IN THE HIGH COURT OF KERALA AT ERNAKULAM
ST.Rev..No. 550 of 2004()
1. STATE OF KERALA, REPRESENTED BY
... Petitioner
Vs
1. THE WESTERN INDIA PLYWOOD LTD.,
... Respondent
For Petitioner :GOVERNMENT PLEADER
For Respondent :SMT.S.AMINA
The Hon'ble the Chief Justice MR.H.L.DATTU
The Hon'ble MR. Justice A.K.BASHEER
Dated :15/09/2008
O R D E R
H.L.DATTU, C.J. & A.K.BASHEER, J.
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S.T.Rev.Nos.550 OF 2004, 18 OF 2005,
74 OF 2005 & 85 OF 2005
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Dated this the 15th day of September 2008
ORDER
H.L.DATTU, C.J.
These revision petitions are heard and disposed of by this common order,
since the facts and the legal issues involved in these revision petitions are
identical.
2. In S.T.Revision Case No. 550 of 2004 and S.T.Revision Case No.74 of
2005, the assessing authority, while completing the assessment in the case of
respondents, for the assessment years 1995-96 and 1997-98 respectively, had
assessed the purchase turnover of firewood at 12%, on the ground that the same
would fall under item No.8 of Fifth Schedule to the Act. The first appellate
authority has confirmed the quantification made by the assessing authority. In the
second appeal filed by the respondents, the Appellate Tribunal has come to the
conclusion, that, the firewood does not fall under Entry 8 of Fifth Schedule and
therefore, requires to be classified as residuary item under Entry 156 of the First
Schedule to the Act and taxable at 6%. It is the correctness or otherwise of the
findings of the Tribunal is questioned by the Revenue in these two revision cases.
3. In S.T.Revision Case No. 18 of 2005, the respondent/assessee is
a Forest Contractor. While completing the assessment for the year 1994-95, the
S.T.Rev.Nos.550 OF 2004, 18 OF 2005,
74 OF 2005 & 85 OF 2005
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assessing authority has assessed the sales turnover of firewood at 2%, on the
premise that the said turnover falls under Entry No.8 of the Fifth Schedule to the
KGST Act. After unsuccessful attempt before the first appellate authority, the
assessee was before the Sales Tax Appellate Tribunal. The Appellate Tribunal is
of the view that, the sales turnover requires to be taxed only under Entry 156 of
First Schedule to KGST Act and not under Entry 8 of First Schedule as has been
done by the assessing authority.
4. In S.T.Revision Case No.85 of 2005, the assessing authority
while completing the assessment of the respondent/assessee for the assessment
year 1996-97, has assessed the purchase turnover of firewood under Section 5A of
the KGST Act at 12.5%, treating it as an item falling under Entry 8 of the Fifth
Schedule and the findings of the assessing authority is confirmed by the first
appellate authority. However, in the second appeal filed by the assessee, the
Appellate Tribunal is of the view that the ‘firewood’ sold by the assessee is an
unclassified item and requires to be taxed only under Entry 156 of First Schedule
to KGST Act.
5. The Revenue being aggrieved by the findings and conclusions
reached by the Tribunal in the aforesaid appeals is before us in these tax revision
cases.
6. The question of law framed by the Revenue for our consideration
S.T.Rev.Nos.550 OF 2004, 18 OF 2005,
74 OF 2005 & 85 OF 2005
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and consequent decision is as under:
“Whether on the facts and circumstances of the case,
the Tribunal is justified in its finding that firewood is an
unclassified item and will not fall under entry 8 of Fifth Schedule
to the Act?”
7. The relevant entries for the relevant assessment years to be taken
note of are as under:
Entry 8 of Fifth Schedule:
—————————————————————————————————
Sl. Description First Point Rate of 2nd Point Rate of Where there are Rate of
No. of goods of levy Tax of levy tax no 2 points of tax
(percent) (percent) levy in the State (percent)
—————————————————————————————————————————–
8 Timber At the point of 10 At the point of 2 At the point of 12
first sale by a sale by a first sale to a
registered dealer registered person other than
to a registered dealer a registered dealer
dealer
—————————————————————————————————
Explanation: Timber includes all kinds of woods, standing trees, logs, planks,
rafters of any size or variety.
