(Prayer in W.P.No.33047 of 2005: PETITION filed under Article 226 of the Constitution of India praying for the issuance of Writ of Mandamus to forbear the respondents herein from collecting any tax other than the taxes under Section 8(1) read with Section 8(4) of the Central Sales Tax Act, 1956 against C declaration forms of the petitioners, on the sales of eucalyptus blue gum wood by the District Forest Officer, the third respondent herein for consumption in the factor of the petitioners at Dandeli, State of Karnataka, sold and delivered under G.O.(RT) No.294 dated 28.10.2004.
W.P.No.33048 of 2009: PETITION filed under Article 226 of the Constitution of India praying for the issuance of Writ of Certiorari call for the records on the files of the third respondent herein in Ref.No.9850/2004 L dated 1.4.2005 and quash the proceedings of the third respondent herein in Ref.No.9850/2004 L dated 1.4.2005.
W.P.No.33049 of 2009 : PETITION filed under Article 226 of the Constitution of India praying for the issuance of Writ of Certiorari call for the records on the files of the second respondent herein in D.Dis.Act.Cell-II/38181/05 (Clarification No.128/05) dated 12.9.2005 and quash the proceedings of the second respondent herein in D.Dis.Act.Cell-II/38181/05 (Clarification No.128/05) dated 12.9.2005.
W.P.No.2874 of 2006 : PETITION filed under Article 226 of The Constitution of India praying for the issuance of Writ of Certiorari calling for the records on the files of the second respondent herein in Ref.No.1453/2005 L Dated 13.10.2005 in so far as it applies to the petitioners and quash the proceedings of the second respondent in Ref.No.1453/2005 L Dated 13.10.2005 in so far as it applies to the petitioners.
W.P.No.2875 of 2006 : PETITION filed under Article 226 of The Constitution of India praying for the issuance of Writ of Mandamus to forbear the third respondent herein from collecting any tax other than the taxes under Section 8(1) read with Section 8(4) of the Central Sales Tax Act, 1956, against the C declaration forms of the petitioners, on the sales of eucalyptus blue gum wood by the third respondent for consumption in the factory of the petitioners at Bhadrachalam, State of Andhra Pradesh, sold and delivered under G.O.RT.No.15, Environment & Forest Department, dated 14.2.2005 and agreed dated 22.3.2005.
W.P.No.2876 of 2006 : PETITION filed under Article 226 of The Constitution of India praying for the issuance of Writ of Mandamus forbear the second respondent herein from collecting any tax other than the taxes under Section 8(1) read with Section 8(4) of the Central Sales Tax Act, 1956, against the C declaration forms of the petitioners, on the sales of eucalyptus blue gum wood by the second respondent for consumption in the factory of the petitioner at Bhadrachalam, State of Andhra Pradesh, sold and delivered under G.O.RT.No.15, Environment & Forest Department, dated 14.2.2005 and agreement dated 12.04.2005.)
W.P.Nos.33047 to 33049 of 2005 and 2874 to 2876 of 2006:
1. There are two assessees to state sales tax in this batch of six (6) writ petitions, i.e., West Coast Paper Mills Limited and ITC Limited, both engaged in the manufacturing of paper and paper board and located in the States of Karnataka and Andhra Pradesh respectively.
2. The three writ petitions filed by West Coast Paper Mills Limited in W.P.Nos.33047 to 33049 of 2005 are elaborately heard and the facts and legalities involved in these writ petitions are stated to be identical with those in ITC Limited as well, except for variations in dates and quantum. Material facts and legal issues being identical, the decision I arrive at in the writ petitions of West Coast Paper Mills is equally applicable to the case of ITC.
3. Heard Mr.Sriprakash, learned counsel for the petitioners, Mr.Hariharan, learned Additional Government Pleader for the Commercial Taxes Department and Ms.Thangavadana Balakrishnan, learned Government Pleader for R3/DFO.
