| SooperKanoon Citation | sooperkanoon.com/56775 |
| Court | Sales Tax Tribunal STT West Bengal |
| Decided On | Nov-23-1990 |
| Judge | Author: S D Ghosh |
| Reported in | (1991)81STC376Tribunal |
| Appellant | Rangpur Tea Association Ltd. |
| Respondent | Commercial Tax Officer, |
2. The case of the applicant may be briefly stated as follows : The applicant, namely, Rangpur Tea Association Ltd., a company under the Companies Act, 1956, carries on business of manufacturing and selling of tea in the State of West Bengal. It has tea gardens at Alipurduar where tea leaves are grown and thereafter tea is manufactured by various processes. By the side of the tea bushes, shade trees are planted for giving protection to the tea bushes from sun and rain. The applicant is registered as a dealer under the Bengal Finance (Sales Tax) Act, 1941 (hereinafter called "the Act") and is regularly assessed by the sales tax authorities on the sale of tea in the State of West Bengal and outside. During the period of four quarters ending December 31, 1981, the applicant sold certain big standing trees of its gardens at a total value of Rs. 1,03,500 which were planted for giving protection to the green tea leaves. The applicant did not charge any tax on the sale of the said standing trees as these are exempt from tax under the said Act. But the Commercial Tax Officer, Jorasanko Charge, in the course of assessment for the said period levied tax at the rate of 8 per cent on the said sale of trees for Rs. 1,03,500 and an additional demand of Rs. 7,679.70 was raised against the applicant. An appeal was filed against the said order by the applicant before the Assistant Commissioner, Commercial Taxes, Calcutta North Circle, who, however, confirmed the order of the Commercial Tax Officer. Thereafter a revision petition was filed before the West Bengal Commercial Taxes Tribunal, which also rejected the petition by its order dated January 30, 1989, which is under challenge here.
3. The subject-matter of challenge in this application is the levy of sales tax on the sale of standing trees, which are planted at the tea gardens for giving shade and protection to the green leaves from sun and rain. The challenge is on three grounds : (a) standing trees are not "goods" as defined in Section 2(d) of the Act and hence their sale is not exigible to tax, (b) trees are included in entry 47 of Schedule I, which are declared as tax-free under Section 6 of the Act, and (c) the applicant is a dealer carrying on the business of selling tea and not of selling standing trees.
4. The respondents have opposed the application on the ground that the standing trees assume taxability if these are liable to be severed from earth under the contract of sale and that these are goods as defined in the Sale of Goods Act, 1930. They have further averred that trees are not included in entry 47 of Schedule I of the Act and hence are taxable. As regards the question whether the sale of standing trees is business, it has been stated that as the applicant is a manufacturer of tea and is carrying on the business of selling tea, sale of standing trees is ancillary and incidental to the business of the applicant.
6. Mr. A.K. Chakraborty, learned Advocate for the applicant, referred to the definition of "goods" in Section 2(d) of the Act and argued that standing trees rooted in the earth are not movable property and hence cannot be treated as "goods" as defined in the Act. He also referred to the definition of "movable property" as given in the Bengal General Clauses Act, 1899. According to the said definition things attached to the earth could not be treated as movable property. He further said that it would appear from the bills relating to the sales of these trees that these were sold in "as is where is" condition. He, however, added that the buyer was required to cut the trees and take them away after paying the full price thereof. He relied on a decision of the Division Bench of the Nagpur High Court in Husenali Adamji & Co. v.Commissioner of Sales Tax [1956] 7 STC 88, which was affirmed by the Supreme Court in Commissioner of Sales Tax v. Husenali Adamji and Co.
