9911796707
TMI Blog1979 (5) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... cond and third instalments of the royalty. The petitioners were therefore asked to pay the amount due within fifteen days of the letter. Another communication dated 31st May, 1976 (annexure P/3), was addressed to the petitioner requiring it to pay the arrears of royalty plus sales tax at 8 1/2 per cent on certain amount and 9 per cent on some other amount. It also informed the petitioner that the petitioner was liable to pay cess tax on sales of bamboo at 3 per cent. The petitioner received another letter dated 12th July, 1976, stating that the amount of Rs. 50,000 paid by the petitioner under a bank draft dated 25th June, 1976, was being adjusted towards part-payment of royalty, payment of sales tax at 9 per cent and part-payment of cess tax. It also informed the petitioner that if the petition submitted by the petitioner in respect of sales tax and cess tax is decided by the higher authorities in its favour, the amount would be adjusted towards the balance due in respect of the "old lease". A representation (annexure 5) was filed by the petitioner to the Commissioner of Commercial Taxes (Finance), Government of Bihar, contending, inter alia, that the sales tax and cess tax were n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was pointed out by Jaswant Singh, J., in Board of Revenue v. A.M. Ansari[1976] 38 S.T.C. 577 (S.C.); A.I.R. 1976 S.C. 1813.: "...it is the creation of an interest in immovable property or right to possess it that distinguishes a lease from a licence. A licence does not create an interest in the property to which it relates while a lease does. There is, in other words, transfer of a right to enjoy the property in case of a lease. As to whether a particular transaction creates a lease or a licence is always a question of intention of the parties which is to be inferred from the circumstances of each case. For the purpose of deciding whether a particular grant amounts to a lease or a licence, it is essential, therefore, to look to the substance and essence of the agreement and not to its form...." It was further held in this case: "(1) To ascertain whether a document creates a licence or lease, the substance of the document must be preferred to the form; (2) the real test is the intention of the parties-whether they intended to create a lease or a licence; (3) if the document creates an interest in the property, it is a lease; but, if it only permits another to make use of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) The payment is to be made at the rate of Rs. 35 per tonne for the bamboos actually extracted in excess of 5,000 tonnes, with a minimum royalty of Rs. 1,75,000 for 5,000 tonnes; (iii) The lessee has to cut and remove the bamboos within the period allowed for such operation, the failure to do so makes him liable to pay the cost of felling, etc. This shows that the right conferred is of cutting and removal of bamboos and not an interest in the land; (iv) The petitioner had to pay rent for any land used in recognised bamboo depot but is not required to pay rent for the land inside the coupe permitted by the Divisional Forest Officer for temporary storage of bamboos; (v) Schedule D to the agreement uses the expression payment of purchase price; (vi) The lessee is not entitled to cut and remove any other produce of the coupe nor he is permitted in cutting or extracting as bamboos to damage any plant or any other bamboos which are to be left out. If the cutting is not according to the Bamboo Felling Rules or there is failure to cut and clear clumps, the work is to be done departmentally and the petitioner has to pay costs and penalty. 8.. Strong reliance was placed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Madhya Pradesh[1971] 28 S.T.C. 532. was referred to. Definition of "sale" in the relevant Act was similar to the Andhra Pradesh Act in consideration before the Supreme Court and, that is why, reference was made to the decision of the Madhya Pradesh High Court in the case of Orient Paper Mills Ltd.[1977] 40 S.T.C. 603 (S.C.); A.I.R. 1977 S.C. 687. The Supreme Court in the peculiar circumstances of the case held that holding of auction of the forest produce did not constitute carrying on business in the sale of that class of goods. 10.. The Orient Paper Mills' case[1977] 40 S.T.C. 603 (S.C.); A.I.R. 1977 S.C. 687. in the Supreme Court was an appeal against the decision of the Madhya Pradesh High Court in Orient Paper Mills Ltd. v. State of Madhya Pradesh[1971] 28 S.T.C. 532. The learned State counsel contended before the Supreme Court that the agreement was a lease. He relied on the fact that the annual payment therein envisaged was of royalty and not price. The expressions used in the deed were "demise", "lease" and "leased areas". The period of lease was 20 years, later on substituted by 30 years. Minimum royalty was also fixed. There was also a renewal clause. These factors wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 tonnes of bamboo, and thereafter payment at the rate of Rs. 35 per tonne. This indicates that the agreement fixes a price for the goods sold. Like the Orient Paper Mills[1977] 40 S.T.C. 603 (S.C.); A.I.R. 1977 S.C. 687., here also, supportive strength is available from clause 6(d), where the petitioner was required to keep account of the bamboos that were cut and the materials into which they were converted. The use of the expressions "lease" and "royalty" cannot be determinative in this case. As already pointed out it is the cumulative effect of the various terms that has to be examined. Schedule D, which forms