TaxTMI 
TaxTMI 
2014 (12) TMI 998
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....- company for grant of long term leases of forest land for making bamboo available, for the consumption of the respondent, at their paper mills. The assessing authority assessed the respondent-company to tax for the five assessment years 1994-1995 to 1998-1999. The Deputy Commissioner (CT), Warangal verified the assessment records and, on noticing that the purchase value of bamboo cut bundles were not brought to tax by the assessing authority, issued pre-revision show cause notice dated 27.02.2002 calling upon the respondent-company to submit their objections to the proposal to bring the bamboo cut bundles to tax under Section 6-A of the Act. The respondent-company, relying on the judgments of the Supreme Court in State of Orissa v. Titaghur Paper Mills Co. Ltd. (1985) 60 STC 213 and of a Division Bench of this Court in Andhra Pradesh Paper Mills Ltd. v. Government of Andhra Pradesh (1989) 73 STC 26, contended that the lease agreements, between the Government of Andhra Pradesh and themselves, was not for sale of bamboo cut bundles; and any benefit which the respondent may have received from the leased land was a profit a prendre, and did not fall within the ambit of the provisions....
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....er they were cut unless they were weighed, the royalty was determined, permits were granted after the officials were satisfied that there was no illicit felling, no money was due, and the terms of the contract or the statute were not violated; when the agreement was entered into, the subject quantity of bamboos were not in a deliverable state; as such, there was no sale within the purview of the Act; the agreement could not be called a long term selling arrangement; though, prior to removal of bamboos, liability, with regards theft, fire and floods or other causes, was placed on the lessee; normally such a risk was not placed on the buyer unless ownership had passed; the agreement clauses specifically stated that bamboos shall be considered to have passed into the possession of the lessee-paper mills, for the purpose of this clause; the said clause was applicable in cases where, in terms of Section 26 of the Sale of Goods Act, the parties had otherwise agreed for passing of the risk before passing of title; in the present case, it is only a grant of a profit a prendre or a right in immovable property, and not the sale of bamboos after they have been put in a deliverable state; even....
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....nsaction thereunder have to be determined, with reference to all the terms and clauses of that document, and all the rights and results flowing therefrom. (Titaghur Paper Mills Co. Ltd.(1985) 60 STC 213; Halsbury's Laws of England, 'Fourth Edition, Volume 12, paragraph 1469 at page 602). The subject agreement was entered into between the respondent-company and the Governor of Andhra Pradesh represented by the Principal Chief Conservator of Forests. Clause V(1) thereof stipulated that the lessee shall, during the period of the agreement, be entitled to fell, collect, store and remove, subject to the conditions and restrictions mentioned in the agreement, all the stocks of bamboos now growing, or are likely to grow on the lands in the leased areas mentioned in the schedule, other than those from the plantations; all or any of the stock of the removals of which any person, now or may at any time or times hereafter, be entitled under the provisions of the Andhra Pradesh Forest Act, 1967, or under any rule or proceedings of the Forest Department of the Government of Andhra Pradesh (hereinafter called the Government); and those bamboos specially reserved under the agreement for ....
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.... working plan; and the Lessee was required, before starting work in the coupe, to furnish to the Range officer concerned, a written statement to the effect that they had taken charge of the coupe in the leased area. Sub-clause (8) enabled the Lessee to remove/transport the extracted bamboo, within six months of the expiry of the lease year, without any penalty and by paying the selling price at the rates applicable to the year of extraction. Under sub-clause (10), the selling price was to be charged on the basis of weighment of the bamboos at the lessees mill gate or at a mutually agreed weigh bridge; and the expenditure towards weighment, and other incidentals, was to be borne by the lessee. Sub-clause (13) stipulated that a sum of rupees Rs. 1,00,000/- (Rupees one lakh only) in cash should be deposited by the Lessee with the officer appointed by the Prl. Chief Conservator of Forests for due fulfillment of any or every one of the conditions of the agreement; the Divisional Forest Officer concerned was empowered to issue orders, for forfeiture of the security deposit, for breach of the conditions; the Lessee was disentitled from claiming any compensatory area in lieu of the areas a....