Historical data
Period: Rate Entry No. Point of levy
From 1.4.93 to 31.3.94 4/4/8 Sch. V/8 Refer Schedule
From 1.4.94 to 31.3.95 6/2/8 Sch. V/8 Refer Schedule
From 1.4.1995 10/2/12 Sch.V/8 Refer Schedule
8. Entry 156 is as under:
156. All other goods not coming under At the point of first sale in the
any entry in any of the Schedules State by a dealer who is liable
to tax under Section 5
S.T.Rev.Nos.550 OF 2004, 18 OF 2005,
74 OF 2005 & 85 OF 2005
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9. Before we comment on the issues raised in these revision
petitions, it is necessary for us to notice the undisputed facts. They are, the
respondents have purchased firewood from the forest department and have sold to
a government company for use as a fuel. The assessing authority had treated the
wood so purchased by the respondents herein as an item falling under Entry 8 of
Fifth Schedule to the Kerala General Sales Tax Act. The respondents in these
revision petitions, being aggrieved by the assessment order so passed by the
assessing authority, had carried the matter before the First Appellate Authority
who in turn had rejected the appeals. The assessees were before the Tribunal by
filing separate appeals. The Tribunal is of the view that the wood sold by the
assessees is fire wood and, therefore, requires to be classified as an item falling
under residuary entry. The findings and the conclusion reached by the Tribunal is
as under:-
“8. The first question for consideration is
regarding the legality of rate of tax adopted in the case of
firewood and the disallowance of exemption claimed on
firewood being second sales. The appellant sold firewood to
M/s.Travancore Sugars. The above company used the firewood
only as fuel for manufacturing arrack. Firewood is a commodity
distinctly understood as a separate commercial commodity in
common parlance and commercial parlance. The fifth Schedule
of KGST Act and the Explanation thereto does not treat timber
as firewood. The explanation says:
S.T.Rev.Nos.550 OF 2004, 18 OF 2005,
74 OF 2005 & 85 OF 2005
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“Timber includes all kinds of wood, standing trees,
logs, planks, rafters, of any size or variety”.
It is a fact that this Explanation was not in the statute book
during the year 1994-95 and the assessment was made on
25-2-2000 without looking into the statutory position during the
year 1994-95. Even otherwise, timber does not take in
“firewood” within the meaning of the explanation to that entry
in Fifth Schedule. The word all kinds of wood in the context and
connotation means timber only. The legislature has expressed
no intention to include the same in the category of timber. The
department publication namely “Commodity Referencer”
published by Centre for Taxation Studies treats firewood as
falling under residuary Entry (page 149). Considering the
above facts, we are of the view that the contentions raised by the
appellant deserve consideration. So we direct the assessing
authority to treat firewood sold to M/s.Travancore Sugars as an
item falling under Entry 156 (Residuary Entry) of I Schedule.
Admittedly, the appellant purchased the entire firewood from
the Government Forest Department by paying first point tax and
so the appellant is not liable to pay tax.”.
10. While disposing of these revision petitions, we are not entering
into the question whether the wood that was sold by the respondent assessee is
timber or not. In the instant case, the wood that was sold by the assessee to a
Government Company was for the purpose of using it as a fuel. This factor is
not in dispute nor disputed by the revenue either before the Tribunal nor before us
S.T.Rev.Nos.550 OF 2004, 18 OF 2005,
74 OF 2005 & 85 OF 2005
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at the time of hearing these revision petitions by the learned Government
Advocate, which only means what was sold by the assessee is a fire wood and not
a timber. What is a fire wood and what is a timber is explained by the Apex
Court in Mukesh Kumar Aggarwal & Company v. State of Madhya Pradesh and
Others [1988 SCC 324]. In the said decision, the Apex Court has stated as under:
“If wood is not “fire-wood”, it need not
necessarily and for that reason alone be “timber”. All
wood not “timber”, nor, indeed, is all wood “fire-wood”,
though both “fire-wood” and “timber” are wood in its
generic sense.
The nature of goods cannot be determined by the
test of the use to which they are capable of being put. The
user test is logical but inconclusive. 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.
In a taxing statute, words which are not technical
expressions or words of art, but are words of every day
use, must be understood and given a meaning, not in their
technical or scientific sense, but in a sense as understood
in common parlance. 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. “
11. We are conscious of the views expressed by various courts that
S.T.Rev.Nos.550 OF 2004, 18 OF 2005,
74 OF 2005 & 85 OF 2005
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the user test is only logical; but is again inconclusive. 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. In the facts and circumstances of this case, in our view,
the other tests which are commonly applied for interpreting the taxing entry need
not be resorted to, since the facts in the instant case, clearly demonstrates that the
commodity purchased and sold is only “firewood”, and therefore, in our view, the
Appellate Tribunal was justified in classifying the commodity as a residuary item
falling under Entry 156 of First Schedule to KGST Act. Therefore, we are of the
view that, the Tribunal has not committed any error on facts which would call for
interference.
12. Accordingly, keeping in view the facts situation which is not
disputed by either side, that, the assessee had sold the wood to the purchaser,
namely, a Government Company only as “firewood” and not as timber, while
sustaining the orders passed by the Tribunal, we reject these revision petitions.
Ordered accordingly.
(H.L.DATTU)
CHIEF JUSTICE
(A.K.BASHEER)
JUDGE
jes/dk