1973 (1) TMI 88 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of sales of firewood a second time
Tax liability on amount obtained from fair price shops for supplying firewood

Analysis:
The petitioner, a forest contractor, obtained the right to cut and remove treegrowth from the Government through an auction. The Sales Tax Officer rejected the petitioner's accounts and assessed him based on the best judgment principle, resulting in a turnover fixed at three times the bid amount, with a sales tax rate of 3 per cent applied. Subsequently, the petitioner was assessed again for the sales of firewood extracted from the treegrowth. The Sales Tax Officer sought to tax this turnover of firewood at a reduced rate of one per cent under head 55 of Schedule I to the Kerala General Sales Tax Act. The petitioner raised objections, arguing that the second assessment of firewood sales was illegal and that the amount obtained from supplying firewood to fair price shops should not be taxed. Both objections were rejected, leading to an appeal before the Sales Tax Appellate Tribunal.

The Government Pleader contended that treegrowth, timber, and firewood were distinct commodities requiring separate taxation as industry was involved in extracting them. However, the court disagreed, likening the purchase of treegrowth to standing crops, where what is purchased is the timber and firewood obtained from it. The court emphasized that there is no separate commodity like "tree-growth" and that the sales of timber and firewood should be taxed accordingly. The Sales Tax Officer had erroneously treated all sales from the treegrowth as timber and imposed tax at a higher rate, leading to an inequitable assessment.

The court held that the petitioner should only be taxed on the sales of timber and firewood at the appropriate rates, rather than taxing the same sales multiple times. Even if forest-growth, timber, and firewood were considered separate commodities, the assessment could not be sustained as the sales of firewood, previously taxed as timber, could not be taxed again as firewood. Consequently, the court allowed the revision case, setting aside the assessment on firewood and ruling in favor of the petitioner. The petitioner was also awarded costs.