4. The State of Tamil Nadu, in terms of the Tamil Nadu Essential Articles Control and Requisitioning Act, 1949 (TNEA (C&R) A) had imposed a ban on 03.04.2007 on the harvesting and movement of certain specified commodities outside the state. Thereafter, vide G.O.(D)No.81 dated 28.03.2018, issued by the Environment & Forest Department, the Principal Secretary to Government suggested that suitable amendments be considered to the (TNEA (C&R) A) permitting the movement of pulpwood to neighbouring states. The rationale of the relaxation sought was that such movement would benefit private farmers to obtain a better price for their crops. Vide G.O.(Ms).No.172, Environment and Forest Department dated 14.09.2005, the ban imposed was limited to certain specified periods alone and relaxed for the period 14.9.2005 to 14.8.2006 in respect of five commodities, one of which is Eucalyptus/ Pulpwood/ blue gum wood.
5. Meanwhile, upon the requisition of the petitioner dated 07.09.2004 for allotment of Blue Gum Wood, the District Forest Officer issued a Government Order bearing No.294 dated 28.10.2004, permitting the harvesting and movement of blue gum wood by the petitioner for the financial year 2005-2006. The G.O. reads as follows:
6. Consequent to G.O.294, an agreement was entered into on 06.12.2004 inter se West Coast Paper Mills Limited and the District Forest Officer, Nilgiris South Division, Udhagamandalam (R3/DFO) for the period 06.12.2004 to 27.10.2005 and a specified area of forest was allotted for exploitation by the petitioner.
7. The agreement specifies the quantum of pulpwood, area alloted to be felled/harvested for such exploitation, the rate at which the wood be felled and compensation and charges in respect of the same. The agreement specifically stated that the Forest Department retained the right to dispose the leaves of the Bluegum trees before placing the trees at the disposal of the petitioner for being cut and removed to the factory. The relevant Clauses of the agreement are extracted hereunder:
'Whereas Tvl.West Coast Paper Mills Limited have applied to the Govt. for supply of Bluegum wood and the Govt. have ordered to supply the Bluegum wood to the said company in G.O.(Rt) No.294, Environment and Forests (FR4) Dept. dt.28.10.2004 and the Principal Chief Conservator of Forests' No.E2/30860/2004 dt. 14.11.2004.
Now this Agreement witnesseth as under:
1. This agreement shall be in force for a period commencing on and from the date of execution of agreement till 27.10.2005. This agreement shall be modified or terminated by either of the party by giving to the other party 3 months previous notice in writing expiring with 27.10.2005. The District Forest Officer reserves the right to add any supplementary conditions or modify or omit any of the existing conditions if found necessary during the period of agreement. The District Forest Officer reserves the right to sell in auction if Tvl. West Coast Paper Mills does not remove the stock in the area allotted to it within the prescribed voidah and the District Forest Officer also reserves the right to recover from the said Company resultant loss, if any, consequent to such auction.
4. Felling, billeting and transport of wood from the forest site should be done by Tvl. West Coast Paper Mills Limited as its own cost.
6. Tvl.West Coast Paper Mills Limited shall remove the wood from all the areas allotted by the Forest Department and any request from Tvl.West Coast Paper Mills Limited for withdrawal of any particular area from total extent allotted by the Department or allotment of alternate area will not be entertained. The coupe stripe should be worked systematically from one end to another end and no haphazard working shall be allowed. If a coupe exceeds 20 hectares it will be divided in to not less than 3 strips, each strip not exceeding 20 hectares be allowed for working. Transport of felled, stacked and measured wood will be permitted from only one strip at a time and in the order in which felling has been permitted.
8. The procedure for movement of the wood, once felled, has been detailed as follows:
6. (a) The Tvl.West Coast Paper Mills Limited will be allowed to commence the felling in the second or subsequent strip only after completing felling and conversion of the previous strips. In the coupe alloted no tree should be left unfelled unless specially reserved at the time of allotment by the District Forest officer. No pulpwood should be left unremoved by Tvl. West Coast Paper Mills Limited. The said Company should remove all the billets upto 3" (7.6 cms) diameter and billets below 3" (7.6 cms) in diameter shall be left as rejects. The said Company will be permitted to work in two centres not exceeding 20.00 Ha each in one Range for each species simultaneously. Wattle Trees and all other trees but for Blue gum, standing in the coupe should be retained without felling by the company.
