Back
1988 Supreme(AP) 81
Andhra Pradesh High Court
Judges : B.P.JEEVAN REDDY, M.JAGANADHA RAO
A.P.Paper Mills Ltd. - Appellant
Versus
Government Of A.P. - Respondent
Decided On : 02-29-88
A contract for the sale of standing timber or bamboos is not a "sale of goods" within the meaning of the Indian Sale of Goods Act, 1930 and the Andhra Pradesh General Sales Tax Act, 1957, but a grant of a profit a prendre or a right in immovable property.
Headnote:
T. JAGANNADHA RAO, J. ( 1 ) THE petitioner-paper mills entered into a preliminary agreement as stated in G. O. Ms. No. 681 (Forests and Rural Development), later confirmed by a regular deed dated 20/07/1977 agreeing to fell, collect and remove the bamboos in three divisions of forest area in the State, paying a royalty of Rs. 60 per tonne. Each year, one lakh tonnes are to be removed for 20 years during the period 1/10/1975 to 30/09/1995. The question is whether the preliminary contract or the regular contract amounts to "sale" of bamboos attracting the provisions of the Andhra Pradesh General Sales Tax Act, 1957 read with the Indian Sale of Goods Act, 1930.
Fact of the Case:
The petitioner-paper mills entered into a preliminary agreement as stated in G. O. Ms. No. 681 (Forests and Rural Development), later confirmed by a regular deed dated 20/07/1977 agreeing to fell, collect and remove the bamboos in three divisions of forest area in the State, paying a royalty of Rs. 60 per tonne. Each year, one lakh tonnes are to be removed for 20 years during the period 1/10/1975 to 30/09/1995. The question is whether the preliminary contract or the regular contract amounts to "sale" of bamboos attracting the provisions of the Andhra Pradesh General Sales Tax Act, 1957 read with the Indian Sale of Goods Act, 1930.
Finding of the Court:
The court held that there is no "sale" of bamboos either at the time of preliminary agreement dated 19/09/1975 when G. O. Ms. No. 681 was issued or on 20/07/1977 when the contract was signed. The court also held that there is no "sale" of bamboos by the State to the petitioner at any time subsequently, at least after the bamboos are put in a "deliverable state" in each year in respect of the annual quantities of one lakh tonnes each, and the "royalty" cannot be treated as sale consideration.
Issues: 1. Whether under the preliminary contract evidenced by G. O. Ms. No. 681 (Forests and Rural Development) dated 19/09/1975 or the regular contract dated 20/07/1977, there is any "sale" of the bamboos, as defined in the Indian Sale of Goods Act, 1930 and the Andhra Pradesh General Sales Tax Act, 1957 either on 19/09/1975 or on 20/07/1977 ? 2. Whether there is a "contract of sale" or "sale" of bamboo - if not as stated under point No. 1, - at any point later, when each year one lakh tonnes of bamboos are put in a deliverable state and removed by the petitioner-company, during the 20 years period from 1/10/1975 to 30th September, 1995 ?
Ratio Decidendi: The court held that the terms of the bamboo contract in the present case are similar to the terms of the bamboo contract in the Orissa case, State of Orissa v. Titaghur Paper Mills Co. Ltd. [1985] 60 STC 213, and therefore, the Supreme Court judgment is applicable to the present case. The court also held that the contract created a right to benefits arising out of land, namely, the right to cut and remove bamboos which would grow from the soil coupled with the ancillary rights and thus a grant of profit a prendre (a right in immovable property) and not a "sale of goods".
Final Decision: The writ petition was allowed and it was held that there is no "contract of sale" or "sale of bamboo" falling within the definition of "sale" in the Indian Sale of Goods Act, 1930 or the Andhra Pradesh General Sales Tax Act, 1957 and that what is granted to the petitioner is only a "profit a prendre" or a right in immovable property.
( 1 ) THE petitioner-paper mills entered into a preliminary agreement as stated in G. O. Ms. No. 681 (Forests and Rural Development), later confirmed by a regular deed dated 20/07/1977 agreeing to fell, collect and remove the bamboos in three divisions of forest area in the State, paying a royalty of Rs. 60 per tonne. Each year, one lakh tonnes are to be removed for 20 years during the period 1/10/1975 to 30/09/1995. The question is whether the preliminary contract or the regular contract amounts to "sale" of bamboos attracting the provisions of the Andhra Pradesh General Sales Tax Act, 1957 read with the Indian Sale of Goods Act, 1930.
( 2 ) UNDER his proceedings dated 13/09/1983 the Divisional Forest Officer, Bamboo Weighment, Rajahmundry informed the petitioner-company that unless a sum of Rs. 17,05,295. 55, being the sales tax on the royalty for the period from 1/11/1979 to 31/08/1983 is paid with interest and surcharge, the same would be recovered as arrears of sales tax. Obviously, the said proceeding was issued pursuant to sub-clause (25) of the abovesaid lease deed under which the petitioner agreed to pay all taxes payable under the laws in force from time to time. The petitioner has questioned the said proceeding in this writ petition impleading the State of Andhra Pradesh as the 1st respondent and the Divisional Forest Officer as the 2nd respondent.
( 3 ) IT is contended by the learned counsel for the petitioner, Sri K. Srinivasa Murthy, that the present case is squarely governed by the judgment of the Supreme Court in State of Orissa v. Titaghur Paper Mills Co. Ltd. [1985] 60 STC 213. It is pointed out that the Supreme Court judgment considered a similar agreement entered into by a paper mill and came to the conclusion that there was no "sale" of the bamboos under the contract inasmuch as the goods were not put in a deliverable state at the time of contract and since the purchases were governed by the provisions of the Forest Laws of the State. The Supreme Court case, it is further pointed out, dealt not only with the case of standing timber but also with the future growth of bamboo and that so far as bamboo contract was concerned, the Supreme Court went further and held that the contract conferred upon the paper mill a benefit to arise out of the land which was in the nature of grant of a profit a prendre, and that such a right was a right in immovable property. On the basis of the above said judgment, it is argued that in the present case the contract relating to bamboos is not exigible to sales tax.
( 4 ) ON the other hand, it is contended by the learned Government Pleader, Sri A. Venkataramana, that the judgment of the Supreme Court is not applicable to the facts of the present case, that the agreement is a "long-term selling arrangement" for 20 years that there is a sale every year of bamboo of a quantity of one lakh tonnes and that there is a "sale of goods" attracting the provisions of the sales tax law. It is pointed out that each year the bamboo coupes are not constant but go on changing as identified by the Forest Department and that there is no such annual earmarking of the bamboo coupes in the Orissa case decided by the Supreme Court. It is also pointed out that the actual cutting of the bamboo trees up to a height is also regulated by the Forest Department and that there is no similar provision in the Orissa case. It is further argued that the contract does not relate to bamboo which would grow in future and that the agreement related, each year, to bamboo which had already grown up to a particular height, and such a transaction amounted to a "sale". It is, therefore, contended that the Supreme Court judgment is not applicable to the facts of the present case.
( 5 ) ON the basis of the above contentions two points arise for consideration : Point No. 1 : Whether under the preliminary contract evidenced by G. O. Ms. No. 681 (Forests and Rural Development) dated 19/09/1975 or the regu
