Cut/Sized Shade Trees Constitutes "Agricultural Produce", No Sales Tax Applicable: Madras High Court

The issue raised was whether the sales of cut/sized Silver Oak grown as shade trees in the Tea Estates would constitute "agricultural produce" or sales of "firewood" or sales of "timber".

The petitioner has challenged the order of the Tribunal challenging the levy of tax on the premise that the sale of shade trees cut/sized for the purpose of transportation would still constitute "agricultural produce." It would fall outside the purview of turnover under the TNGST Act, 1959.

The petitioner submitted that the sale of shade trees cut to size would constitute firewood. The department has misdirected themselves in looking at the manner of billing to decide the classification, viz., whether the wood or goods sold were timber, firewood, or agricultural produce.

The department contended that the wood/goods sold by the petitioner were neither agricultural produce nor firewood but rather a sale of timber liable to tax in terms of the TNGST Act, 1959. The department relied on sale bills, which would show that the wood was sold in cubic metres and not by weight. Firewood is normally sold by weight and not in cubic metres. It is only the timber that is sold by the length of a cubic metre. The factum was taken to be conclusive proof of the fact that the wood sold was neither agricultural produce nor firewood, but the sale of timber, and thus liable to tax.

The court rejected the claim of the petitioner that the cut/sized Silver Oak/shade tree would constitute "firewood".

The Madras High Court bench of Justice R. Mahadevan and Justice Mohammed Shaffiq has held that the cut and sized shade trees would constitute "agricultural produce" and, therefore, fall outside the purview of the Tamil Nadu General Sales Tax Act, 1959 (TNGST Act, 1959).

The issue raised was whether the sales of cut/sized Silver Oak grown as shade trees in the Tea Estates would constitute "agricultural produce" or sales of "firewood" or sales of "timber".

The petitioner has challenged the order of the Tribunal challenging the levy of tax on the premise that the sale of shade trees cut/sized for the purpose of transportation would still constitute "agricultural produce." It would fall outside the purview of turnover under the TNGST Act, 1959.

The petitioner submitted that the sale of shade trees cut/size would constitute firewood. The department has misdirected themselves in looking at the manner of billing to decide the classification, viz., whether the wood or goods sold were timber, firewood, or agricultural produce.

The department contended that the wood/goods sold by the petitioner were neither agricultural produce nor firewood but rather a sale of timber liable to tax in terms of the TNGST Act, 1959. The department relied on sale bills, which would show that the wood was sold in cubic metres and not by weight. Firewood is normally sold by weight and not in cubic metres. It is only the timber that is sold by length/cubic metre. The factum was taken to be conclusive proof of the fact that the wood sold was neither agricultural produce nor firewood, but the sale of timber, and thus liable to tax.

The court rejected the claim of the petitioner that the cut/sized Silver Oak/shade tree would constitute "firewood".

The Madras High Court bench of Justice R. Mahadevan and Justice Mohammed Shaffiq has held that the cut/sized shade trees would constitute "agricultural produce" and, therefore, fall outside the purview of the Tamil Nadu General Sales Tax Act, 1959 (TNGST Act, 1959).

The issue raised was whether the sales of cut/sized Silver Oak grown as shade trees in the Tea Estates would constitute "agricultural produce" or sales of "firewood" or sales of "timber".

The petitioner has challenged the order of the Tribunal challenging the levy of tax on the premise that the sale of shade trees cut/sized for the purpose of transportation would still constitute "agricultural produce." It would fall outside the purview of turnover under the TNGST Act, 1959.

The petitioner submitted that the sale of shade trees cut/sized would constitute firewood. The department has misdirected themselves in looking at the manner of billing to decide the classification, viz., whether the wood/goods sold were timber, firewood, or agricultural produce.

The department contended that the wood/goods sold by the petitioner were neither agricultural produce nor firewood but rather a sale of timber liable to tax in terms of the TNGST Act, 1959. The department relied on sale bills, which would show that the wood was sold in cubic metres and not by weight. Firewood is normally sold by weight and not in cubic metres. It is only the timber that is sold by length/cubic metre. The factum was taken to be conclusive proof of the fact that the wood sold was neither agricultural produce nor firewood, but the sale of timber, and thus liable to tax.

The court rejected the claim of the petitioner that the cut/sized Silver Oak/shade tree would constitute "firewood".

"We are of the view that it may not be necessary to examine the other question viz., as to whether the wood/ goods sold was firewood or timber, though a number of decisions were cited by both sides, in this regard. The said exercise would be purely academic, which we do not intend to enter into," the court said.

Case Title: M/s. United Nilgiri Tea Estates Company Ltd. Versus The Tamil Nadu Sales Tax Appellate Tribunal

Case No: W.P. Nos.46464 to 46470 of 2006

Citation: 2022 LiveLaw (Mad) 362

Dated: 29.07.2022

Counsel For Appellant: Senior Counsel R.L.Ramani

Counsel For Respondent: Addl. Govt. Pleader Richardson Wilson

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