(b) The felled wood should be cut in to one metre long billets and stacked one metre height at convenient full metre lengths. The felled wood shall be stacked within three days of felling. The stacks will be measured by the Forester in charge of the coupe in the presence of the authorised agent of Tvt. West Coast Paper Mills Limited and the measurements recorded in the Register "wood stacked and measured" in quadruplicate as and when the wood is stacked.
(c) The stacks in each plantations should be given serial numbers in red paint. The size of the stacks (1M x 1M) length should also be written on the stack with red paint. After entire felling is over in a coupe or a strip the stack measurements will be completed and recorded in the Register "wood stacked and measured" in quadruplicate and signed both by the Forest in charge of the coupe and by the agent of the said company. One copy of this form will be forwarded to Tvl. West Coast Paper Mills Limited through their Agent. The stacking will be done preferably on level grounds in the coupe.
(d) As soon as the felling and stacking is over in a coupe or a strip the District Forest officer or the Assistant Conservator of Forests will check minimum of ten percent of the stacks. The Ranger and Assistant Conservator of Forests or District Forest Officer when checking the stacks in field will affix their dated initials in the duplicate copy of the Register "wood stacked and measured" that will reach the District Forest Officer. Transport of stacked wood will be allowed only after the stacked wood is measured by the District Forest Officer or Asst. Conservator of Forests.
7. Tvl. West Coast Paper Mills Limited shall pay a rate of Rs.1450/- (Rupees One thousand Four Hundred and Fifty only) per M.T. for Bluegum wood. The said company shall also pay administrative charges towards supervision of the felling, removal and transport of the forest produce. .....
10. Tvl. West Coast Paper Mills Limited shall remove the entire stock before 27.10.2005 otherwise for removal of balance quantity in the subsequent period, if permitted by the Government, rates pertaining for that period will be charged.
11. The Forest Department of the Government (hereinafter referred to as “The Forest Department”) retain the right to dispose of the leaves of the Bluegum trees before placing the trees at the disposal of Tvl.West Coast Paper Mills Limited for being cut and removed to the factory in pursuance of this agreement. Tvl. West Coast Paper Mills Limited shall have no right over the reject wood not removed to the factory from the coupe. Such material cut and not removed to the factory will become the absolute property of the Government and the Government reserves the right to dispose of such materials in any manner that they may decide and the said Company shall have no right whatsoever to such material or on the receipts realized on the disposal of such materials.'
9. A reading of the aforesaid clauses makes it abundantly clear that the burden entirely rested on West Coast Paper Mills to not only fell trees from the areas allotted, but to move the same to their factory at Belgaum. The procedure for such felling has been stipulated in great detail as has been the procedure for stacking, storage and weighment of the wood, clearance of the area and onward transport of the wood to destination outside the State. The agreement makes it clear that upon felling, it was mandatory for West Coast to move the goods and any tardiness or lethargy in such movement would result in additional charges being imposed in terms of Clause 10 extracted above. At Clause 11, the State says that if there is no prompt movement of the goods, then such material would become absolute property of the Government to be disposed in any manner that if desires.
10. Penalties are also envisaged for breach of the aforesaid terms in terms of Clauses 21 and 22, extracted below:
21. In the event of any breach by Tvl. West Coast Paper Mills Limited or its agents or by any person employed by them either or any of the terms and conditions of this agreement, the Government may terminate the agreement by written notice in such case, all stocks which are available in the alloted areas shall become the absolute property of the Government and the same may either be resold or be worked departmentally and for any profit arising there from the said company shall have no right and on the termination of the agreement, it shall be open to the Government to collect the balance of the amount due from the said company and under the provisions of the Tamil Nadu Revenue Recovery Act, 1864 (Tamil Nadu Act II of 1864).
22. Tvl. West Coast Paper Mills Limited shall pay Sales Tax and Income Tax on the sale value of the bluegum wood at such rate as may be current during the period of contract.”
11. In my view, the wood sold to West Coast is clearly intended to be transported to Belgaum, across the State border, constituting inter-state sales. The agreement is stated to have been acted upon and the tax liability discharged by the petitioner in terms of the Central Sales Tax Act, 1959,(CST Act), meaning that the petitioner has remitted the tax component to the DFO along with the sale consideration for the wood, treating the transaction as an Inter-state sale.
