2008 (9) TMI 899 - HC - VAT and Sales Tax

Whether on the facts and circumstances of the case the Tribunal is justified in its finding that firewood is an unclassified item and will not fall under entry 8 of the Fifth Schedule to the Act? Held that - The user test is only logical but is again inconclusive. The particular use to which an article can be applied in the hands of a special consumer is not determinative of the nature of the goods. In the facts and circumstances of this case the other tests which are commonly applied for interpreting the taxing entry need not be resorted to since the facts in the instant case clearly demonstrate that the commodity purchased and sold is only firewood and therefore in our view the Appellate Tribunal was justified in classifying the commodity as a residuary item falling under entry 156 of the First Schedule to the KGST Act. Therefore we are of the view that the Tribunal has not committed any error on facts which would call for interference. Accordingly keeping in view the facts situation which is not disputed by either side that the assessee had sold the wood to the purchaser namely a Government company only as firewood and not as timber while sustaining the orders passed by the Tribunal we reject these revision petitions.

Summary

Issues involved:
1. Classification of firewood for taxation under the Kerala General Sales Tax Act, 1963.
2. Interpretation of entries in the Fifth Schedule and First Schedule of the Act.
3. Discrepancies in assessment by the assessing authority and the Appellate Tribunal.

Issue 1: Classification of firewood for taxation under the Kerala General Sales Tax Act, 1963

The revision petitions involved cases where the assessing authority had classified the purchase or sales turnover of firewood under specific entries in the Fifth Schedule of the Act. However, the Appellate Tribunal in each case concluded that firewood should be classified as a residuary item under entry 156 of the First Schedule and taxed at a different rate. The central question was whether firewood should be considered timber under entry 8 of the Fifth Schedule or as a separate commodity under the residuary entry.

Issue 2: Interpretation of entries in the Fifth Schedule and First Schedule of the Act

The Fifth Schedule contained an explanation stating that timber includes various forms of wood, but the Tribunal argued that this did not encompass firewood specifically. The Tribunal relied on common commercial understanding and the absence of firewood in the statutory explanation during the relevant assessment years to support its classification of firewood under the residuary entry. The Tribunal also referenced a department publication treating firewood as a residuary item, further supporting its interpretation.

Issue 3: Discrepancies in assessment by the assessing authority and the Appellate Tribunal

In all revision cases, the assessing authority had initially assessed the turnover of firewood under specific entries in the Fifth Schedule, while the Appellate Tribunal disagreed and reclassified firewood under the residuary entry in the First Schedule. The Tribunal's decisions were based on the nature of the commodity sold, specifically as firewood for fuel use, and the absence of clear inclusion of firewood under the timber category. The High Court upheld the Tribunal's decisions, emphasizing the common commercial understanding of firewood and rejecting the Revenue's challenge to the classification.

In conclusion, the High Court upheld the Tribunal's classification of firewood as a residuary item under entry 156 of the First Schedule to the Kerala General Sales Tax Act, rejecting the Revenue's arguments. The judgment highlighted the importance of common commercial understanding in interpreting tax entries and clarified that firewood, distinct from timber, should be taxed accordingly.