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Deputy Commissioner Vs. Western India Plywoods (P.) Ltd. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKerala High Court
Decided On
Case Number T.R.C. Nos. 137, 138 and 139 of 1979
Judge
Reported in[1980]46STC331(Ker)
AppellantDeputy Commissioner
RespondentWestern India Plywoods (P.) Ltd.
Appellant AdvocateThe Government Pleader
Respondent Advocate T.L. Viswanatha Iyer, Adv.
DispositionPetition dismissed
Cases ReferredDeputy Commissioner of Sales Tax v. Pai and Co.
Excerpt:
.....of sales tax v. these observations of the supreme court do not get attracted to a case like the present one where the concerned entry in the first schedule is specific and clear and refers to a commodity which has got a commercial identity of its own such as firewood. we are therefore of the opinion that the tribunal was right in holding that since what the assessee had purchased was only firewood, the fact that a good part of the total quantity purchased during the first two assessment years and the entirety of what was purchased during the third year had been utilised as raw material for the manufacture of hard-board would not operate to deprive the assessee of the benefit of the concessional rate available on account of the inclusion of the commodity in the first schedule......the assessing authority took the view that since only a small portion of the total quantity of the material purchased by the assessee during the assessment years 1971-72 and 1972-73 had been actually used as fuel for the boilers in the factory and the balance quantity was used as raw material for manufacture of hardboard and since the entirety of the quantity purchased in 1973-74 was used only as raw material for the manufacture of hardboard it must be taken that the assessee had known that what they purchased was 'timber' and not firewood as understood in common parlance. in the view of the assessing authority timber purchased and used for the manufacture of hard-board is not understood as 'firewood' in common parlance and in commercial circles. on this ground the assessing authority.....
Judgment:

V. Balakrishna Eradi, C.J.

1. These revision petitions have been filed by the Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam, against the decision rendered by the Kerala Sales Tax Appellate Tribunal, Additional Bench, Kozhikode, allowing three appeals filed by the respondent-assessee and holding that the assessing authority was not justified in levying tax at 3 per cent on the turnover of the assessee relating to purchase of firewood which was admittedly put to use as raw material for the manufacture of hardboard and directing the assessing authority to tax the disputed turnover at one per cent.

2. The assessment years concerned are 1971-72,1972-73 and 1973-74. The assessee-The Western India Plywoods (P.) Limited, Baliapatam-is engaged, among other things, in the manufacture of hardboard. Large quantities of material described as firewood were purchased by the assessee during the assessment years in question and a substantial portion thereof had been admittedly used as raw material for the manufacture of hardboard. 'Firewood' is taxable only at the concessional rate of one per cent as it forms subject-matter of item No. 55 in the First Schedule to the Kerala General Sales Tax Act, 1963 (hereinafter called the Act).

3. The assessing authority took the view that since only a small portion of the total quantity of the material purchased by the assessee during the assessment years 1971-72 and 1972-73 had been actually used as fuel for the boilers in the factory and the balance quantity was used as raw material for manufacture of hardboard and since the entirety of the quantity purchased in 1973-74 was used only as raw material for the manufacture of hardboard it must be taken that the assessee had known that what they purchased was 'timber' and not firewood as understood in common parlance. In the view of the assessing authority timber purchased and used for the manufacture of hard-board is not understood as 'firewood' in common parlance and in commercial circles. On this ground the assessing authority held that except in respect of the material actually used by the assessee as fuel for the boilers, the balance quantity had to be regarded as 'timber' and subjected to the levy of tax at 3 1/2 per cent under Section 5(2) read with Section 5A of the Act. The Deputy Commissioner (Appeals), Agricultural Income-tax and Sales Tax, Kozhikode, before whom the matter was carried in appeal by the assessee confirmed the assessments made by the Sales Tax Officer. The assessee thereupon filed appeals before the Sales Tax Appellate Tribunal. The Tribunal allowed the appeals holding that the material purchased by the assessee was firewood falling within the description contained in item No. 55 of the First Schedule and the mere fact that it had been used as raw material for the manufacture of hardboard did not take it out of the scope of the said item so as to deprive the assessee of the benefit of the concessional rate of taxation at one per cent. Pointing out that the assessing authority itself had treated part of the very same material as firewood on the ground that the said quantity had been actually used as fuel, the Tribunal held that the balance quantity of the same material could not be regarded as a different commodity falling outside the scope of item No. 55 of the First Schedule merely because it had been put to some use other than as fuel, namely, as raw material for the manufacture of hardboard. In this view the Tribunal held that the entirety of the disputed purchase turnover of the assessee was liable to be taxed only at one per cent. The legality and correctness of the said conclusion recorded by the Tribunal are under challenge by the State in these tax revision cases.

4. The Tribunal has clearly found as a fact that the commodity that was actually purchased by the assessee was 'firewood' falling squarely within the scope of item No. 55 of the First Schedule. Even the assessing authority had not recorded any finding to the contrary and it had treated a part of the turnover relating to the identical material only as firewood. In regard to the remaining quantity of the very same commodity the assessing authority had applied the higher rate of 3 1/2 per cent treating it as purchase turnover relating to 'timber' on the sole ground that the user to which the said portion had been put was as raw material for the manufacture of hardboard. If what was purchased by the assessee was 'firewood' as understood in the ordinary parlance, we fail to see how it will cease to be firewood and fall outside the scope of item No. 55 merely because the assessee had subsequently used the material for some purpose other than as fuel. Strong reliance was placed by the learned Government Pleader on certain observations of the Supreme Court in Deputy Commissioner of Sales Tax v. Pai and Co. [1980] 45 S.T.C. 58 (S.C.) as lending support to his contention that the test to be applied for determining whether a particular commodity falls within the description given in an item in the First Schedule is the user to which the commodity is actually put. We are not able to regard the decision as an authority laying down such a wide proposition as applicable in all cases. In the case before the Supreme Court the question that fell to be considered was whether G. I. pipes came within the description 'water supply and sanitary fitting' occurring in entry 26A of the First Schedule to the Act. The description contained in the said entry was such as to make its applicability in relation to any particular article dependent on its use as a 'water supply fitting or sanitary fitting'. It was in the said context that the Supreme Court observed that for the purpose of determining whether G. I. pipes sold by the assessee in that case were 'water supply...fittings' it was relevant to examine the purpose for which the pipes were meant to be used. These observations of the Supreme Court do not get attracted to a case like the present one where the concerned entry in the First Schedule is specific and clear and refers to a commodity which has got a commercial identity of its own such as firewood.

5. Once it is found that the commodity which forms the subject-matter of the transaction of sale or purchase is directly covered by an entry in the First Schedule, the benefit of the concessional rate becomes available to the assessee and that will not be lost by reason of the fact that the goods purchased were used by the assessee for a purpose other than what is regarded as the predominant or ordinary use of that article. We are therefore of the opinion that the Tribunal was right in holding that since what the assessee had purchased was only firewood, the fact that a good part of the total quantity purchased during the first two assessment years and the entirety of what was purchased during the third year had been utilised as raw material for the manufacture of hard-board would not operate to deprive the assessee of the benefit of the concessional rate available on account of the inclusion of the commodity in the First Schedule. No interference is, therefore, called for by this Court with the order sought to be revised. These tax revision cases are accordingly dismissed, but, in the circumstances, without any direction regarding costs.


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