JUDGMENT
J. Kanakaraj, J. (Chairman)
1. For the assessment year 1984-85, the petitioner/assessee reported a total and taxable turnover of Rs. 1,82,847,65. For the assessment year 1986-87, they reported a total and taxable turnover of Rs. 13,09,228.75. The place of business of the assessee was inspected on August 6, 1985. It was found that the assessee was effecting purchases of casuarina wood and sending them to Dandeli in Karnataka State, for use in the manufacture of paper. It was found from D7 records that for the period from March 9, 1985 to March 31,1985, the assessee had purchased casuarina wood to the extent of Rs. 1,82,848. The assessing authority treated the said turnover as actual suppression and made an equal addition by way of estimation. He also proposed penalty at 1 1/2 times the actual tax.
2. Similarly for the assessment year 1986-87, it was found that the assessee had purchased casuarina wood barked in 60 c.m. length from agriculturists and transported them to their head office at Dandeli. He, therefore, held that such purchases were liable to be taxed under Section 7-A(b) of the Tamil Nadu General Sales Tax Act, 1959 at 5 per cent. The turnover involved in the year 1986-87 was Rs. 13,09,229. Before the assessing authority, it was claimed that as per Notification No. II(1)/Rev/386(g)/74 dated March 4, 1974, the sale of firewood was exempted from levy of tax. Consequently, it was argued that purchase tax also cannot be levied. The assessing authority considered the objections and found that the assessee-firm is a manufacturer of paper and casuarina wood is one of the main raw material in the manufacture of paper. He particularly remarked that the assessee-firm is not a dealer in firewood. The perusal of the agreement entered into between the suppliers at Cuddalore and the petitioner indicated that the assessee was purchasing only casuarina wood with good quality and sized to 60 c.m. length for use in the paper mill. The penalty was confirmed, because but for the inspection, the assessee would not have filed the return and paid the tax under protest. Since the non-filing of returns was deliberate, penalty was justifiable according to the assessing authority.
3. For both the assessment years, appeals were filed before the Appellate Assistant Commissioner. Both the appeals were dismissed on the same date, namely, October 5, 1988 and with the same reasoning. Before the first appellate authority, several decisions were cited both on behalf of the assessee and the Revenue. The first appellate authority found that any tree can be treated as firewood after a particular stage. He, accordingly, upheld the order of the assessing authority and held that the goods cannot be treated as firewood.
4. The appeals to the second Appellate Tribunal for both the assessment years, were taken up together and disposed of on April 24, 1990. The Appellate Tribunal has gone into the question of the applicability of Section 7-A of the TNGST Act, 1959 and held in favour of the Revenue. So far as the exemption claimed in respect of the casuarina wood, the Appellate Tribunal rejected the contentions in the following words :
“The casuarina poles purchased with specification of particular size (barked in 60 c.m. length) and for the specific use in the manufacture of paper cannot be treated as firewood. It is seen that casuarina poles barked in 60 c.m. length were used as raw material by the paper manufacturer for making wood pulp to produce the finished product, paper. The levy of tax under Section 7-A on the purchase of casuarina poles from agriculturists is in order, since the transaction falls Under Clause (c) of Sub-section (1) of Section 7-A.”
However, the Appellate Tribunal reduced the penalty to 50 per cent of the tax. The present revisions are, therefore, directed against the said order of the Appellate Tribunal.
5. Mr. N. Inbarajan, learned counsel for the petitioner, brought to our notice the order of the Government in G.O. Ms. No. 361 (Forests and Fisheries Department) dated March 28, 1985. In and by the said Government Order, the Tamil Nadu Timber Transit Rules, 1968 were amended, by excluding “casuarina souisetifola (Tamil name–savukku : trade name–casuarina)”. In making the said exemption, the Government observes that casuarina is extensively used for fuel, poles and bailies by the villagers and the weaker section of the community. Therefore, it was decided to exempt casuarina from the Timber Transit Rules. Reference is also made by Mr. N. Inbarajan to other literature for buttressing his argument that casuarina is commonly used only as a fuel or firewood. The argument proceeds that if in common parlance, casuarina can be treated only as firewood, merely because a particular consumer used casuarina for a different purpose, it cannot be argued that the goods have to be dealt with otherwise than as firewood. Consequently, Mr. Inbarajan says that casuarina purchased for whatever purpose by an assessee has to be treated only as firewood and therefore, eligible for exemption under the notification cited above.