12. However, on a specific query posed to both the learned counsel appearing for the DFO as well as the Government Advocate for the Commercial Taxes Department, the latter submits on written instructions, that the Forest Department, Udagai (both North and South Divisions) have not filed any monthly returns for the periods in dispute and there have been no assessments framed upon them by the State Tax Officer. There has thus, been no move by the Revenue till date to assess the DFO or even seek the filing of returns in order to initiate and complete the finalization of assessments.
13. It appears that clarifications were sought by the DFO as well as by the petitioner from the Department, and the Commissioner of Commercial Taxes has issued a Clarification on 12.09.2005 to the effect that the supply of blue gum wood by the Forest Department shall be treated as a local sale taxable at 10% under Entry No.37/Part-C/ First Schedule to the Tamil Nadu General Sales Tax Act, 1959(Act) with surcharge at 5% on tax due under Section 3-I of the Act. This Clarification is under challenge in W.P.No.33049 of 2005. Consequently DFO/R3 has called upon the petitioner vide letter dated 01.04.2005 to remit 10% local sales tax along with surcharge after reducing the tax already paid at 4%, treating the transaction as local sales of timber/pulpwood. Thus, in W.P.Nos.30047 of 2005 and W.P.No.30048 of 2005, a Mandamus is sought forbearing the R3/DFO from collecting anything more than 4% as sales tax.
14. The nature of the transaction in question will necessarily have to be determined prior to imposition of tax thereupon. This has to be done bearing in mind the agreement inter se the parties as well as the applicable legal provisions. In the present case, there was a ban on the movement of blue gum wood, that was relaxed in the case of the petitioner under G.O dated 28.10.2004 bearing No.294 for the period 01.04.2005 to 31.03.2006. The relaxation of the ban is clearly for the purpose of enabling the movement of the wood harvested from the alloted area to outside the State. This is apparently the avowed purpose of the relaxation of the ban, itself.
15. The agreement between the parties also makes it clear, in my considered view, that the purpose of the transactions is only the inter-state movement of the goods from the alloted area in Tamil Nadu to Karnataka and Andhra Pradhesh.
16. Section 3 of the CST Act stipulates when a sale or purchase of goods is said to take place 'in the course of inter-state trade or commerce' and reads as follows:
'A sale or purchase of goods shall be deemed to take place in the course of inter-state trade or commerce if the sale or purchase-
(a) occasions the movement of goods from one state to another; or
(b) is effected by a transfer of documents of title of the goods during their movement from state to another.'
17. Thus if the sale or purchase occasions the movement of goods from one state to another, then such sale or purchase shall be deemed to have taken place in the course of inter-state trade or commerce. In this particular case, the existence of the ban generally and the relaxation of the same for the period in question, seen in tandem with the agreement entered into inter-se the parties, makes it clear that the movement of goods is inter-state only.
18. Mr.Hariharan, learned Government Pleader places reliance on a decision of a Division Bench of this Court in the case of Karnataka Soaps and Detergents Vs. District Forest Officer (140 STC 112). This decision is of no assistance to the Department, since it relates to an auction and not an allotment. The difference in facts emanate from the analysis at paragraph 6, wherein the facts of that case are distinguished from the facts in Co-operative Sugars (Chittur) Ltd. Vs. State of Tamil Nadu [ 1993 (90) STC 1] as follows:
'6. The learned Senior Counsel for the petitioner/appellant then relied on the decision of the Supreme Court in Co-operative Sugars (Chittur) Ltd. Vs. State of Tamil Nadu,  90 STC 1. In our opinion that decision is also distinguishable. The said decision related to the purchase of sugarcane in Tamil Nadu by the appellant therein who had a sugar factory in Kerala. It may be mentioned that under the Sugarcane Control Order, 1966, ordinarily sugarcane cannot be transported except to the factory lying within the reserved area. The system of supply of sugarcane to the sugar factories, which is prevalent in most parts of the country, is that the Government declares a certain area lying within a certain radius of a sugar factory as a reserved area. The sugarcane growers within that reserved area can sell sugarcane only to that factory which is inside the reserved area, and the sugar factory can only purchase cane from the cane growers within that reserved area. However, it appears that sugarcane was not available in Kerala State. Hence, the Governments of Kerala and Tamil Nadu entered into an agreement pursuant to which the Government of Tamil Nadu issued a G.O. permitting the appellant therein to purchase sugarcane from certain areas in Coimbatore and Pollachi Taluks in Tamil Nadu. The appellant was permitted to purchase sugarcane in Coimbatore and Pollachi Taluks only with a view to and exclusively for the purpose of transporting it to its factory in Kerala. The movement of the goods from Tamil Nadu to Kerala was occasioned by the sale by the farmers or by the purchase by the appellant. Thus, it is evident from the facts of the above case that the appellant was permitted to purchase sugarcane in Coimbatore and Pollachi Taluks in Tamil Nadu only with a view to and exclusively for the purpose of transporting it to its factory in Kerala. This was because of the G.O. issued by the Tamil Nadu Government in pursuance of its agreement with the Kerala Government. Thus, the aforesaid decision of the Supreme Court was on its own peculiar facts, and hence it is clearly distinguishable.'
