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1989 (7) TMI 321 - HC - VAT and Sales Tax
Issues: Taxability of rubber trees under the Kerala General Sales Tax Act, applicability of the definition of "timber," interpretation of agricultural produce exclusion, and the relevance of rule 9(g) in the sale of rubber trees.
Analysis: The High Court of Kerala addressed two revision petitions concerning the taxability of rubber trees sold by the petitioners. In the first case for the assessment year 1981-82, the assessee sold rubber trees earmarked for cutting and replanting. The assessing officer considered the standing rubber trees as timber, forming part of the turnover, relying on a previous court decision. The Appellate Assistant Commissioner and the Tribunal upheld this view, leading to the filing of the tax revision case. Similarly, in the second case for the assessment year 1983-84, the Sales Tax Officer included the turnover from the sale of old rubber trees based on the same court decision, with subsequent appeals being dismissed. The primary issue revolved around whether rubber trees sold by the assessees qualified as timber under the Kerala General Sales Tax Act. The court referred to a previous decision where it was held that rubber trees fall under the expression "timber," excluding them from agricultural produce under the Act. The assessees argued against this classification, citing a Supreme Court decision regarding the definition of timber in a specific context. However, the court maintained its stance that rubber trees are considered timber in Kerala, emphasizing their use in various applications like furniture manufacturing. Furthermore, the court addressed an additional argument in one of the cases concerning the applicability of rule 9(g) to the sale of rubber trees. The contention was that the sale of rubber trees should be treated as the sale of a business as a whole, warranting a specific exemption under the rule. However, the Tribunal rejected this argument, stating that rule 9(g) does not apply when rubber trees are sold by an agriculturist, as it does not constitute the sale of the entire business. The court concurred with this view, finding no grounds to interfere with the Tribunal's orders, ultimately dismissing the tax revision cases. In conclusion, the High Court of Kerala upheld the taxability of rubber trees as timber under the Kerala General Sales Tax Act, denying the exemption based on the agricultural produce exclusion. The court also clarified that the sale of rubber trees by an agriculturist does not qualify for the deduction under rule 9(g), as it does not amount to the sale of the entire business. The petitions were consequently dismissed, affirming the decisions of the Appellate Tribunal in both cases.
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