6. In support of his argument, reliance is placed on [1979] 43 STC 435 (All.) (Commissioner of Sales Tax, Lucknow v. Marwah & Co.). That is no doubt a direct case. The only difference is that in that case, the assessee was a dealer in fuel wood. He purchased fuel wood from various persons. When he supplied the wood purchased to the paper mills for manufacture of paper, the assessing authority treated the wood as pulp wood and not as firewood. The first appellate authority treated the wood sold as firewood and not as timber. On revision, the view of the first appellate authority was confirmed. When the matter was taken up to the Allahabad High Court, the single Judge also confirmed the said view. The High Court held that eventhough the goods were supplied to a paper mill, the goods as such was only firewood, as commonly understood in the State.
7. The next reference was to the judgment of the Supreme Court reported in [1988] 68 STC 324 (Mukesh Kumar Aggarwal & Co. v. State of Madhya Pradesh). In that case, stacks of “eucalyptus wood” sold by the Forest Department after separating the “bailies” and “poles” were held as not answering the description of “timber”. The Supreme Court, however, remanded the case to the High Court to find out the correct entry. In holding that the goods were not timber, the apex Court observed as follows :
“In a taxing statute words which are not technical expressions or words of art, but are words of everyday use, must be understood and given a meaning, not in their technical or scientific sense, but in a sense as understood in common parlance, i.e., ‘that sense which people conversant with the subject-matter with which the statute is dealing, would attribute to it’. Such words must be understood in their ‘popular sense’. The particular terms used by the Legislature in the denomination of articles are to be understood according to the common commercial understanding of those terms used and not in their scientific and technical sense ‘for the Legislature does not suppose our merchants to be naturalists or geologists or botanists’.”
They also observed that “user test” is logical and not conclusive. The particular use to which an article can be applied in the hands of a special consumer, is not determinative of the nature of the goods. Mr. N. Inbarajan relies upon the above observation. But, it has to be noticed that the Supreme Court was only considering the use to which a particular hypothetical consumer could put to. They were not considering a case of a purchase by an actual consumer as raw material for manufacturing paper. This aspect of the case has been more explained in certain judgments of the Madras High Court.
8. In [1982] 51 STC 353 (Mad.) (K.S. Vasan and Sons v. State of Tamil Nadu), the assessee was a dealer in firewood. He purchased cut-ends and sized below 1.2 metres for use in the manufacture of cable drums. He, however, argued that such purchases were only purchases of firewood. The Board of Revenue held that the claim of the assessee was not supported by evidence. In affirming the said view of the Board of Revenue, the Madras High Court particularly approved of the following observations of the Board of Revenue.
“The purchase of the cut-ends from persons other than the assessee is not denied. The only dispute is whether the cut-ends could be classified as timber or as firewood. In deciding this issue a certificate issued by the forest department is of no significance, for, it is not clear on what basis the forest department gave certificate that the cut-ends could be classified as firewood. The assessee is not a dealer in firewood. His letter-head described him as a manufacturer of wooden cable drums and other wooden articles and dealer in all kinds of timber. Apart from cable drums the assessee also deals in timber of all kinds but definitely not in fire wood”.
9. In [1983] 52 STC 3 (Malayalee Stores v. State of Tamil Nadu), the Madras High Court held that “eucalyptus” is not a firewood. Its sale is not, therefore, exempt from the notification relating to firewood and therefore, the goods were taxable.
10. We have to look at the whole issue from the angle of the exemption notification. The exemption notification exempts the sale of firewood, because firewood is commonly used by the weaker section of the community. Therefore, we have to find out whether the wood involved in this case were purchased as firewood for the purpose of fuel and consequently, exempt under the Government notification. If we look at from this angle, there is no escape from the conclusion that these goods were purchased only for use in the paper industry. Therefore, we are not inclined to grant the said exemption to the case before us, because admittedly, the goods were purchased for use in the paper industry. If there had been no evidence one way or the other, we might have adopted the common parlance theory that casuarina is normally used only as firewood. Inasmuch as there is clear evidence that casuarina was purchased only for the purpose of use in the paper industry, we are unable to strain the exemption notification and make it applicable to the assessee. In this view of the matter, we confirm the findings of the lower authorities and hold that the casuarina purchased in the instant cases, were not firewood, but for a different purpose, namely, for use in the paper industry. Consequently, the exemption notification cannot be applied to the petitioner. In this view of the matter, the tax revision cases are dismissed and inasmuch as the penalty was restricted to 50 per cent of the tax due, we confirm the same.
11. In fine, the tax revision cases are dismissed.
12. And this Tribunal doth further order that this order on being produced be punctually observed and carried into execution by all concerned.
13. Issued under my hand and the seal of this Tribunal on the 16th day of February, 2000.