[1959] 10 STC 297. It was decided in this case that standing sawar trees were not "goods" within the meaning of the State Sales Tax Act and, therefore, the assessee was not liable to sales tax. Another decision of the Division Bench of the Bombay High Court in Champalal v.Deputy Commissioner of Sales Tax [1966] 18 STC 424 was also cited. In this case the decision in Husenali Adamji's case [1956] 7 STC 88 (Nag) mentioned above was followed. It was decided therein that standing timber in the forest for the cutting of which the contract was given to the petitioner is not goods within the definition of "goods" contained in the Bombay Sales Tax Act, 1959, as the standing trees are very much attached to the earth and, therefore, could not be regarded as movable property. The definition of "goods" on the basis of which the above-mentioned decision was rendered was later retrospectively amended to include at all relevant times "standing timber agreed to be severed before sale or under contract of sale". In view of this amended definition of "goods" the Supreme Court held State of Maharashtra v.Champalal Kishanlal Mohta [1971] 27 STC 116 (SC) that the sale of goods agreed to be severed under the terms of the contract would be regarded as sale of goods and was chargeable to sales tax under the Bombay Sales Tax Act, 1959. Mr. A.K. Chakraborty argued that though the earlier decision of the High Court was reversed by the Supreme Court on review State of Maharashtra v. Champalal Kishanlal Mohta [1971] 27 STC 116 (SC) in the context of the altered definition of "goods", but earlier it had accepted the finding of the High Court that the sale of standing trees is not sale of goods chargeable to sales tax under the Bombay Sales Tax Act.
7. Another decision of the Division Bench of the Kerala High Court in Deputy Commissioner of Sales Tax v. Kalpana Krishna Mohan [1985] 59 STC 316, was cited. This was affirmed by the Supreme Court in Deputy Commissioner of Sales Tax v. Kalpana Krishna Mohan [1987] 67 STC 210.
According to the Kerala Act goods sold must be produced by the seller.
It was held in that case that the sale of shade trees of spontaneous growth, which were not produced by the seller, was not exigible to tax.
This case, as has been rightly pointed out by the learned State Representative, does not help the applicant and is not at all applicable to the present case.
8. The learned State Representative contended that by the inclusive definition of "goods" in Section 2(7) of the Sale of Goods Act, 1930, things which were attached to the land might be the subject-matter of a contract of sale provided that under the terms of the contract they were to be severed before sale or under contract of sale and that the expression "sale of goods" in the Constitution of India in entry 54 of List II had the same meaning as that expression had in the Sale of Goods Act. He further said that as the sale related to standing trees agreed to be severed under the terms of the contract, such sale was chargeable to sales tax. The gist of the argument of the learned State Representative was that standing trees are "goods" in terms of its definition in the Act read with Bengal General Clauses Act, 1899 and the inclusive definition given in Section 2(7) of the Sale of Goods Act, as these are to be severed before sale or under the contract of sale. He drew our pointed attention to the fact stated by the learned advocate for the applicant that the trees were required to be severed and cut by the purchaser under the contract of sale. He relied in this connection on a decision of the Supreme Court in State of Orissa v.Titaghur Paper Mills Co. Ltd. 9. The learned State Representative particularly drew our attention to the observations of Vivian Bose, J. with regard to the distinction between trees and standing timber at page 239 of the Titaghur Paper Mills' case [1985] 60 STC 213 (SC). The conclusions drawn from these observations are reproduced below : "Thus, trees which are ready to be felled would be standing timber and, therefore, movable property. What is, however, material for our purpose is that while trees (including bamboos) rooted in the earth being things attached to the earth are immovable property and if they are standing timber are movable property, trees (including bamboos) rooted in the earth which are agreed to be severed before sale or under the contract of sale are not only movable property but also goods." 10. The entire line of argument by the learned State Representative appears to be rather fallacious. The Sale of Goods Act, though relevant for the purpose of delineating the ambit of powers of the State Legislature with regard to entry 54 of the State List and certain other matters, cannot obviously be used as an instrument of taxation in a field where legislation by the State does not exist. If certain items have not been included in the definition of "goods" in the State Sales Tax Act, we cannot refer to the Sale of Goods Act to show that such items as have been regarded as goods in the latter Act could be treated as having been included in the State Act. We, therefore, agree with Mr.