the integral part of the agreement, specifically uses the expression "payment of purchase price". The heading of the schedule is "special conditions regulating and restricting felling, conversion, collection, extraction, transport of bamboos, payment of purchase price and other matters". The use of the expression "payment of purchase price" is a strong factor supporting the case of the State. The agreement nowhere envisages giving of the possession of land to the petitioner-company. On the other hand, as indicated in clause I of the agreement, it is the liberty and li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yalty". Royalty, as pointed out in the Orient Paper Mills' case(1), is "feudalistic euphemism for the price of the timber". I have already dealt with the factors (c) and (e), as relied upon by the learned counsel for the petitioner, while dealing with the contention of the petitioner, and these, for the reasons already explained, support the case of the State and not those of the petitioner. The right of the petitioner to sub-let or resell his coupe or part of his interest therein under the agreement does not lead to the inference that lease has been created. The permission is in respect of whatever interest the petitioner has under the agreement. What that interest is has to be determined on the basis of other relevant factors. The right of the petitioner to develop a communication in the leased area is connected with such business as is permitted in the agreement. The making of legal demand as the first charge on the bamboos extracted is similarly not a factor of consequence. Neither the provision of minimum royalty nor the duration of the term of agreement can outweigh the other factors in favour of the State, as already noticed, and lead to the conclusion that the agreement was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s goods to its members." It may be noticed that the expression "who carries on the business of sale...", which was in the previous Act, has now been deleted. "Goods" has been defined in section 2(j) to mean goods of all kinds of movable property. The explanation states: "Materials, commodities and articles attached to or forming part of an immovable property which are agreed to be severed under the contract of sale shall be deemed to be goods within section 2(j) of the Act." It is to be noticed that the definition of "goods" in the Madhya Pradesh General Sales Tax Act (as amended) included "all growing crops, grass, trees, plants and things attached to, or forming part of the land which are agreed to be severed before sale or under the contract of sale". Thus, for all material purposes, the definition in the Bihar Act and the Madhya Pradesh Act is similar. It was observed in the Orient Paper Mills' case(1): "The key expressions which unlock the mystique of turnover-cum-sale of goods are the last inclusive limb of the clause 'also includes...trees which are agreed to be severed under the contract of sale'. The crunch issue thus is whether the self-styled lease deed is in substan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S.T. (Amendment and Validation) Act 13 of 1971. The definition of 'dealer' and other related provisions were touched up and redefined in such manner that the finding on point No. (3) formulated by the High Court was effectively nullified. Indeed, the legislation is a sequel to the decision and has squarely undone the impediment in the way of the State collecting sales tax from the respondent. So long as that law holds good the State's claim cannot be bowled out....... To abbreviate the discussion, thanks to Act 13 of 1971, the forest department of the State shall be deemed to be dealer. If it is a dealer, the levy of sales tax from it is legal and the controversy on this score is silenced." 19.. Reliance was placed by the learned counsel for the petitioner on the decision of the Orissa High Court in Straw Products Ltd. v. State of Orissa[1978] 42 S.T.C. 302. The definition of "dealer" in the Orissa Act was that dealer means any person who carries on business of purchasing or selling. Thus, it would be seen that business element was necessary under the Orissa Act. In view of the changed definition of the expression "dealer" in the Bihar Act, this case cannot help the petitioner. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (annexure P/17), "timber" and some other items were deleted from the list of exempted goods. I do not see any difficulty in holding that the power of exemption includes within itself the power of withdrawal of exemption. A mere reading of section 24 of the Bihar and Orissa General Clauses Act makes it abundantly clear that such a power exists. So far as annexure P/18 is concerned, it is said that the notification, in the words of the learned counsel, "smuggles new items of goods", and makes them taxable. Section 3, which is the charging section, makes every dealer liable to the payment of sales tax (subject to the conditions mentioned in the section). This is subject to the other provisions of the Act. In respect of goods not liable to exemption under section 4 of the Act, the rate of tax payable is fixed under section 6. Section 6(1) of the Act lays down that the general sales tax payable by a dealer shall be 1 per cent of the taxable turnover. Section 6(2) similarly states that the special sales tax payable by a dealer shall be at the rate of 5 per cent of the taxable turnover. Proviso to both these sub-clauses empowers the State Government from time to time, by notification, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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