of the General Clauses Act which runs thus :--
" 'Immovable property' shall include land, benefits to arise out of the land, and things attached to the earth, or permanently fastened to anything attached to the earth."
Section 3 of the T. P. Act defines immovable property as follows:--
" 'Immovable property' does not include standing timber, growing crops or grass."
"Timber" has been defined under Section 2 (6) of the Forest Act. It includes trees when they have fallen or even felled, and all wood whether cut up or fashioned or hollowed out for any purpose or not. Section 2 (4) of Forest Act defines forest produce. Halsbury's Laws of England (4th Edn.) Vol. 19 p. 21 para. 33 deals with timber and trees:
"Meaning of timber at any law oak. ash and elm are timber if over twenty years old, but not so old as to have no usable wood in them. Other trees may be timber by the custom of the country. Thus beech is timber by the custom of Buckinghamshire and parts of Gloucestershire. Aspen and horse-chestnut are timber in some counties. Trees less than six inches in diameter have been said not to be timber."
The provisions of different Acts having different meaning of immovable property have been referred to with the purpose of showing that the petitioner-company is not liable to pay cess but before considering the provisions of different Acts while deciding a case under the Cess Act it must be borne in mind the note of warning given by the Supreme Court in the following terms:--
"It is the part of judicial prudence to decide an issue arising under a specific statute by confining the focus to that statutory compass as far as possible. Diffusion into wider jurisprudential areas is fraught with unwitting conflict or contusion."
In support of the submissions reference has been made to the following cases by Mr. Mishra, Smt. Shantabai v. State of Bombay (AIR 1958 SC 532), Hindi Constructions Ltd. v. Cess Deputy Collector, Hazaribagh, AIR 1956 Pat 100), Ananda Behera v. State of Orissa (AIR 1956 SC 17), Rajindra Bahadur Singh v. Malhoo Khan (AIR 1929 Oudh 93), B. M. Lall v. Dunlop Rubber Co. (India) Ltd. (AIR 1968 SC 175), Chhotabhai Jethabhai Patel and Co. v. State of Madhya Pradesh (AIR 1953 SC 108). All these cases have been considered in the case of Someshwar Pd. (1974 BLJR 348) (supra) and the petitioner in that case had also taken a lease from the Forest Department and was directed to file return, for the payment of cess and had challenged in this court and it was held that the petitioner was not a bare licensee but also grantee of a benefit in immovable property and, therefore, an occupier within the meaning of the term as used in Section 72 of the Act after fully considering, explaining and distinguishing the cases of Hindi Constructions Ltd. v. Cess Deputy Collector, Hazaribagh (AIR 1956 Pat 100), Smt. Shantabai v. State of Bombay (AIR 1958 SC 532), and Chhotabhai Jethabhai Patel and Co. v. State of Madhya Pradesh (AIR 1953 SC 108) (supra) on which reliance was placed by the lessee. I may also mention that the terms of the agreement in the instant case are similar to the terms and agreement in the case of Someshwar Pd. Learned counsel for the petitioner has drawn our attention to the terms of the agreement according to which the petitioner had to cut the trees which are marked by the Forest Department and stems had to be left and has urged that the lessee has no interest in the immovable property. This argument was also advanced in the case of Someshwar Pd. and has been rightly rejected. Mr. Mishra has also relied on other decisions in order to show that he is not an occupier and is mere licensee. Those cases, at the outset, I must say are under different acts where different meaning has been given for Immovable property and in my opinion are not of any help to the petitioner. In the case of Dan Singh Bisht v. Firm Janki Saran Kailash Chander Dhampur (AIR 1948 All 396) it has been held that timber is immovable property but that case was under the sale of Goods Act. In the case of Associated Hotels of India Ltd. v. R. N. Kapur (AIR 1959 SC 1262) their Lordships were considering the case of lease and licence under the T. P. Act and Easements Act. In the case of Ashoke Singh v. Bodha Gandheri (AIR 1926 Pat 125) there the point for consideration was whether the tree is a movable or immovable property and it was held that if the right was only to enjoy fruits and not to cut the tree then it was immovable property but that case was also under the Indian Registration Act and the T. P. Act where definition of immovable property is different from Cess Act. In the case of the Dist. Board of Benaras v. Churhu Rai (AIR 1956 All 680) it was held that under the U. P. Dist. Board Act the trees cut and removed were not immovable property but it has also been held that the real test for judging whether the tree is a movable or immovable property is not the nature of the tree but the way in which it is intended to be dealt with. It may be stated that U. P. General Clauses Act is different from the Bihar Act where immovable property excludes standing timber and, therefore, that case is fully distinguishable. In the case of Mohamed Khan v. Ramnarayan Misra (AIR 1956 Orissa 156) their Lordships were considering a case of licence under the Easements Act and held that in order to determine whether the right granted was a lease or a licence it had to be decided on the terms and conditions of the agreement. This also does not improve the case of the petitioner because I have referred to the various terms and conditions of the agreement and it cannot be held that the petitioner was a bare licensee having no interest in the land. A similar point also came up for consideration is the case of Beant Singh v. Cantonment Executive Officer, Jammu (AIR 1960 J and K. 83) where on a consideration of the document it was held that the transaction between the parties was a licence not coupled with a transfer of a property. That case was also under the provisions of the T. P. Act and the Easements Act where different meaning has been given for the word "Immovable Property" as referred to above. All these decisions in no way induce me to take a view different from the case of Someshwar Pd. (1974 BLJR 348) (supra) where all these matters have been discussed in great detail and distinguished.
