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The West Coast Paper Mills Ltd. v. The Commercial Tax Officer - Writ Petitions No.9767 to 9768 of 2000 and WPNOs.17649 to 17653 of 2000  RD-TN 7 (11 December 2001)
In the High Court of Judicature at Madras
The Honourable Mr.Justice R.Jayasimha Babu
The Honourable Mr.Justice A.K.Rajan
Writ Petitions No.9767 to 9768 of 2000 and WPNOs.17649 to 17653 of 2000
The West Coast Paper Mills Ltd.,
39 A, Brahmin Street,
Cuddalore District. Petitioner in all
the Writ Petitions
1. The Commercial Tax Officer,
Cuddalore. Respondent 1 in
all the petitions
2. The Tamil Nadu Sales Tax
Appellate Tribunal, rep.
by its Secretary,
City Civil Court Buildings,
Chenani 600 104. Respondent 2 in
3. The Tamil Nadu Taxation
Chennai 1. Respondent 2 in
WPs 17649 to 17653 of 2000 and
Respondent 3 in
Writ Petitions No.9767 and 9768 of 2000 are filed under Article
226 of the Constitution of India praying for the issue of writ of
certiorari calling for the records of the Tamil Nadu Taxation Special
Tribunal in it's order in T.C.(R) No.1468 and 1467 of 1997 dated
16.02.2000 confirming the assessment of the Commercial Tax Officer,
Cuddalore in TNGST No.582029/86-87 and 186709/84-85 dated 19.11.1987 and
29.12.1 987 respectively along with the orders of the Tamil Nadu Sales
Tax Appellate Tribunal in T.A. No.917 and 916 of 1987 dated 24.04.1990
and to quash the orders of the Tamil Nadu Taxation Special Tribunal in so
far as it relates to the tax imposed under Section 7-A of the Tamil Nadu
General Sales Tax Act, 1959.
Writ petitions No.17649 to 17653 of 2000 filed under Article 226
of the Constitution of India for the issue of writ of certiorari calling
for the records on the file of the Tamil Nadu Taxation Special Tribunal
in O.Ps. No.1246, 1250, 1247, 1249 and 1248 of 2000 respectively and
quash the order made in that O.Ps. Dated 28.09.2000, confirming the
proceedings of the Commercial Tax Officer, Cuddalore in TNGST No.5
82029/89-89; 93-94, 90-91, 92-93 and 91-92 respectively dated 28.07.2
For Petitioner : Mr.C.Natarajan,
Senior Counsel, for
For Respondents : Mr.T.Ayyasamy,
Special Goverment Pleader (T)
(Order of the Court was made by
R.Jayasimha Babu, J.)
Petitioner is a manufacturer of paper. It has its paper mill in the State of Karnataka. It had, during the years 1984 to 1992 purchased `Casuarina Wood' in dimension of 0.6 metres length and 5 cms. width at the thin end, from farmers in Tamil Nadu in circumstances in which no sales tax was payable by reason of the farmers not being dealers and not being liable to pay tax, even though firewood is taxable under the residuary entry in the first schedule to the Tamil Nadu General Sales Tax Act, hereinafter referred to as the Act. The rate of tax during that period ranged between 3 to 5%.
2. The petitioner was assessed to purchase tax by invoking Section 7A of the Act. The dealers' objection that casuarina was firewood in respect of which the Government had by its notification of 4th March 1974, issued under Section 17(1) of the Act granted exemption, and therefore no purchase tax could be levied, was overruled by the assessing officer, whose order was upheld in appeals, preferred by the dealer to the appellate Tribunal and to the Special Taxation Tribunal.