Chakraborty, the learned advocate for the applicant, that to decide the issue whether standing trees are goods we have to refer to the definition of "goods" in the State Act, and not to that in the Sale of Goods Act.
11. Looking at it from this angle, we have now to interpret the definition of "goods" in the Act, which will obviously govern this case. The relevant definition is reproduced below : "2. Definition.--In this Act, unless there is anything repugnant in the subject or context,-- (d) 'goods' includes all kinds of movable property other than actionable claims, stocks, shares or securities.
Since there is no definition of "movable property" in the Act we have to refer to the Bengal General Clauses Act, 1899. The relevant definitions therein are reproduced below : " 'Immovable property' shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth.
'Movable property' shall mean property of every description, except immovable property." It is clear that standing trees attached to the earth are not movable property and hence not "goods" according to the State Sales Tax Act.
Support for this view is also invoked from the decisions in [1966] 18 STC 424 (Bom) (Champalal v. Deputy Commissioner of Sales Tax), [1956] 7 STC 88 (Nag) (Husenali Adamji & Co. v. Commissioner of Sales Tax) and [1959] 10 STC 297 (SC) (Commissioner of Sales Tax v. Husenali Adamji and Co.) 12. The crucial question to be decided in this case is whether the sale of standing trees in the facts and circumstances of the case is a sale of goods exigible to tax as contemplated in the Act. To constitute a transaction of sale there should be an agreement, express or implied, relating to the goods to be completed by passing of title in these goods. Though the bills indicate that standing trees were sold in "as is where is" condition, admittedly the agreement was that the trees were to be cut to effect sale. It may be noted that written agreement, if any, has not been produced at any stage. The invitation or notice to sell the trees, the responses received from the purchaser and such other materials might also constitute an agreement. But those were also not produced by the applicant at any stage. As "sale means any transfer of property in goods", sale of standing trees in this case takes place after the trees are cut and severed. The mere description in the bills that these were "standing trees" does not alter the real character of the transaction. It is clear that the sale here is a sale of goods and not an interest in immovable property, i.e., standing trees rooted in the earth. Had it been a sale of standing trees with interest in the land in which these are rooted, the matter would have been different.
13. No tax can be imposed unless the taxable event (namely, the transfer of property in the goods from the seller to the buyer) takes place ; standing trees continue to be the property of the seller until felled and, therefore, the title to such goods is transferred in favour of the buyer only when the trees are felled and severed after complying with the contract. In the facts and circumstances, therefore, the sale of standing trees here amounts to sale of chattel or goods exigible to tax. The challenge on this count thus cannot be sustained.
14. The next point urged by the applicant is that the sale of trees is declared tax-free under Section 6 of the Act vide entry 47 of Schedule I. Mr. Chakraborty drew our attention to the said entry which is as follows : He contended that plants include trees. He referred to the definition of "plant"in Blackie's Small School Dictionary which reads as follows : "Plant : Anything growing from the earth and feeding on it through its roots (e.g., tree, flower, vegetables, etc.)." He also referred to the forms of plants indicated in a book on biology published by National Council of Educational Research and Training. He read out the following paragraphs, which are reproduced below : "Plants have different forms of growth. They may be tall with a thick main stem and branches which bear leaves. Such plants are trees. The neem, banyan, mango and the palms are all trees.
There are others whose stems are hard but they are not so thick and the plants are not so tall. They have a number of branches starting from the base of the stem close to the ground. The whole plant has a bushy appearance. Such plants are called shrubs. The rose plant and the jasmine are shrubs.
There are still others which are small with soft stems. Most of the weeds and plants growing in shade and near water are herbs. The mustard plant.............. the balsam and grasses are all herbs." Mr. Chakraborty relying on such reference literature tried to establish the point that the trees are exempted from tax.
