G.P. Singh, C.J.
1. This is a reference made by the Board of Revenue referring for our answer the following questions of law :
(1) Whether standing trees in a forest coupe are goods distinct from firewood and charcoal even when after felling them they can be sold as firewood and used in manufacture of charcoal?
(2) Whether sale of such standing trees by the forest department will normally attract tax at 7 per cent under entry No. 1 of Part VI of Schedule II appended to the M.P. General Sales Tax Act, 1958 ?
(3) Whether on the purchase of such trees under Section 8(1) of the Act, on furnishing a declaration in form XII-A, the penalty liable to be imposed under Section 8(2) of the Act for violating the conditions of declarations will be calculated and based at the rate mentioned in question No. (2) or at such different rates on which firewood and charcoal are taxable ?
2. The reference relates to the year 1968-69. The assessee took a forest coupe for Rs. 57,775. The forest coupe was taken on a declaration in form XII-A. The sales outside the State amounted to Rs. 45,486. The assessee was penalised under Section 8(2) of the M. P. General Sales Tax Act, 1958, in respect of these sales for violating the declaration. The question before the sales tax authorities and the Tribunal was as to what rate of tax should be applied for imposing penalty. The contention of the assessee was that the forest was a mixed forest consisting of timber and firewood trees and that in so far as it sold firewood and charcoal manufactured out of firewood outside the State, penalty should be levied having regard to the rate applicable to the entry of firewood, i.e., entry No. 8 of Part III of Schedule II where the rate of tax is 2 per cent. The contention of the department was that standing trees are not covered by any entry, and therefore, the penalty should be computed with reference to the rate of tax applicable to the residuary entry, i.e., entry No. 1 of Part VI of Schedule II which provides the rate of tax at 7 per cent. The Tribunal accepted the contention of the assessee.
3. In the statement of case, it has been clearly stated that the forest taken by the assessee was a mixed forest consisting of timber trees and firewood trees. The property in the standing trees did not pass to the assessee on the taking of the forest contract. The property passed only when the standing trees were felled. At the stage when the property passed to the assessee the felled trees were either timber or firewood. There is a specific entry dealing with firewood and the sale of firewood would be governed by that entry (entry No. 8 of Part III of Schedule II). The rate as provided in this entry is 2 per cent. Section 2(g) of the Act defines 'goods'. This definition includes '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'. As pointed out by us, the property in such goods passes only when they are severed from the land. For example, if the contractor is not able to fell certain trees before his contract expires, the property in those standing trees will continue to remain in the Government. The sale of trees is complete when they are felled and till they are not felled, the property does not pass in favour of the contractor. That being the position, we have to see the character of the. trees after they are felled for applicability of the different entries of the Schedule. Applying this test, there being a separate entry for firewood, sale of firewood would be governed by the rate of tax provided in that entry and sale of timber by the residuary entry. In our opinion, the Board of Revenue came to the right conclusion. Reference in this connection may also be made to the decisions of this Court, viz., Commissioner of Sales Tax, M. P. v. Jagalsingh M.C.C. No. 191 of 1978 decided on 9th April, 1980 (Madhya Pradesh High Court), and Commissioner of Sales Tax, M. P. v. Kartar Singh Narayan Singh M.C.C. No. 249 of 1979 decided on 7th December, 1981 (Madhya Pradesh High Court). In both these cases, it was held that penalty under Section 8(2) should be imposed in the case of firewood having regard to the rate of tax provided for firewood in entry No. 8 of Part III of Schedule II. These were also cases of assessees who were forest contractors and who had taken a forest coupe consisting of timber trees and firewood trees.
4. For the reasons given above, we answer the questions as follows :
(1) and (2) There is no sale of standing trees for the sale takes place when the trees are felled and the rate of tax applicable would be as provided in entry 8 of Part III of Schedule II for firewood and in the residuary entry for timber.
(3) The penalty imposable under Section 8(2) for violating the condition of declaration will be calculated on the basis of the rate mentioned in entry 8, Part III of Schedule II, for firewood and the rate mentioned in residuary entry for timber.
There will be no order as to costs of this reference.