3. Learned counsel for the petitioner submitted that `Casuarina' is indeed firewood and in support of that submission he invited our attention to several publications dealing with `Casuarina'. In the book "Casuarinas" by Dr.N.S.Subbarao and C.Rodriguez Barrueco published in the year 1995, the authors being acknowledged experts in their field of study, in the Chapter "Uses and Economics" it is stated that the bulk of Casuarina wood is used as fuel in India and China. In the preface by the authors, it is also noted that there have been many uses for Casuarina wood apart from its utility as an ideal source of fuel; that Casuarinas are excellent for landscaping, sandbinding, windbreaks in agroforestry and above all rural house construction requiring inexpensive wood; that Casuarinas are regarded as multi purpose trees requiring no special chemical inputs or agronomic practices to raise large plantations on a slender budget, and Casuarinas are indeed a boon to the poor who require fuel as well as shelter at minimum cost. The wood itself is described as pale, brown, strong, heavy and straight grained. When young it weighs 800 kg/m and when old it weighs 96 8 kg/m at 12 percent moisture content of wood. The calorific value of 1 kg wood is 4127 kcal.
4. Counsel also placed before us "A Handbook on the Identification and Description of Trees, Shrubs and Some Important Herbs of the Forests of the Southern States" published by the Southern Forest Rangers College, Coimbatore, in which `Casuarina' is described as a fast growing, conifer-like, evergreen tree, stem erect, branching monopodial, ends of branchlets thickly set with numerous long slender green branchlets which are mostly deciduous branchlets jointed; internodes 0.5 0.64 cm, 6 8 ribbed. As regards it's uses it is stated therein that "Wood is useful for scaffolding poles, rafters, etc. chiefly used for fuel; tree is particularly valuable for afforesting sandy beaches and shifting sand dunes along sea coast; bark sometimes used in tanning and a brown dye is extracted from it."
5. In the book, "Casuarinas Trees of Multiple Utility" published by the Indian Council of Forestry Research and Education in the year 1 992, it is stated by the Director General of that Institute that, " Casuarina equisetifolia" was introduced into India in the 19th century to fuel steam locomotives. Since then it had slowly gained importance as a multipurpose tree to meet the requirements of rural folk for fuel, fodder, poles for farm constructions, shelter belts in area of high velocity winds, and even arresting sand dunes in coastal areas. Recently industries have also shown a keen interest in this species as a source of pulp for manufacture of paper and rayons and that the bark and wood can be used for a number of purpose." In the Chapter relating to Utilization of the tree, under the head "Industrial Uses" it is stated that in India this wood has been found to make a good paper pulp through use of neutral sulphate and semi chemical process; that it is used for making wrapping papers and printing papers; that one of the paper mills in Andhra Pradesh in the year 1988-89 consumed as much as 68,329 metric tons of Casuarina, to make pulp wood. Under the head "Domestic and Other Uses", it is stated that Casuarinas the world over became important with the advent of the energy crisis, and it is estimated that 85 of the wood harvested in developing countries is used for fuel of which Casuarina forms a significant component and that the most universal use of Casuarinas is for fuel, as the wood is dense and burns slowly with great heat and no smoke and further that it can even be burnt when green.
6. Reference was also made to the publication, "Casuarina Production and Marketing in Tamil Nadu" published by the Forest College and Research Institute, Coimbatore, in which it is stated that the trees are cut into different grades like building poles, firewood and that the top portion of the trees are called as "Millers" and that approximate specifications adopted for Casuarina used as centering poles is 10 12 ft height with 3" girth at the top and 5 to 6" girth at the bottom; 15 to 25 ft. height for scaffolding poles; 3 ft. length for firewood and 3.5 ft. length for pulpwood billets. It is also mentioned in that study that about 10 of the Casuarinas grown in Villupuram District of Tamil Nadu is bought by the petitioner herein for use in it's pulp plant.
7. The material purchased by the petitioner clearly shows that Casuarina is indeed a wood which is used as firewood, although it is a multi purpose tree and is capable of being put to use for several other purposes and particularly as centering poles, for scaffolding and for supporting temporary structures. One of the ways in which it has been put to use is for making pulp. The question for consideration therefore is as to whether by reason of the Casuarina being used for making pulp, it ceases to be firewood.
