1981 (12) TMI 153 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the assessee was a dealer in timber within the meaning of section 2(g) of the Tamil Nadu General Sales Tax Act, 1959.
2. Whether the sale of trees of spontaneous growth by the assessee was exigible to sales tax under the Act.
3. Whether the Tribunal's finding that the main activity of the assessee was trading in timber was justified.
4. Relevance of the Supreme Court's decision in Deputy Commissioner v. Palampadam Plantations Ltd. [1969] 24 STC 231 (SC).

Detailed Analysis:

1. Dealer Definition under Section 2(g) of the Act:
The Tribunal concluded that the assessee was a dealer within the meaning of section 2(g) of the Tamil Nadu General Sales Tax Act, 1959. The Tribunal's conclusion was based on the partnership deed, which indicated that the primary object of the firm was timber business, with no reference to plantation activities. Additionally, the firm's letterhead described it as timber merchants, and the annual return of turnover referred to the principal place of business as Korangumudi Coupe, a term associated with forest contracts. The Tribunal found that only a minimal amount had been spent on plantation activities, reinforcing that the main activity was timber exploitation. Thus, the Tribunal's finding was not perverse or without material.

2. Exigibility of Sales Tax on Trees of Spontaneous Growth:
The assessee contended that the sale of trees of spontaneous growth should not be subject to sales tax. However, the court noted that section 2(d) of the Act defines "business" to include any trade, commerce, or manufacture, whether or not carried on with a profit motive, and any transaction incidental or ancillary to such trade. Section 2(g) defines a dealer as any person who carries on the business of buying, selling, supplying, or distributing goods. "Goods" under section 2(j) includes all movable property, and "sale" under section 2(n) includes every transfer of property in goods in the course of business. Therefore, the sale of timber and fuel by the assessee constituted a sale within the meaning of the Act, making the assessee a dealer under section 2(g).

3. Tribunal's Finding on Main Activity:
The Tribunal's finding that the main activity of the assessee was trading in timber was based on substantial evidence, including the partnership deed, letterhead, annual return, and minimal expenditure on plantation. Even if the land was purchased for coffee plantation, the sale of timber and fuel would still fall under "any transaction" incidental or ancillary to the business of coffee plantation, thus falling within the definition of "business" under section 2(d).

4. Relevance of Supreme Court's Decision in Deputy Commissioner v. Palampadam Plantations Ltd.:
The assessee relied on the Supreme Court's decision in Deputy Commissioner v. Palampadam Plantations Ltd., where it was held that trees of spontaneous growth could not be regarded as produced by agriculture or horticulture. However, the court distinguished this case, noting that the definition of "dealer" in the Kerala General Sales Tax Act included a person who sells goods produced by him by manufacture, agriculture, horticulture, or otherwise. The Tamil Nadu Act's definition of "dealer" does not include this inclusive portion. Therefore, the Supreme Court's decision did not apply to the present case.

Conclusion:
The court held that the timber cut from the land of the assessee and sold by the assessee is liable to sales tax. The tax revision case was dismissed, and the department was entitled to its costs, with counsel's fee fixed at Rs. 250.