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....i.e., 1st July to 30th September; and they may remove the felled material and form roads, in the coupes to be leased in the subsequent lease year, during this period. Under sub-clause (19)(1), the Lessee was entitled to inspect the coupe, under working, jointly with the concerned Range Officer regularly at the end of each quarter of the annual working season and rectify the defects, if any, pointed out by the inspecting officer during the lease period. Sub-clause (19)(2) stipulated that, on completion of work in each coupe, the Lessee should forthwith give a written notice thereof to the Range Officer, and the Range Officer should, within thirty (30) days of receipt of such notice, inspect the work and take possession of the coupe and submit the result of such working to the Divisional Forest Officer concerned; and, on receipt of the report, the Divisional Forest Officer could issue orders to the lessee to pay compensation for the damages. Sub-clause (21) empowered the Divisional Forest Officer to serve upon the Lessee a written order prohibiting them from felling, collecting, storing or removing any stock in any part of the leased area or collecting such stock or regulating the st....
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....er; and if the bamboos were used for any purpose, other than those mentioned above, prior permission of the Prl. Chief Conservator of Forests was required to be obtained by the Lessee; and a higher selling price was chargeable as was fixed by the Prl. Chief Conservator of Forests. Sub-clause (34) made the Lessee liable to pay all taxes under the laws in force from time to time. Sub-clause (36) required the Lessee, or their authorized agent, to personally supervise and control the working in the coupes. Sub-clause (37) provided that, if any fire or forest offence occurred in the vicinity of the leased area, the Lessee, their agent, and their employees should render every assistance in extinguishing the fire and apprehending the offender or offenders, and to give immediate notice of the occurrence of the fire or offence to the nearest Forest or Police or Revenue Officials. Sub-clause (39) required the planning, execution and supervision of all forestry operations, involved in the extraction of all forest raw material by the Lessee in the leased forest areas, to be done only by technically qualified and professionally skilled forestry trained officers. The schedule to the agreement re....
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.... of the said produce taken delivery of and transported by them as stipulated by the Forest Department. Condition (6) stipulated that the extraction and supervision charges, payable by the company, shall be Rs. 266/- for 80 full bundles of bamboo industrial cuts for the first year, for each of the subsequent years, in a block of 3 years, the charges payable by the company shall be fixed at 11% above the charges fixed for the preceding year, and the figure will be rounded off to the nearest rupee. Condition (7) stipulated that (i) supply of industrial cuts shall be made after the company pays half the amount of extraction charges at the rates mentioned at Condition No.6 above, against the total allotment for that particular year; after making good the supplies against this half of the amount of extraction charges, the company was required to be given a notice to make payment of the balance half of the amount of extraction charges against the allotted quantity, and such amount was required to be paid within 15 days of such notice; the amount so paid was to be adjusted after the bamboo was actually weighed at the weigh bridge located at the mill gate, or at a mutually agreed place; any....
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.... turnover of sales or purchases of goods in each year irrespective of the quantum of his turnover at the rate of tax and at the point of levy specified in the Schedules. Section 6-A related to levy of tax on the turnover relating to purchase of certain goods, and thereunder every dealer who, in the course of business, (i) purchased any goods (the sale or purchase of which was liable to tax under the Act) from a registered dealer in circumstances in which no tax was payable under Section 5; or (ii) purchased any goods (the sale or purchase of which was liable to tax under the Act) from a person other than a registered dealer and (a) consumed such goods in the manufacture of other goods for sale or consumed them otherwise, or (b) disposed of such goods in any manner other than by way of sale in the State, or (c) despatched them to a place outside the State except as a direct result of sale or purchase in the course of inter-state trade or commerce, was required to pay tax on the turnover relating to the purchase at the same rate at which, but for the existence of the aforementioned circumstances, the tax would have been leviable on such goods under Section 5 of the Act. III. ARE THE....
