2007 (1) TMI 530 - HC - VAT and Sales Tax

Summary

Issues:
1. Classification of wood-wool for tax purposes - whether it is a product of timber taxed at six per cent or an unclassified item taxed at eight per cent.

Detailed Analysis:
The High Court judgment under section 11 of the U.P. Trade Tax Act, 1948 pertained to the assessment year 1987-88. The primary issue was the classification of wood-wool for tax purposes. The assessing authority initially taxed wood-wool at eight per cent as an unclassified item, a decision upheld in appeal but overturned by the Tribunal. The Tribunal ruled in favor of the dealer, considering wood-wool as a product of timber liable to tax at six per cent.

The court examined Notification No. ST-2-5785/X-10(1)-80-U.P. Act XV/48-Order-81, dated September 7, 1981, which specified products of timber or wood taxed at six per cent. Wood-wool, obtained by grinding timber or wood and used for packing and cooling, was deemed a product of timber under this notification. Reference was made to the case of Commissioner of Sales Tax v. Agrawal Wooden Products, where small timber pieces were considered a timber product by a learned single judge.

The court analyzed the meaning of 'product' in the context of timber, emphasizing a direct connection between the source material and its output. Citing the case of Commissioner, Sales Tax v. B.M. Wood Works: No. 1, the court highlighted that 'product' encompassed items produced through action, operation, or work, not limited to natural processes. The judgment referenced the apex court's decision in Collector of Central Excise, Coimbatore v. Protein Products of India Ltd., where the definition of 'product' included items derived through various processes.

Based on these legal principles and precedents, the court upheld the Tribunal's decision, considering wood-wool as a timber product taxable at six per cent. Consequently, the revision was dismissed, affirming the Tribunal's order and settling the classification issue in favor of the dealer.