Timber classification for sales tax: processed eucalyptus logs retained their identity, so second-sale treatment applied and penalty failed.

Mere cutting, debarking, splitting or sizing of eucalyptus timber does not, by itself, alter its essential commercial identity. The Tribunal treated the processed logs or pulpwood supplied to a rayon manufacturer as continuing to be timber, because sales tax classification depends on the goods' market identity and not on the special use intended by the buyer. On that basis, the sale qualified for second-sale treatment under the timber entry, and the attempt to levy multi-point tax again, together with penalty, was held unsustainable. The Revenue's revision therefore failed, and the assessee was not liable to be taxed again on the disputed turnover.

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Issues: Whether eucalyptus timber purchased on payment of tax, when cut, debarked and converted into logs or pulpwood for supply to a rayon manufacturer, ceased to remain timber so as to attract multi-point taxation and penalty, or whether it continued to be timber entitled to second-sale treatment under the tax entry applicable to timber.

Analysis: The relevant enquiry was whether the processing of the trees into logs or pulpwood altered the essential commercial identity of the goods. The reasoning accepted that mere cutting, debarking, splitting, or sizing of timber does not necessarily create a new commercial commodity. The intended use of the goods by a particular purchaser is not decisive of classification, because the nature of the goods must be determined by their commercial identity and not merely by the use to which a special buyer may put them. The earlier authorities relied on by the Revenue were distinguished on the footing that eucalyptus logs sold as raw material for the rayon industry had been treated in prior decisions as timber falling under the relevant entry, and the processed form did not lose its identity as timber. On that basis, the turnover could not be assessed again as a different multi-point commodity, and the penalty could not stand.

Conclusion: The processed eucalyptus logs remained timber, the sale qualified for second-sale treatment, and the levy of multi-point tax and penalty was unsustainable.

Final Conclusion: The revision by the Revenue failed, and the Tribunal's view that the assessee was not liable to be taxed again on the disputed turnover was upheld.

Ratio Decidendi: Mere processing of timber by cutting, debarking, or sizing does not by itself change its essential commercial identity, and classification for sales tax must turn on the goods' market identity rather than the special use intended by the buyer.

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