15. The learned State Representative took objection to this particular plea being raised at this stage since this was neither raised before the assessing officer nor before the appellate or revisional authorities. He further contended that as those authorities are creatures of the statute, they could not decide a plea which was not specifically raised before them. He argued that this Tribunal is required to adjudicate on the decision of the Commercial Taxes Tribunal and as the consideration of this plea is not included in that decision, the Tribunal should not entertain the plea unless the subordinate authorities had applied their mind to this new plea and taken a decision on it. He referred in this connection to a decision of a Division Bench of the Madras High Court in State of Madras v. Spencer and Company Limited [1974] 34 STC 249. In this case certain new claims were admitted by the Tribunal, which were not raised before the Appellate Assistant Commissioner and the Division Bench held that the Tribunal should not have entertained the claim. It, however, appears from the facts of the case that the claims of exemption of certain demands were entertained by the Tribunal, though the demands were earlier voluntarily admitted and accepted by the assessee before the appellate authority and also at the lower stage. It is in this context that the decision of the High Court was rendered. The case, therefore, is clearly distinguishable and cannot help the respondents.
16. As regards the admissibility of this plea, Mr. Chakraborty, learned advocate for the applicant, referred to two decisions, one of the Division Bench of the Calcutta High Court in Eastern Cold Storage (P.) Ltd. v. Commissioner of Income-tax [1983] 139 ITR 664, and another of the Supreme Court in Commissioner of Income-tax v. Mahalakshmi Textile Mills Ltd. [1967] 66 ITR 710. In the earlier case it has been held that if the amount of depreciation is on record the fact that the assessee had not claimed a deduction before the Income-tax Officer would be immaterial and the Income-tax Officer would be bound to set-off the unabsorbed depreciation against the balancing charge.
17. In the next case the High Court had earlier held that the Tribunal had jurisdiction to permit the assessee to raise a new contention which was not raised before the departmental authorities. Against this decision the Commissioner went up to the Supreme Court. The Supreme Court decided that the Tribunal is competent to pass such orders on appeal "as it thinks fit". There is nothing in the Income-tax Act, which restricts the Tribunal to the determination of questions raised before the departmental authorities. All questions, whether of law or facts, which relate to the assessment of the assessee may be raised before the Tribunal. If for reasons recorded by the departmental authorities in respect of a contention raised by the assessee, grant of relief to him on another ground is justified, it would be open to the departmental authorities and the Tribunal, and indeed they would be under a duty to grant that relief. The right of the assessee to relief is not restricted to the plea raised by him.
18. We need not enter into the question whether these decisions would be applicable to the present case, as the powers of Appellate Tribunal under the Income-tax Act are different from the powers of this Tribunal set up under Article 423B of the Constitution of India. This issue can be decided independently by the Tribunal on the strength of the powers conferred on it without drawing any support from these decisions.
19. Section 8 of the West Bengal Taxation Tribunal Act confers extraordinary jurisdiction on this Tribunal. Apart from the powers of revision, it exercises writ jurisdiction under Article 226 and also powers of superintendence under Article 227 of the Constitution of India. While deciding the subject-matter of case the Tribunal can issue such direction or pass such order "as it may deem fit". The Tribunal can entertain an application even if the applicant had not availed himself of all remedial measures available to him, if it is satisfied that the application involves a substantial question of law relating to the interpretation of the Constitution of India or the specified State Act or Rules framed thereunder, etc. By the same token, the Tribunal, therefore, can entertain a plea involving a substantial question of law relating to interpretation of the specified State Act even if the plea had not been taken earlier before a lower forum, provided, of course, no question is involved where a finding of fact is essential. Here it is a question of interpretation of a statutory entry. The applicant had already claimed exemption on certain grounds. By way of an alternative argument it has also staked its claim by taking the help of a statutory provision to support it. If for technical reasons the plea is thrown out and the issue is remanded to the lower authorities, it will mean unnecessary loss of time, energy and money. Apart from the wide discretionary powers, which can brush aside technical objections, if any, inhibiting speedy justice, the Tribunal has been specifically armed in Section 8(3) of the West Bengal Taxation Tribunal Act with powers to take care of the present situation. In view of the reasons given above, we overrule the objection of the learned State Representative and hold that this point urged by the learned Advocate for the applicant should be considered on its merits by this Tribunal.
