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2022 (8) TMI 280 - HC - VAT and Sales TaxTaxability - Sales of cut / sized Silver Oak grown as shade trees in the Tea Estates of the petitioner admittedly in cubic metre and charged per cubic metre - would constitute agricultural produce in terms of Section 2(r) of the TNGST Act, 1959 or would constitute sales of firewood and thus exempt in terms of Entry 52 of Part B of the Third Schedule to the TNGST Act, 1959 or would constitute sales of timber liable to tax under the TNGST Act, 1959? - HELD THAT - The sale of shade trees cut/sized would constitute firewood and the authorities below have misdirected themselves in looking to the manner of billing to decide the classification viz., whether the wood/ goods sold was timber or fire wood or agricultural produce. Whether shade trees grown in tea estate cut/sized and sold would constitute agricultural produce , may be the principal question that needs to be answered first. If the answer to the said question is in the affirmative, the need to travel beyond and examine, whether the wood sold is firewood or timber, may not even arise. This is, in view of the fact that once it is agricultural produce , then, it goes outside the purview of the turnover under the TNGST Act, 1959 - The shade trees that have been cut/sized and sold are Silver Oak. These trees have their origin in Australia, an exotic plant variety and they are used as shade trees in tea estates in southern parts of India. These shade trees viz., Silver Oak need to be attended to periodically and they have to be planted and grown at particular intervals/distance to serve its purpose as shade trees for growth of tea plants. It is not the case of the Revenue that the growth of Silver Oak is wild or spontaneous, rather it is the case of the petitioner, which remains uncontroverted, these require human effort/labour and attention and thus, would constitute agricultural produce . Thus, it is clear that the cut/ sized shade trees would constitute agricultural produce and therefore, fall outside the purview of TNGST Act, 1959 - petition allowed.
Issues Involved:
1. Whether the sales of cut/sized Silver Oak constitute "agricultural produce" under Section 2(r) of the Tamil Nadu General Sales Tax Act, 1959 (TNGST Act, 1959). 2. Whether the sales of cut/sized Silver Oak qualify as "firewood" and are thus exempt under Entry 52 of Part B of the Third Schedule to the TNGST Act, 1959. 3. Whether the sales of cut/sized Silver Oak should be classified as "timber" and are liable to tax under the TNGST Act, 1959. Detailed Analysis: 1. Agricultural Produce: The primary issue was whether the cut/sized Silver Oak trees grown as shade trees in the petitioner's tea estates constitute "agricultural produce" under Section 2(r) of the TNGST Act, 1959. The petitioner argued that the sales of these trees should be considered agricultural produce and thus fall outside the purview of "turnover" under the TNGST Act, 1959. The court referred to the following requisites for something to be considered agricultural produce: - The proceeds of sale must be of "agricultural or horticultural" produce. - The produce should be grown within the State. - The activity of growing the produce must be by the assessee himself. - The claimant of the exemption must have a substantial interest in the land where the produce is grown. The court noted that Silver Oak trees are planted and grown with human effort and attention, which qualifies them as agricultural produce. The court also cited previous judgments, including CIT vs. Raja Benoy Kumar Sahas Roy and CIT vs. Sundara Mudaliyar, to support the definition of agricultural produce as something that involves human effort and does not grow wild or spontaneously. 2. Firewood: The petitioner alternatively claimed that the sales of cut/sized Silver Oak should be considered as "firewood" and thus exempt under Entry 52 of Part B of the Third Schedule to the TNGST Act, 1959. However, the Revenue argued that firewood is typically sold by weight and not by cubic meter, as was the case with the petitioner's sales. The court found that the classification of the wood based on its use (firewood or timber) was inconclusive. The court referred to previous judgments, including Porritts and Spencer vs. State of Haryana, Andavar and Co. vs. State of Tamil Nadu, and State of Tamil Nadu vs. Modern Mill Stores, which held that the 'user' test is not definitive for determining classification unless the entry itself refers to the nature of use. 3. Timber: The Revenue contended that the sales of cut/sized Silver Oak should be classified as "timber" and thus liable to tax under the TNGST Act, 1959. The Revenue's argument was based on the fact that the wood was sold in cubic meters, which is typical for timber and not for firewood. The First Appellate Authority and the Tribunal had affirmed this view, relying on the manner of billing and the unit of measurement used in the sales bills. Conclusion: The court concluded that the cut/sized Silver Oak trees constitute "agricultural produce" and therefore fall outside the purview of turnover under the TNGST Act, 1959. The court emphasized that the trees were grown with human effort and attention, qualifying them as agricultural produce. Consequently, the court set aside the order of the Tribunal and allowed the writ petitions, rendering it unnecessary to further examine whether the wood sold was firewood or timber. The court's decision was based on the interpretation of Section 2(r) and the relevant explanations in the TNGST Act, 1959, as well as supporting judicial precedents.
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