8. The Supreme Court in the case of Mukesh Kumar Agarwal vs. State of Madhya Pradesh and others, 68 STC 324, while considering the question as to whether the wood-heaps after the extraction of poles and ballies of eucalyptus trees was merely firewood held that, "In a taxing statute, words which are not technical expressions or words of art, but are words of every day use, must be understood and given a meaning, not in their technical or scientific sense, but in a sense as understood in common parlance, i.e., "that sense which people conversant with the subject-matter with which the statute is dealing, would attribute to it."
The eucalyptus logs which were subject matter of the sale in that case before the apex Court were also meant for use in making pulp by a manufacturer of synthetic fibre. The High Court in that case had reached the conclusion that eucalyptus was not firewood, and therefore it was timber. The apex Court observed that all wood is not timber as indeed all wood is not firewood either, though perhaps it will not be incorrect to say that both the firewood and timber are woods in its generic sense. On the question as to whether the nature of the goods can be ascertained with reference to its user, the apex Court observed that, "The `user-test' is 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. Even as the description of the goods by the forest authorities called them varyingly as `eucalyptus fuel wood' `eucalyptus wood-heap', etc. is not determinative, the fact that purchasers were dealers in timber is also not conclusive."
The Court went on to hold that even though eucalyptus, by every reckoning is a timber tree, the subsidiary parts of the tree sold in heaps after the poles are separated, cannot be regarded as timber with the sense, size and utility implicit in the idea of timber. The Court also observed that difference of degree can bring about difference of kind but that no test of general validity applicable to or governing all cases can at all be laid down.
9. Casuarina like eucalyptus is a tree. The fact that it is a tree and it's poles are used for scaffolding or centring purposes, and the tree itself is grown in certain areas with a view to improve the environment, would not render all parts of the tree into timber. Timber and firewood has implicit in them a reference to their use. Part of the same tree can be regarded as timber, while some other parts may be fit for use only as firewood. Even the difference in degree such as length and breadth may bring about differences of kind. To conclude that a whole species of tree is either timber or firewood, therefore, does not appear to be permissible. The actual use to which a specific part of the tree is put is however not determinative of the category into which it is to be placed whether as timber or firewood.
10. The question would then be as to whether that part of the Casuarina tree which is fit for, and is predominantly used as firewood, ceases to be firewood for the purposes of the Act when it is actually put to a different use. As observed by the Supreme Court user test is logical but, is inconclusive. The fact that wood burns when it is lit would not, on that score, make all wood into firewood. The term firewood can be used only when the part suitable for use as firewood, is used for that purpose, and such user is it's primary user. If such wood is put to other uses, such other use would not render firewood into something other than firewood, unless wood is classified in the statute with reference to it's actual use, such as wood used for making pulp.
11. In this case, the size of the material to be supplied is such, that it is suitable for use as firewood. That Casuarina itself is excellent fuel is not in doubt and cannot be doubted. Though Casuarina Poles may not appropriately be described as firewood, Casuarina branches and timber pieces of the size for which the petitioner had contracted, being predominantly fit for use as firewood has to be regarded as firewood in the absence of any specification in the Act with reference to the actual use to which such wood is put.
