1978 (2) TMI 202 - HC - VAT and Sales Tax

Summary

Issues:
- Whether the assessees should be treated as dealers in timber, firewood, and charcoal?
- Whether the sales of firewood are liable to tax?
- Whether the turnover relating to the sale of sized timber is liable to tax?
- Whether the act of sizing timber cut from trees makes the assessees dealers in commercial articles?

Analysis:
The assessees purchased a reserve forest for coffee plantation, cleared a portion of the land, and sold timber, firewood, and charcoal obtained from the natural growth trees. The assessing authority treated the assessees as dealers and assessed a turnover. The Appellate Assistant Commissioner held that the assessees were dealers in sized timber but not in firewood, as the firewood sales were realized during the plantation process. The Tribunal upheld the deletion of turnover related to firewood and ruled that selling sized timber did not constitute carrying on business as the forest was cleared for plantation purposes. The department challenged the Tribunal's decision on sized timber in a revision petition.

The Government Pleader argued that selling sized timber as sleepers made the assessees dealers. However, the Court referred to a Kerala High Court decision stating that sizing timber for transport does not create a commercial article different from timber logs unless further processed into sleepers. Since there was no evidence of further processing into sleepers for sale, the Court held that sizing timber did not make the assessees dealers in a commercial article. Consequently, the Court dismissed the tax revision case, following the Kerala High Court decision and held that the sized timber was not liable to sales tax under the Tamil Nadu General Sales Tax Act. The petition was dismissed with costs awarded.