6. Now I will consider the case of State of Madhya Pradesh v. Orient Paper Mills Ltd. (AIR 1977 SC 687) on which strong reliance has been placed by Mr. Mishra and has submitted that by this decision the case of Someshwar Pd. stands overruled. In that case the subject matter of litigation was the competency to collect sales tax on bamboo and salai wood extracted from a forest which was taken on lease by a company under the provisions of Madhya Pradesh General Sales Tax Act, 1958 (S. 2 (g)) of that Act was as follows :--
"2 (g)--'goods' means all kinds of movable property other than actionable claims, newspapers, stocks, shares, securities or Government stamps and includes all materials, articles and commodities whether or not to be used in the construction, fitting out, improvement or repair of movable or immovable property and also includes all growing crops, grass, trees, plants and things attached to, or forming part of the land which are agreed to be severed before sale or under the contract of sale."
After going through the various provisions of the Act and after interpreting various terms and conditions of the lease it was held as follows (at p. 693 of AIR 1977 SC 687) :--
"We are satisfied that despite its description, the deed confers in truth and substance a right to cut and carry timber of specified species. Till the trees are cut, they remain the property of the owner, namely the appellant. Once the trees are severed, the property passes. Royalty is a feudalistic euphemism for the "price" of the timber, we may also observe that the question before us is not so much as to what nomenclature would aptly describe the deed but as to whether the deed results in sale of trees after they are cut. The answer to that question, as would appear from the above, has to be in the affirmative."
The contention raised on behalf of the petitioner company in the Supreme Court case was accepted and it was held that the document in question did not create lease but granted a licence. This case also does not support the case of the petitioner because the terms of the agreement are quite different from those in the Orient Paper Mills case and it is not necessary to reproduce the same. A similar case regarding interpretation of a deed came up for consideration in our own High Court in the case of Titagarh Paper Mills Co. Ltd. v. State of Bihar, C.W.J.C. 619 of 1978, decided on 15th May, 1979.* That was a case relating to sale tax and the question was whether the agreement was a lease or a licence and after considering the various provisions of the Sales Tax Act and the deed it was held that the use of the expressions 'property' and 'licence' for the purpose of exploitation of the bamboos permitted to be cut and removed were strong factors which led to the conclusion that the agreement in question was a licence and not a lease. Their Lordships further held that even though one factor may not be conclusive, the totality was cumulative and decisive in the result. Mr. Mishra has relied on this decision also but, in my opinion, the reasons given in Some-shwar Pd. case fully applies to the instant case and is not affected in any manner by the decision of the Supreme Court in the Orient Paper Mill's case and the case of Titaghar Paper Mills and, as I have stated earlier, relating to the interpretation of the Act regarding the levy of sale tax. That decision was given in a different context altogether and cannot be authority for the instant case which is under a different Act and different terms of lease. The Cess Act is a self-contained Act. We have to confine ourselves to the provisions of this Act keeping in view the scheme, object and purpose of the Act, The definition of immovable property which includes lands and all benefits to arise out of land and things attached to the earth, (underlined by me) leaves no manner of doubt that standing trees or trees which are cut after they are marked by the Forest Department by petitioner company, come within the definition of immovable property. It is not at all necessary to take the aid of different Acts where immovable property has been defined for different purpose and has been given different meaning. Thus, in my opinion, reading the provisions of the Act, there is no room for doubt that cess has to be levied on the petitioner company under the terms and conditions of the agreement. Tree is also not a crop and for that reliance has been placed on behalf of the State in the case of K.C. Alexander v. State of Kerala, (AIR 1'966 Ker 72) where Section 9 of the Land Conservancy Act, 1891 was being considered and according to that "persons occupying any Government land in an unauthorised manner were liable to pay a fine also evicted summarily and crops or other product raised on the land was liable to be forfeited." The question which arose for consideration was whether the trees wh ch have been illegally grown by a trespasser could be forfeited and it was contended on behalf of the State that trees do not come within the meaning of Section 9 which included any crop or other product raised on the land. Their Lordships held as follows (at p. 76 of AIR 1966 Ker):--
"Trees cannot possibly be considered as a 'crop or other product raised on the land.' What is meant by 'crop or other product raised on the land' must be what is familiarly known in the law as 'emble-ments'. According to Black's Law Dictionary the word 'crop1 or 'emblements' means, such products of the soil as are annually planted, severed and saved by manual labour, as cereals, vegetables, grass maturing for harvest or harvested, etc. but not grass on land used for pasturage."