12. In the case of Deputy Commissioner of Sales Tax (Law) Board of Revenue (Taxes), Ernakulam vs. C.R.Paul & Sons, 59 STC 231, a decision rendered by the Kerala High Court prior to the decision of the apex Court in the case of Mukhesh Kumar Agarwal cited supra, it was held that wood brought and sold for the purposes of making pulp could not be regarded as firewood as the wood supplied was made specially suitable for the manufacture of pulp, and both the seller and the purchaser had consciously entered into an agreement for the supply of raw material for the manufacture of pulp. The Court held that reality could not be ignored and the concessional rate of tax provided for firewood could not be extended to such wood which had been described by the parties as timber pieces of specific sizes. That judgment of the Kerala High Court was followed by another Bench of the same Court in the case of the Deputy Commissioner of Sales Tax (Law) vs. M/s. Mavoor Trade Links, A.Rajan & Co. And others, T.R.Cs. No.27, 32, 34 to 38, etc. Of 1985 decided on 1st April, 1986. That later judgment was taken up in appeal to the Supreme Court in Civil Appeals No.4129 to 4138 of 1988 and was decided on 21.11.1988. The apex Court set aside that judgment in a brief order in which it was stated that in view of the decision of that Court in the case of Mukesh Kumar Agarwal, the judgment of the High Court is set aside.
13. The Kerala High Court itself had much earlier, in the case of Deputy Commissioner vs. Western India Plywoods (P) Ltd., 46 STC 331, held that the predominant or ordinary use of the article would be decisive for the purpose of determining it's nature, and the fact that it is put to use for some other purpose also would not have any impact in it's proper classification. The Court upheld the claim of a manufacturer of hardboard who had used the wood purchased by it as raw material, that it was entitled to concessional rate of tax, as the predominant and ordinary use of the wood purchased by it was only as firewood.
14. Learned counsel for the Revenue invited our attention to the decision of this Court in the case of A.H.K. & Company vs. The State of Tamil Nadu, 46 STC 117, in which it was held that specification for the supply of the goods involved in that case indicated that neither party intended that the goods should be sold or bought only as firewood.
15. The agreement between the parties in this case merely provides for the sale of Casuarina Wood of diameter of 0.5 cms. at the thin end and length of approximately 0.6 metres. No over-sized, undersized, burnt sandpattered, charred, bent or rotten blinks was to be accepted. It is obvious that the agreement was not for supply of wood which was to be used for firewood. However, that fact alone would not determine the nature of the wood that was supplied. As observed by the apex Court in the case of Mukesh Kumar Agarwal, the fact that a purchaser is a dealer in timber as also the description of the goods by the authorities in the department would not be determinative of the nature of the goods. Having regard to these observations of the apex Court, the fact that the parties did not intend that the wood sold was to be used as firewood, would not be decisive of it's nature.
16. What is taxed under the Act are transactions of sale or purchase involving goods. The purposes for which the transaction is entered into is not material except to the extent taken note of while granting the concession in the rate of tax. Goods have to be identified for being what they are. The same goods cannot be described at different points differently and varying rates of tax levied, unless a proper classification is made by the Legislature itself or by the authority properly delegated with such power if such delegation is permissible. When the exemption notification merely uses the term firewood without any condition or qualification, it must necessarily follow that all goods which answer the description, and fall within the scope of that term are entitled to exemption. The fact that the goods which fall within that exemption are used for a purpose other than that for which the goods generally belonging to that class are used, would not take those goods out of that class, in the absence of any other requirement in the statute.
17. It is always open to the Revenue to qualify the exemption with reference to the user, as the State is not bound to enact law levying tax on goods without reference to their user, nor is there any prohibition in the Act against exemption being granted with reference to their user. If the State has not chosen to clarify it's intention and has not chosen to specify any condition subject to which the exemption can be availed, there is no alternative but to hold that all goods falling within the description of the goods mentioned in the exemption notification will qualify for the exemption. For the purpose of ascertaining the nature of the goods, it's predominant use and the popular sense in which the words used in the notification are understood would be material. The special use for which a particular dealer or buyer uses those goods will not render those goods into something other than what they normally are, having regard to their nature and dominant and ordinary user.
18. The writ petitions are allowed. 11.12.2001 Index : Yes
Web site : Yes/No
1. The Commercial Tax Officer,
The Tamil Nadu Sales Tax
City Civil Court Buildings,
Chenani 600 104.
3. The Tamil Nadu Taxation
R.Jayasimha Babu, J.
17649 to 17653 of 2000
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