1990 (11) TMI 372 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Whether standing trees are "goods" as defined under the Bengal Finance (Sales Tax) Act, 1941.
2. Whether standing trees are exempt from tax under entry 47 of Schedule I of the Act.
3. Whether the sale of standing trees is ancillary and incidental to the applicant's business of selling tea.

Issue-wise Detailed Analysis:

1. Whether standing trees are "goods" as defined under the Bengal Finance (Sales Tax) Act, 1941:

The applicant argued that standing trees rooted in the earth are not movable property and hence cannot be treated as "goods" as defined in section 2(d) of the Act. The definition of "movable property" in the Bengal General Clauses Act, 1899, excludes things attached to the earth. The applicant cited case law, including Husenali Adamji & Co. v. Commissioner of Sales Tax [1956] 7 STC 88, affirmed by the Supreme Court in Commissioner of Sales Tax v. Husenali Adamji and Co. [1959] 10 STC 297, which held that standing trees are not "goods" within the meaning of the State Sales Tax Act. The respondents contended that standing trees agreed to be severed under the contract of sale are "goods" as per the Sale of Goods Act, 1930. However, the Tribunal agreed with the applicant, stating that the definition of "goods" in the State Act governs the case, and standing trees attached to the earth are not movable property and hence not "goods" according to the State Sales Tax Act. The Tribunal concluded that the sale of standing trees in this case amounts to the sale of chattel or goods exigible to tax.

2. Whether standing trees are exempt from tax under entry 47 of Schedule I of the Act:

The applicant contended that trees are included under entry 47 of Schedule I, which declares "flowers and plants" as tax-free. The applicant referred to dictionary definitions and academic literature to argue that trees are plants. The respondents objected to this plea being raised at this stage, arguing that it was not raised before the assessing officer or appellate authorities. The Tribunal overruled this objection, stating that it has the jurisdiction to entertain a plea involving a substantial question of law relating to the interpretation of the specified State Act. On merits, the Tribunal held that the word "plant" in the context of the Sales Tax Act has a more restricted meaning, referring to small plants rather than big trees. The association of "flowers" and "plants" in the same entry supports this interpretation. Thus, the plea that trees are exempt from tax under entry 47 was rejected.

3. Whether the sale of standing trees is ancillary and incidental to the applicant's business of selling tea:

The applicant argued that selling standing trees is not part of its business of selling tea and lacks the elements of frequency, continuity, volume, and regularity. The respondents contended that the plantation and sale of shade trees are integral to the tea manufacturing process and thus ancillary and incidental to the applicant's main business. The Tribunal agreed with the respondents, citing Supreme Court decisions that any transaction incidental or ancillary to the main business constitutes business, even if it lacks the characteristics of business in ordinary parlance. Therefore, the sale of shade trees is considered ancillary to the applicant's business of selling tea.

Conclusion:

The Tribunal dismissed the application, holding that the sale of standing trees is exigible to tax, trees are not exempt under entry 47 of Schedule I, and the sale of standing trees is ancillary and incidental to the applicant's business of selling tea.