Prakash Krishna, J. - (1.) CHALLENGING the legality and validity of the order dated April 7, 2000, the present revision under Section 11 of the U.P. Trade Tax Act, 1948, has been filed relevant to the assessment year 1997 -98.
(2.) THE opposite party (hereinafter called as, "the dealer") carries on the business of balli, firewood, pulpwood, etc. The dealer though disclosed a sale of wood, etc., at Rs. 60,99,456.70, but did not accept any tax liability. It is also admitted by the dealer that he made the purchases of timber from unregistered dealer without paying any tax. Part of such purchase was disposed of by the dealer by cutting the timber in small sizes and making pulpwood. The pulpwood was sold to M/s. Star Paper Mills, Saharanpur. The remaining timber was sold to unregistered dealer. The assessing officer by the order dated August, 23, 1999, taxed the purchase of timber from unregistered dealer for the period October, 1, 1997 to March, 31, 1998, on the turnover of Rs. 33,51,508. He also taxed the pulpwood as timber product at the rate of 15 per cent on the turnover of Rs. 4,23,086. The appeal against the said order was allowed by the Deputy Commissioner (Appeals) by the order dated November 4, 1999, in part. The view taken by the first appellate authority was that by cutting the timber in small sizes and selling them, the liability of tax under Section 3AAAA is not attracted and the said part of the assessment order was set aside. In further appeal, the Tribunal set aside the entire assessment order by allowing the appeal preferred by the dealer and dismissing the appeal filed by the Department, by the order under revision. In the memo of revision the following three questions of law have been sought to be raised: (i) Whether the Trade Tax Tribunal is legally justified to hold the dealer is exempt from tax despite the dealer having sold pulpwood manufactured from timber purchased from unregistered dealer? (ii) Whether the Trade Tax Tribunal is legally justified to hold that the dealer is not a manufacturer? (iii) Whether the Trade Tax Tribunal is legally justified in confirming the view of the first appellate authority that the tax is not leviable under the provisions of Section 3AAAA of the U.P. Trade Tax Act despite the dealer having purchased timber from unregistered dealer and not selling it in the same form and condition? Shri B.K. Pandey, the learned Standing Counsel for the Department, submits that it is an admitted fact that the dealer has purchased the timber from unregistered dealer without paying any purchase tax and sold them either to M/s. Star Paper Mills by cutting the timber into small pieces and making it pulpwood or to unregistered dealers. He submits that since the timber has not been sold in the same form and condition in which it was purchased, in view of Section 3AAAA the liability of tax on such sale shall remain on the dealer whether the sale was effected to a registered dealer, namely, M/s. Star Paper Mills or to unregistered dealers. Shri Rakesh Ranjan Agrawal, the learned Counsel for the dealer, on the other hand, supports the impugned order of the Tribunal. The crux of the controversy is the applicability of Section 3AAAA of the Act. The said Section was introduced by way of amendment with effect from October, 1, 1997. It provides tax on purchases of goods in certain circumstances. The present case falls under Section 3AAAA(b) wherein it has been provided that every dealer is liable to tax under this Act on purchases of any goods from any person other than the registered dealer whether or not tax is payable by such person on the purchase price of such goods at the same rate at which tax is payable on the sale of such goods. It is not in dispute that the purchase of the timber is taxable under the Act. The submission of the learned Counsel for the dealer is that the case falls in proviso (iii) to this section. For the sake of convenience the said Clause is reproduced below: Provided that no tax shall be leviable on the purchase price of such goods in the circumstances mentioned in Clauses (a) and (b), if - (i) & (ii).... (iii) The purchasing dealer resells such goods within the State or in the course of inter -State trade or commerce or exports out of the territory of India, in the same form and condition in which he had purchased them;....
(3.) THE first appellate authority and the Tribunal were of the view that converting the timber into pulpwood does not amount manufacturing activity and as such in view of proviso (iii), the sale of pulpwood to M/s. Star Paper Mills will not attract the tax under Section 3AAAA of the Act. The learned Counsel for the dealer reiterates the above view and submits that the manufacture of pulpwood out of the wood does not amount to manufacturing and as such the view taken by the Tribunal is legally justified. The said argument is not tenable. Section 3AAAA of the Act does not talk about "manufacture". On the contrary, it provides that no tax shall be payable besides the other things if the purchasing dealer resells such "things...in the same form and condition" in which he had purchased them. The learned Counsel for the dealer could not give any reply with regard to the fulfilment of the above statutory ingredient. On the admitted facts, the timber was reduced in size by cutting them. Not only this it was thereafter converted into pulpwood. Necessarily, it follows that the purchased timber or wood was not sold by the dealer to M/s. Star Paper Mills in the same form or condition. This being so, the proviso as provided under Section 3AAAA is not attracted. In other words, the liability of the dealer on such purchases of timber which was converted into pulpwood in view of Section 3AAAA(b), is established.;