1987 (12) TMI 55 - SC - VAT and Sales Tax

Whether stacks of eucalyptus-wood sold by the forest department after separating the Ballies and poles constitute and answer the description of Timber under entry 32A of Part II of Schedule II to the Madhya Pradesh General Sales Tax Act 1958? Held that - What emerges therefore is that the goods in question are not Timber within the meaning and for purposes of entry 32A of the Act. In regard to the question as to what other description the goods answer and which other entry they fall under learned Counsel on both sides submitted that if we hold that entry 32A is not the appropriate one the matter be remitted to the High Court for a fresh consideration of the matter in the light of such other or further material the parties may place before the High Court. We accept this submission. Appeals allowed in part and the finding of the High Court that the goods in question fall within and attract entry 32A of Part II of Schedule II of the Act is set aside and the matter is remitted to the High Court for an appropriate decision as to which other entry the goods in question attract. The concerned Respondents are directed to refund to the appellants sums equivalent to 6% wherever the taxes are already recovered at 16%.

Summary

Issues Involved:
1. Whether the eucalyptus wood sold by the forest department constitutes 'Timber' under entry 32A of Part II of Schedule II to the Madhya Pradesh General Sales Tax Act, 1958.
2. Whether the eucalyptus wood sold should be classified under entry 12 of Part V of Schedule II as 'fire-wood'.
3. Determination of the appropriate tax rate applicable to the eucalyptus wood sold.
4. Refund of excess tax collected at 16%.

Issue-Wise Detailed Analysis:

1. Whether the eucalyptus wood sold by the forest department constitutes 'Timber' under entry 32A of Part II of Schedule II to the Madhya Pradesh General Sales Tax Act, 1958:
The primary issue was whether the eucalyptus wood sold by the forest department, after separating the "Ballies" and "poles," could be classified as 'Timber' under entry 32A. The High Court had previously held that the goods were 'Timber' and thus subject to a 16% sales tax. The Supreme Court, however, emphasized that in a taxing statute, words must be understood in their common parlance and popular sense rather than their scientific or technical sense. The term 'Timber' has an accepted legal connotation and a popular meaning that coalesce. The court referred to various definitions and previous judgments to determine the meaning of 'Timber.' It concluded that the eucalyptus wood sold in heaps did not meet the popular or legal notion of 'Timber,' which implies wood suitable for building purposes with certain size, stability, and durability. Therefore, the goods in question were not 'Timber' within the meaning of entry 32A.

2. Whether the eucalyptus wood sold should be classified under entry 12 of Part V of Schedule II as 'fire-wood':
The appellants contended that the wood sold was merely 'fire-wood,' falling under entry 12, which attracts a different tax rate. The High Court rejected this argument, reasoning that 'fire-wood' in common commercial parlance is not just any wood that can be used as fuel but wood that has attained notoriety as fuel. The Supreme Court noted that the High Court's reasoning was based on the fact that the wood sold did not meet the commercial understanding of 'fire-wood.' However, the Supreme Court pointed out that just because the wood was not 'fire-wood,' it did not automatically become 'Timber.' The court highlighted that all wood is not necessarily 'Timber' or 'fire-wood.'

3. Determination of the appropriate tax rate applicable to the eucalyptus wood sold:
Given that the eucalyptus wood did not qualify as 'Timber,' the Supreme Court remitted the matter to the High Court for a fresh consideration to determine the appropriate entry under which the goods should be classified. This would involve examining other possible entries in the schedule and considering additional material that the parties might present.

4. Refund of excess tax collected at 16%:
The appellants argued that since the goods did not attract the 16% tax under entry 32A, the respondents should refund the excess tax collected. The Supreme Court found this request reasonable and directed the respondents to refund sums equivalent to 6% of the tax wherever it had been collected at 16%, as the goods would not attract a higher tax rate than 10% under any other entry.

Conclusion:
The Supreme Court allowed the appeals in part, setting aside the High Court's finding that the goods fell under entry 32A as 'Timber.' The matter was remitted to the High Court for a fresh determination of the appropriate tax entry. Additionally, the respondents were directed to refund the excess tax collected at 16%. There was no order as to costs.