Tax on felled forest produce follows the commodity after severance, with specific tariff entries prevailing over the residuary rate.

Where trees are agreed to be severed before sale, property passes only on severance and the tax character depends on the felled commodity, not the standing trees. A specific tariff entry governs firewood, while timber is taxed under the residuary entry. Penalty for breach of a declaration under section 8(1) is computed by applying the rate relevant to the goods actually involved in the breach, so firewood attracts the firewood rate and timber the residuary rate.

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Issues: (i) Whether standing trees in a forest coupe constitute goods distinct from firewood and charcoal, and whether sale tax liability should be determined by the character of the trees after they are felled. (ii) Whether penalty under section 8(2) of the M.P. General Sales Tax Act, 1958, for breach of a declaration under section 8(1) is to be computed on the basis of the rate applicable to firewood or on the residuary rate applicable to timber.

Issue (i): Whether standing trees in a forest coupe constitute goods distinct from firewood and charcoal, and whether sale tax liability should be determined by the character of the trees after they are felled.

Analysis: Section 2(g) of the M.P. General Sales Tax Act, 1958 includes trees agreed to be severed before sale within the definition of goods. Property in such trees passes only on severance. Once felled, the trees assume the character of the actual commodity sold. Where a specific entry exists for firewood, that entry governs firewood, while timber falls under the residuary entry.

Conclusion: Standing trees are not sold as such; the sale takes place on felling, and tax liability must be determined according to the character of the felled goods, with firewood falling under the specific entry and timber under the residuary entry.

Issue (ii): Whether penalty under section 8(2) of the M.P. General Sales Tax Act, 1958, for breach of a declaration under section 8(1) is to be computed on the basis of the rate applicable to firewood or on the residuary rate applicable to timber.

Analysis: The penalty provision is linked to the tax rate relevant to the goods actually involved in the breach. Since firewood is covered by a specific entry and timber by the residuary entry, the penalty must be computed by applying the appropriate rate to each category according to its taxable entry.

Conclusion: Penalty under section 8(2) is to be calculated on the basis of the rate applicable to firewood under entry No. 8 of Part III of Schedule II, and on the residuary rate for timber.

Final Conclusion: The reference was answered by treating felled firewood and timber according to their respective tariff entries, and the penalty basis was confined to the rates applicable to those categories.

Ratio Decidendi: Where trees are agreed to be severed before sale, property passes only on severance and taxation must follow the character of the commodity after severance, with a specific tariff entry prevailing over the residuary entry.

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