20. As regards the merits of the plea, the learned State Representative contended that "plants" mentioned in the relevant entry did not include trees and hence trees are not exempted from tax. By referring to the rule of interpretation of associated words he argued that the juxtaposition of "flowers" and "plants" in the said entry is significant and actually determines the meaning of the word. He claimed that plants could not mean big trees because of its association with flowers and here what the Legislature actually meant was small plants with roots covered with loose earth, which are sold in the market for replantation. He also drew support from the rule that a word of everyday use should be construed in its popular sense and claimed that the word "plant" mentioned before a common man would never conjure up a vision of a big tree.
21. It is an accepted principle that general or common words of everyday use must receive a general or popular construction. It is no use depending on their scientific and technical meaning prevalent in academic circles, which may be totally out of context.
22. The meaning of "plant" in natural history as also in a dictionary is comprehensive enough to include "all members of vegetable group of living organisms" ranging from herbs, fungi, ferns and shrubs to big trees with stems, branches and leaves. But this is its botanical or technical meaning. Mr. Chakraborty has actually adopted this meaning.
In everyday use, however, it has a more restricted meaning, i.e., its popular meaning, which people conversant with the subject-matter with which the statute is dealing would attribute to it. Here popular meaning in the context of the Sales Tax Act is that meaning which is popular in commercial circles. How would anyone accustomed to the word plant react when such a word is uttered Will he visualise a big tree, with a thick stem, branches and leaves or will he think of a small plant, say, not more than 3 to 4 feet height 23. Moreover, the association of "flowers" and "plants" together in the same entry is a significant indicator. Each of these two words takes its meaning or colour from the other under the rubric noscitur a sociis. The meaning of the word "plant", therefore, is to be judged by the company it keeps with "flowers". This confirms the interpretation that plant in this context cannot possibly include big trees as urged by Mr. Chakraborty. The plea of the applicant, therefore, docs not have any substance.
24. Lastly, Mr. Chakraborty contended that the applicant is carrying on the business of selling tea in the State and that it is not its business to carry on sale of standing trees, which has no connection with its actual business. He further contended that to constitute business there should be these four elements, viz., frequency, continuity, volume and regularity and as the sale of standing trees is neither frequent, nor continuous, voluminous or regular, it could not possibly amount to business. He admitted that the applicant was a dealer carrying on the business of selling tea, but argued that the selling of standing trees could not be considered as ancillary and incidental to such business. He relied in this connection on a decision of the Supreme Court in Board of Revenue v. Ansari [1976] 38 STC 577.
It was held in the said case that to constitute business there should be volume, frequency, continuity and regularity of transactions of sale.
25. Shri Majumdar, the learned State Representative, however, argued that plantation of shade trees is essential for the purpose of nurturing tea plants and is an integral part of the process of manufacture of tea the applicant is engaged in. He further argued that the selling of such trees is, therefore, ancillary and incidental to the applicant's main business of selling tea. He relied on two decisions of the Supreme Court in State of Tamil Nadu v. Binny Ltd. [1982] 49 STC 17 and State of Tamil Nadu v. Burmah Shell Oil Storage and Distributing Co. of India Ltd. [1973] 31 STC 426. It was held in these cases that "any transaction in connection with, or incidental or ancillary to, the main business would constitute business even though the transaction by itself may not have the characteristics of business as understood in ordinary parlance". In other words, the ingredients of business, frequency, etc., mentioned in Ansari's case [1976] 38 STC 577 (SC) would not be necessary.
26. We agree with the learned State Representative and hold that the selling of shade trees is ancillary or incidental to the main business of the applicant, viz., selling of tea and that the applicant is carrying on business in terms of Section 2(la)(ii) of the Act.
27. In the premises, the application fails and is dismissed. There will be no order for costs.