1990 (9) TMI 338 - HC - VAT and Sales Tax

Summary

Issues: Interpretation of the term "timber" in a dealer's registration certificate to include standing trees for sales tax set off.

Analysis:

1. The case involved a dispute regarding the interpretation of the term "timber" in a dealer's registration certificate under the Madhya Pradesh General Sales Tax Act, 1958, specifically whether it includes standing trees for the purpose of claiming a sales tax set off. The assessee, a forest contractor, purchased standing trees and paid full sales tax on the transactions, seeking to set off the tax paid against the sales tax assessed for the Diwali year 1972-73.

2. The assessing authority and appellate authority initially rejected the assessee's claim for set off, stating that the entry in the registration certificate did not cover standing trees. However, the Tribunal ruled in favor of the assessee, holding that the contract was for the sale of standing trees agreed to be severed, and that the entry "timber" in the registration certificate should include standing trees. This decision led to the reference of the question to the High Court for opinion.

3. The High Court analyzed the definition of "goods" under the Madhya Pradesh General Sales Tax Act, 1958, and referred to a Supreme Court decision regarding the inclusive definition of goods under the Sale of Goods Act. The Court emphasized that under the terms of the contract of sale, standing trees agreed to be severed can be considered as goods, and the sale of such trees can be regarded as the sale of timber.

4. The Court delved into previous legal interpretations regarding the term "timber," citing cases where the dictionary meanings and common parlance understanding of the term were considered. It referenced judgments that highlighted the significance of administrative interpretations in determining the meaning of tax provisions, especially in relation to terms like "timber."

5. Based on the analysis of various legal precedents and the specific circumstances of the case, the High Court concluded that the standing trees purchased by the assessee should be considered as timber for all practical purposes, even before being felled. The subsequent sale of the timber in various forms did not alter the character of the goods sold. Therefore, the Court held in favor of the assessee, stating that the entry "timber" in the registration certificate includes standing trees.

6. Ultimately, the High Court answered the reference question in the affirmative, supporting the Tribunal's decision in favor of the assessee. The parties were directed to bear their own costs of the reference, and the reference was answered accordingly in favor of the assessee.