TMI Blog1996 (11) TMI 433X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 1,09,149 2,070 53 of 1995 1981-82 Tea (excluding expenses) from 1-4-81 to 15-9-81 Do. From 16-9-81 to 31-3-82-2.5% Tea sale expenses 5% (from 1-4-81 to 15-9-81) Do. from 15-9-81 to 31-3-82 Rubber tree sales 4% 9,46,971 12,47,631 15,322 20,187 18,55,105 47,349 31,191 766 505 74,204 4,735 3,119 77 51 7,420 54 of 1995 1980-81 Tea 5% Tea sale expenses 5% Rubber tree sale 4% 18,89,531 32,375 2,31,000 94,477 1,619 9,240 55 of 1995 1984-85 Tea sales 5% Exemption claimed for tea sold at Cochin auction 5% Rubber tree sales 5% 1,83,651 18,40,863 10,17,500 9,182 92,043 50,875 1,377 13,806 7,631 5% " " 56 of 1995 1973-74 Tea 5% (excluding sale expenses) Tea sales expenses 5% Sale of rubber trees 3% 9,54,896 21,895 1,55,980 47,774 1,094 46,794 57 of 1995 1977-78 Tea 5% Tea sale expenses 5% Tree sales 4% 32,35,258 59,454 1,75,200 1,61,763 2,973 7,008 58 of 1995 1986-87 Tea sold through auction (exemption claimed 5%) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited is concerned, there are eight tax revision cases and they relate to the assessment years 1976-77 up to 1987-88. 2. When out of these tax revision cases, T.R.C. No. 96 of 1996 relating to the assessment year 1983-84 came up before us on October 3, 1996, on the submission of the learned Senior Counsel for the assessees, all these twenty-three tax revision cases came to be clubbed together by our earlier order with a further direction to place them in a group on October 29, 1996. The tax revision cases were heard extensively yesterday and today. The characteristic fairness of the learned Senior Counsel confined the controversy to the following two questions of law: "(i) Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the standing rubber trees sold by the assessee are timber exigible to tax? (ii) Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the standing rubber trees will come within the expression of timber and so excluded from 'agricultural produce' within the meaning of explanation 1(ii) of section 2(xxvii) of the Kerala General Sales Tax Act?" making it clear that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und that tea, coffee, rubber, cardamom or timber would not be considered as agricultural or horticultural produce. In other words, for the purpose of deciding the questions, we will have to consider as to what is sold by the assessees during the above assessment years could be considered as "timber or agricultural produce or otherwise". This is because the agricultural or horticultural produce is statutorily to be excluded from his turnover. 4.. The petitioners are rubber planters in the context of the question for consideration and consequent decision, and are assessees under the Kerala General Sales Tax Act on the files of the Assistant Commissioner (Assessment), Special Circle, Sales Tax Office, Kottayam. The assessees entered into agreements for sale of the standing rubber trees. Some of the common features of these agreements would be necessary to be born in mind. The agreements mention that rubber trees planted many years back have become old and very uneconomical. The agreements also mention that the trees are being sold with a view to replant rubber in the said areas. The agreements also specify that the rubber trees were standing on the land of the assessees. The agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 89) 1 KLT 270 (Kanakapalam Estate v. State of Kerala) to hold that rubber trees would be nothing but timber assessable to tax under the Kerala General Sales Tax Act, 1963. The Tribunal has relied upon a passage from the said decision of this Court and the said decision being the decision of the jurisdictional High Court was, naturally, held binding by the Tribunal. However, it was brought to the notice of the Tribunal that the decision of this Court in Kanakapalam Estate's case [1989] 73 STC 336; (1989) 1 KLT 270 was taken up before the apex Court and it was submitted in that connection that though the special leave petitions came to be dismissed, the apex Court passed the following order: "It will be open to the petitioner to place adequate materials to establish that rubber trees did not constitute timber in subsequent year, as alleged." The assessees acted on the above observation of the apex Court dated November 27, 1989 while dismissing the special leave petition in Kanakapalam Estates' case and produced certain documents to contend and show that rubber trees will not constitute timber liable to be assessed. 8.. One of the documents produced, which was referred to in the j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing and felling of certain trees as prohibited. This was in relation to the M.P. Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950. In the leading judgment of Vivian Bose, J., the question that came up for consideration was with regard to tree and standing timber and the distinction in regard thereto in the context of the provisions of the Transfer of Property Act, 1882. It is observed with reference to the provisions of the Transfer of Property Act that "trees" are regarded as immovable property because they are attached to or rooted in the earth and at the other end, "standing timber, growing crops or grass" would not be considered as immovable property in the context. 