Timber remains timber after conversion into logs or ballis, but account rejection and turnover enhancement were upheld.

Rejection of the account books and slight enhancement of turnover were upheld because the timber sales figures appeared inconsistent with the quantity extracted and the ballis account was not kept in cubic feet. Purchase tax under section 8(1) of the Madhya Pradesh General Sales Tax Act, 1958, was not leviable on lease money paid for forest coupes, as felling standing trees and converting part of the timber into ballis did not alter the essential character of the goods or amount to manufacture of other goods. The reference was thus disposed of partly against the assessee and partly in its favour.

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Issues: (i) Whether rejection of the assessee's account books and enhancement of turnover were justified; (ii) Whether purchase tax under section 8(1) of the Madhya Pradesh General Sales Tax Act, 1958, could be levied on lease money paid for purchase of forest coupes.

Issue (i): Whether rejection of the assessee's account books and enhancement of turnover were justified.

Analysis: The accounts were not accepted because the sales of timber in cubic feet appeared to exceed the quantity extracted, and the ballis account was not maintained in cubic feet. The facts were treated as similar to earlier references between the same parties, and the enhancement was only slight.

Conclusion: The rejection of the account books and enhancement of turnover were upheld and the issue was answered in the affirmative, against the assessee.

Issue (ii): Whether purchase tax under section 8(1) of the Madhya Pradesh General Sales Tax Act, 1958, could be levied on lease money paid for purchase of forest coupes.

Analysis: Felling standing trees, cutting them, and converting some into ballis did not change the basic character of the goods as timber. The goods did not become "other goods" within section 8(1), and the activity was not treated as manufacture of other goods.

Conclusion: Purchase tax was not leviable on the lease money, and the issue was answered in favour of the assessee.

Final Conclusion: The reference was disposed of by upholding the turnover enhancement but rejecting the levy of purchase tax on the lease money, with costs left to be borne by the parties themselves.

Ratio Decidendi: Conversion of standing timber into logs or ballis does not alter its essential character as timber so as to amount to manufacture of other goods for purchase tax purposes.

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