1995 (9) TMI 333 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of pine square beams as converted timber or unconverted timber.
2. Validity of the suo motu revision of assessment orders.
3. Levy of interest under the Meghalaya Purchase Tax Act.

Issue-wise Detailed Analysis:

1. Classification of Pine Square Beams as Converted Timber or Unconverted Timber:

The core issue was whether pine square beams should be classified as converted timber taxable at 15% or as unconverted timber taxable at higher rates under the Meghalaya Purchase Tax Act. The petitioner-company argued that pine square beams are classified as roughly converted timber. This argument was supported by letters from the Conservator of Forests, Social Forestry Circle, Meghalaya, and the Officer-in-Charge, Composite Wood Branch, Government of India, Forest Research Institute, which stated that pine square beams are roughly converted timber. The petitioner also cited the Indian Forest Utilization and the Supreme Court's decision in Ganesh Trading Co. v. State of Haryana, emphasizing that commercial understanding should prevail over dictionary definitions. The court accepted the petitioner's contention, noting that pine square beams are not available in their natural state and require some conversion, thus qualifying as converted timber.

2. Validity of the Suo Motu Revision of Assessment Orders:

The petitioner challenged the validity of the suo motu revision of the original assessment orders by the respondent No. 3, which had been issued more than five years after the original assessments. The petitioner argued that the original assessments were correctly made at the rate of 15% for converted timber and that the revision lacked reasonable grounds. The court found that the suo motu revision was not justified as the pine square beams were indeed converted timber. The court quashed the order of the Commissioner that had reclassified the pine square beams as unconverted timber and ordered fresh assessments.

3. Levy of Interest under the Meghalaya Purchase Tax Act:

The petitioner contested the levy of interest under section 21 of the Meghalaya Purchase Tax Act and rule 22 of the Meghalaya Purchase Tax Rules, arguing that these provisions were ultra vires. The petitioner relied on the case of India Carbon Ltd. v. State of Assam, where similar provisions under the Assam Sales Tax Act and Rules were declared ultra vires. The court agreed with the petitioner, declaring that rule 22 was ultra vires to the extent that it visualized charging interest on the tax assessed rather than the tax due as per the return. Consequently, interest could only be realized on the basis of tax due as per the return, and only from registered dealers.

Conclusion:

The court allowed the petitions, holding that pine square beams are converted timber and that interest could only be realized based on the tax due as per the return. The impugned orders were quashed, and the levy of interest as done in these cases was invalidated.