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B.K. Ray, G.K. Misra, JJ.
KRUPASINDHU SAHU & SONS
Versus
STATE OF ORISSA
S.J.C. No. 150 of 1971
Decided On: Decided On : 08-07-1974
SALES TAX - Orissa Sales Tax Act, 1947 (Act 14 of 1947) - Section 5(2)(A)(a)(ii) - Interpretation - Meaning of 'timber' - Conversion of timber into sized wood - Whether contravention of the proviso to section 5(2)(A)(a)(ii) - Held, no contravention - Question referred to the High Court modified.
Fact of the Case:
The petitioner purchased logs from registered dealers free of tax to the extent of Rs. 29,551.50 for resale in Orissa. The logs were cut into sizes in saw mills and then were resold in Orissa. All the taxing authorities held that by conversion of logs into sized wood the petitioner contravened section 5(2)(A)(a)(ii) of the Act.
Finding of the Court:
The court held that the taxing authorities acted contrary to law in invoking the proviso without indicating the nature of the conversion of original timber. The Tribunal is to gather further facts as to in what manner the original timbers were sized and if such sizing charges the essential character of the timber.
Issues: Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the proviso to section 5(2)(A)(a)(ii) is applicable inasmuch as the assessee purchased round logs on the basis of his registration certificate free of tax to resell them in Orissa but instead of doing so he converted them into sized wood then resold the same.
Ratio Decidendi: The court held that the meaning of 'timber' as used in common parlance in commercial circles is not the dictionary meaning, but how those entries are understood in common parlance, specially in commercial circles. Timber in common parlance in Orissa takes within its ambit only long and big sized logs of woods ordinarily used in house constructions as beams and pillars. Timbers can be used for other purposes such as planks, rafters and other wood products like tables and chairs. When timbers are so converted or are cut into very small sizes so as to be unfit for user as beams, pillars and similar such uses, they cannot be termed as timbers in common parlance though they retain their essential character as wood. The essential characteristic of timber as a commercial commodity is lost after such conversion.
Final Decision: The reference is accepted as indicated above. In the circumstance, parties to bear their own costs. The reference fee deposited be refunded to the petitioner.
JUDGMENT
G. K. MISRA, C.J. - Under section 24(1) of the Orissa Sales Tax Act, 1947 (Act 14 of 1947) (hereinafter to be referred to as the Act), the Tribunal has referred the following question of law arising out of its appellate order passed on 26th December, 1970.
"Whether, on the facts and circumstances of the case, the Tribunal was right in holding that there was contravention of the proviso to section 52(2)(A)(a)(ii) inasmuch as the assessee purchased round logs from registered dealers on the basis of his registration certificate free of tax to resell them in Orissa but instead of doing so he converted them into sized wood and then resold the same ?"
2. The undisputed facts are that the petitioner purchased logs from registered dealers free of tax to the extent of Rs. 29,551.50 for resale in Orissa. The logs were cut into sizes in saw mills and then were resold in Orissa. All the taxing authorities held that by conversion of logs into sized wood the petitioner contravened section 5(2)(A)(a)(ii) of the Act.
3. Section 5(2)(A)(a)(ii) of the Act runs thus :
"In this Act, the expression 'taxable turnover' means that part of a dealer's gross turnover during any period which remains after deducting therefrom -
(a) his turnover during that period on .........
(ii) sales to a registered dealer of goods specified in the purchasing dealer's certificate of registration as being intended for resale by him in Orissa ...........
Provided that when such goods are used by the registered dealer for purchases other than those specified in his certificate of registration, the price of goods so utilised shall be included in his taxable turnover."
The petitioner was the purchasing dealer. Timber is one of the goods specified in his certificate of registration as being intended for resale by him in Orissa. On the basis of such entry and a declaration given in form XXXIV under rule 27(2) of the Orissa Sales Tax Rules the petitioner purchased timbers free of tax. The turnover in respect of such purchase was deducted from his gross turnover to determine the taxable turnover. Before resale, however, he sized the timbers and resold them in Orissa.
4. The question for consideration is whether the logs sized in the saw mills can still be styled as "timber" as specified in the petitioner's certificate of registration. In other words, whether logs originally purchased and those very logs sized after purchase are identical goods for the purpose of imposition of sales tax is to be determined.
5. The Supreme Court has now firmly ruled that in finding out the true meaning of the entries mentioned in a Sales Tax Act, what is relevant is not the dictionary meaning, but how those entries are understood in common parlance, specially in commercial circles : see Ganesh Trading Co., Karnal v. State of Haryana ([1973] 32 S.T.C. 623 (S.C.).).
6. Bereft of authorities we propose to analyse the meaning of the word "timber" as understood in common parlance, specially in commercial circles. It is to be emphasised that all that is wood is not timber though timber is wood. In common parlance timber ordinarily means long logs of wood used for purposes of beams and pillars in the construction of houses and such similar uses. After the felling of big trees and the chopping off of the branches of those trees the trunk of the tree is called timber. A very long piece of log may be cut into different pieces. If the pieces after cutting still remain long so as to be used as beams, pillars and such similar uses, the cut pieces would still be called timber. To illustrate, a timber originally 60 feet long is cut into three pieces of 20 feet each. Each of the three pieces retains sufficient length to be used as beams or pillars and would be still treated as timber in common parlance.
Take another illustration. After purchase of some timbers a dealer for the sake of convenience of transport may cut a portion from each end of the timber, may peel off the barks and polish the joints at
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