12.. It is in this connection, the apex Court was required to consider the difference between standing timber and a tree, especially with reference to the situation that in the first sense, it is to be understood as immovable property and in the other sense, it is not. The apex Court referred to the Webster's Collegiate Dictionary defining timber as follows: "Wood suitable for building houses, bridges, ships, etc., whether on the tree or cut and seasoned". It is observed, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC 532: "On turning to various dictionaries, we find that the dictionary meaning largely coincides with the statutory meaning of the word 'timber'. While discussing the question of the subject-matter of the impugned provisions we have set out the definition of the word 'timber' contained in the Webster Collegiate Dictionary occurring in the passage from the judgment of Vivian Bose, J., in Shrimati Shantabai v. State of Bombay [1959] SCR 265. The relevant meanings of the term 'timber' given in the Shorter Oxford Dictionary, Third Edition, are 'building material generally; wood used for the building of houses, ships, etc., or for the use of the carpenter, joiner or other artisan'. This definition also states that the word is 'applied to the wood of growing trees capable of being used for structural purposes; hence collectively to the trees themselves'. Amongst the meanings given in the Concise Oxford Dictionary, Sixth Edition, are 'wood prepared for building, carpentry, etc.; trees suitable for this; woods, forests, piece of wood, beam'. One of the meanings of the word 'timber' given in Webster's Third New International Dictionary is 'wood used for or suitable for building (as a h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , stability, utility, durability, the unit or measure of quantity and of valuation, etc., and the question is whether by the standard of these popular connotations, the "wood-stacks" or "wood-heaps" sold to, and purchased by the appellants can be held to answer the popular notions of "timber". With reference to the question whether "eucalyptus" tree is or is not a "timber" tree, it is observed that, apart from its utility as a source of gum and medicinal oils, the slow-growing species are especially known for the quality of its timber marked for strength, size and durability. In spite of this position, the apex Court has observed thereafter in the following manner: "...........But the question is whether the subsidiary parts of the tree sold in heaps after the 'ballies' and 'poles' are separated, can be called 'imarathi-lakdi' or 'timber'." and it is observed that it would be somewhat of a strain on the popular meaning of the expression "timber" with the sense, size and utility implicit in the idea, to call these wood-heaps "timber", meant or fit for building purposes. Persons conversant with the subject-matter will not call these wood-heaps "timber " whatever else the goods mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, etc., adequate and effective treatment methods are still obscure. It would be necessary to emphasise that the Director of Research was answering a pinpointed enquiry from the Managing Director, Velimalai Rubber Co. Ltd., Kottayam with reference to the letter dated April 21, 1989 as to whether old rubber trees which are removed for replanting purposes can be used as timber without further treatment for construction of houses, boats, etc. 18.. Then we have the publication from the Rubber Research Institute of India, Kottayam relating to rubber wood, production and utilisation. In chapter one itself relating to growth, availability and present status, in paragraph 1.4.6. at page 10, we find the following observations to show development of excessive cracking, severe borer attacks, warping and twisting also: "1.4.6. Almost all these industries are however facing different types of problems in the use of rubber wood. Some feel that logs stored in yards develop excessive cracking, some have complained of severe borer attacks, some have complained of warping and twisting of thin sections, veneers and splints. Some have noted unwanted cross grain, and loose grain. Varying types of k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposited in the parenchyama (Azizol Rahim Sudin 1989, Wong 1993), are major factors governing the high decay susceptibility of rubberwood." 19. We are not referring to the photostat copy of the issue of "Rubber Asia" for the month of July, August, 1994, because we find that the contents thereof are in the nature of a propaganda literature for sale promotion in regard thereto of rubber produce meant for furniture and partition. Thus, from the material on record, it would be seen that even after all the assessment years in question, the position with regard to the rubber trees agreed to be sold as standing trees could not be understood as timber in any sense of the situation. In fact, the material clearly shows that for long durability purposes like construction of houses, boats, etc., adequate and effective treatment methods are still obscure. It is further seen that the rubber wood is very susceptible to fungal and insect attack. We have also pointed out that even the rubber logs develop excessive cracking, severe borer attacks, warping and twisting. It is also seen that this is the position emerging from the material that came to be published in 1989 and onwards, not to sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n question, answer the position that rubberwood cannot be understood as timber, more so in the context of the agreements in regard thereto. The agreements clearly mention that an occasion to enter into them occurred because rubber trees became old and very uneconomical and also with a view to replant rubber in the same area by way of replacement. This factual position also has to be appreciated in the light of the approach determined by the three decisions of the apex Court. 23.. The learned Government counsel submitted that if the trees are taken up for sale on the ground that they have become old and very uneconomical making out a situation for replanting rubber, the trees could not be considered as trees basically. It is not possible to accept this submission, in the light of the language of the agreements as well as in the light of the common parlance approach that even a dead tree will have to be understood as tree and not by any other nomenclature. 24.. For all the above reasons, we hold that the standing rubber trees sold in pursuance of the agreements would not be timber exigible to tax and consequently would be agricultural produce coming within the meaning of explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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