This decision, in my opinion, also supports the State. 7. Our attention has also been drawn to Ordinance No. 8 of 1979, D/- 3-2-1979 which came into force with effect from 1-4-1975 and Section 4 of the Cess Act was amended by this Royalty and sale value was defined. Section 6 was also substituted by a new section and cess was to be assessed on the annual value of lands and until any other provision was made by the Parliament regarding sale value on the other immovable properties including forest produce. These provisions have been referred to by Mr. Mishra to show that the petitioner company even under the Ordinance is not liable to pay cess. But it may be mentioned that there has been no change in the charging section which is Section 5 and under that section the petitioner company is certainly liable to pay cess. No doubt there has been some change in the procedure for realising the tax and under the new Section 72 of the Ordinance return has to be filed within a prescribed period and no notice has to be given to the assessee which was under the original Act and penalty has been imposed for not filing such return within the specified period under Section 72-A of the Ordinance. Those sections make it obligatory on the occupier to file return in time and it has been held earlier by me that the petitioner is an occupier within the meaning of the term used in Section 72 of the Act as held in the case of Someshwar Pd. (1974 BLJR 348) (supra), Therefore, the Ordinance also do not alter the position of the petitioner in any way. Thus, on a careful consideration of the points, which have been raised in this application, I am of the opinion that the case of Someshwar Pd. (supra) has laid down the correct law and has not been affected by the decision in the Orient Paper Mills (AIR 1977 SC 687) or in the Titagarh Paper Mills case (1980-45 STC 130) (Pat) referred to above. There is thus, no merit in this application and it is, accordingly, dismissed but in the circumstances of this case parties will bear their own costs. K.B.N. Singh, C.J. 8. I agree with the view of my learned Brother P. S. Sahay, J. The case of Someshwar Pd. v. State of Bihar (1974 BLJR 348) was in respect of a similar contract and the question was whether the contractor in question was not a bare licensee but also a grantee in relation to immovable property so as to be liable to payment of cess as an occupier. The present case was referred to a larger Bench in view of the decision of the Supreme Court in the case, of State of Madhya Pradesh v. Orient Paper Mills Ltd. (AIR 1977 SC 687), hereinafter to be referred to as Orient Paper Mills case, wherein for the purpose of sales tax a somewhat similar contract in relation to bamboo and salai wood was held to be a licence and not a lease in respect of immovable property and, therefore, liable to sales tax under the terms of Madhya Pradesh General Sales Tax Act, 1958. This decision has been followed by this court in regard to liability under the Sales Tax Act in respect of somewhat similar contracts in the case of Titagarh Paper Mills Co. Ltd. v. State of Bihar {C.W.J.C. No. 619 of 1978 decided on 15th May, 1979)* and it was held that the contract in question was a licence and not a lease of immovable property and, therefore, amenable to levy of sales tax. The decision in the Orient Paper Mills (supra) proceeded on the construction of the deed that there was sale of bamboo and salai wood under the contract and in the contemplation of the parties they were to be cut and severed pursuant to the contract itself. Such a contract was held to be a licence and not a lease in respect of immovable property so as to take it out from the ambit of the Sales Tax Act. In the instant case the question is not whether it is a lease or a licence but whether it is immovable property for the purpose of the Cess Act. The expression 'Immovable property' for the purpose of Cess Act must take its true colour from the Cess Act itself by confining the focus to the statutory provisions in the Cess Act. The definition of "immovable property" as given in Section 4, quoted by my learned Brother, is comprehensive enough to include standing timber. It excludes only standing crop from its purview and semul tree is not a standing crop. It is fully covered under charging Section 5 already quoted by my learned Brother, The decision in the case of Orient Paper Mills (AIR 1977 SC 687) (supra) is a decision in regard to sales tax where immovable properties are also moveables for the purpose of Sales Tax Act under its interpretation clause and deeming provisions. The definition of goods under the Bihar Sales Tax Ordinance, 1976 for purpose of taxation under its "explanation" includes even immovable properties which are agreed to be severed under the contract of sale may usefully be referred to
" 'Goods' means all kinds of movable property, including livestock, and all materials, commodities and articles but excluding electricity, newspapers, actionable claims, stocks, shares or securities.
Explanation:-- Materials, commodities and articles attached to or forming part of an immovable property which are agreed to be severed under the contract of sale shall be deemed to be goods within the meaning of this clause."
The decision in the case of Someshwar Pd. is not affected in any way by the decision of the Supreme Court in the case of Orient Paper Mills (supra) and is still a good law.
V. Mishra, J.
9. I agree with the views expressed by Hon'ble the Chief Justice and Brother P. S. Sahay, J.