19. Further, at paragraph 19, the Bench notices that there is no compulsion or obligation imposed upon the petitioner (in that case) to transport the wood auctioned after purchase from Tamil Nadu. Paragraph No.19, to such effect, is extracted below:
'19. In the present case, it cannot be said that the petitioner was under any obligation of any nature to transport the sandalwood after purchase in Tamil Nadu to the State of Karnataka. No doubt, as held by the Supreme Court in the above decision, the obligation may be imposed either expressly by the contract or impliedly by a mutual understanding. However, in this case, even by implication it cannot be said that the petitioner was under any obligation to transport the goods from Tamil Nadu to Karnataka. The goods were purchased by the petitioner itself in Tamil Nadu (through its Officers) and surely it cannot be said that the petitioner was under obligation to itself to transport the goods from Tamil Nadu to Karnataka. "A" can be under obligation to "B", but surely "A" cannot be under an obligation to "A" himself. After having purchased the sandalwood in Tamil Nadu, the petitioner could do whatever he liked with it, and he was under no obligation to transport it to Karnataka, and that he did so was of his own choice and volition and not under any obligation. No doubt, the petitioner obtained necessary permits under the Karnataka and Tamil Nadu Acts and obtained the necessary income-tax certificate, but that was all vo
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luntary and of its own choice. If the petitioner had not chosen to transport the goods to Karnataka it may have suffered from the business point of view as it would not get the necessary raw materials for its factory in Bangalore, but that does not amount to saying that it was under any legal obligation, either express or implied, to transport the goods to Karnataka. Hence, the auction sales cannot be called inter-State sales.' 20. Thus, there is a material difference between the transaction in that case and the one at issue before me where there is an obligation cast upon the petitioner both by virtue of the Government order as well as by the Contract to move the goods in question to Karnataka/Andhra Pradesh. 21. The above matter travelled in appeal to the Supreme Court where in Malayagiri Sandalwood Oil Distillery Vs. Special Commissioner and Commissioner of Commercial Taxes & Ors. [Civil Appeal No.2421 of 2006], the concession of parties to participate in proceedings for assessment was recorded by the Court. The Department was directed to complete proceedings for assessment after hearing the DFO as well as the auction purchasers. 22. In the light of the discussion above, the transaction is held to be an Inter-state sale only in the hands of the DFO. The impugned Clarification as well as the consequent communication from DFO/R3 to the petitioner are quashed, since, in my view, the former is contrary to the judgment of the Supreme Court. 23. However, a determination as above would have to be made and an order of assessment to such effect is required to be passed in the hands of DFO/R3, who has, admittedly, not even filed a return of income, all the while holding in its coffers, the remittances/reimbursements of tax to it by the petitioner. The petitioner has only been carrying cudgels on behalf of the DFO, and quite naturally so, since the ultimately tax liability falls upon it for settlement, in the light of the contract between the parties, such liability having been discharged by the petitioner. 24. Returns under the CST Act shall be filed by the DFO within a period of two(2) weeks from date of receipt of a copy of this order and orders of assessment in line with the conclusions above shall be passed, within a period of four(4) weeks from date of receipt of the Returns. 25. The writ petitions are allowed. No costs. Connected miscellaneous petitions are closed.