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....lfilled, it is an agreement to sell which becomes a sale when the time elapses or such conditions are fulfilled. In the former the contract is executed, while in the later it is executory. The distinction between an agreement of sale and a sale of goods is based upon the question whether the "property in the goods" has passed from one person to another. (Andhra Pradesh Paper Mills Ltd.2). It is possible for a sale to come about in one of two ways: either by a contract which itself operates to transfer the goods from the ownership of the seller to that of the buyer, the property passing when the contract is made; or by a contract which is initially only an agreement to sell, but is later performed or executed by the transfer of the property. In either case, the Sale involves not only a contract, but also a conveyance of the property in the goods. The test is the transfer of the property in the goods from the seller to the buyer. (Titaghur Paper Mills Co. Ltd.(1985) 60 STC 213). In order to determine whether, for the provisions to apply, bamboos are to be severed before sale, or under the contract of sale, what is required to be ascertained is the point of time when the property in ....
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....ontract date, the further requirement is that they must be in a deliverable state, and the property passes only when the goods are unconditionally appropriated to the contract by the seller with the assent of the buyer or by the buyer with the assent of the seller, such assent being express or implied or given before or after appropriation.(Andhra Pradesh Paper Mills Ltd.(1989) 73 STC 26). As Section 2(n) of the APGST Act defines sale to mean transfer of property in goods what is made exigible to tax is not an executory contract of sale, but an executed contract of sale or, in other words, not an executory contract of purchase, but a completed contract of purchase. Such purchase would be complete when the bamboos are specific goods, that is, when they are identified and agreed upon at the time the contract of sale is made, the contract is unconditional, and such bamboos are in a deliverable state, that is, nothing remains to be done except for the buyer to enter upon the land, and to fell and remove the bamboos, without any let or hindrance. If these factors exist then, unless a different intention appears, the property in such bamboos would pass from seller to the buyer when the ....
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....s are used to preserve and better their productivity. Silviculture brings within its ambit management of forests, as it involves regenerating, tending and harvesting tactics. The respondent-company was required to carry out silviculture operations, wherever they carried on extraction operations, for improvement of the bamboo forests. Fire protection measures were required to be taken wherever needed. The silviculture operations were required to be completed by the respondent in the year of working itself or in 2(two) years spells (Clause V(16)). The respondent-company was required to work in the leased areas in accordance with the prescriptions of the working plans. They were required to work only in one coupe in the year in each of the felling series prescribed in the working plan and allotted under the agreement (Clause V(7)). While several of the terms and conditions of the agreement are common, both to the bomboo industrial cuts delivered from the departmentally worked coupes and the bomboo extracted, from the allotted coupes, by the respondent-company themselves, additional terms and conditions, with regards the supply of departmentally extracted bamboos, were specified in th....
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.... the departmentally extracted coupes, was not under the contract of sale, but was prior thereto. The bamboos, liable to be cut each year, were not in a "deliverable state" on the date of the agreement. The various clauses in the contract show that there is no "sale", on the contract date, of bamboos as the goods were not in a deliverable state. As the bamboo cannot be cut or removed except as provided therein, the contract is not an agreement to sell bamboos standing in the contract areas, with an accessory licence to enter upon such areas for the purpose of felling and removing the bamboos. Nor is it only in respect of a particular felling season. It embraces not only bamboos which are in existence on the date of the contract, but also bamboos which are to grow and come into existence thereafter. There is, therefore, no "sale" within the purview of Section 2(n) the APGST Act. (Andhra Pradesh Paper Mills Ltd.(1989) 73 STC 26). IV. IS THE SUBJECT CONTRACT A GRANT OF A PROFIT A PRENDRE? A profit a prendre is a right to take something off another person's land. It is a right to enter another's land and to take some profit of the soil, or a portion of the soil itself, for the....
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.... 213; Anand Behera v. State of Orissa AIR 1958 SC 532). The terms and conditions show that the subject contract is not, and cannot be, a contract of sale of goods. It confers upon the respondent Company a benefit to arise out of land, namely, the right over the bamboos which grow from the soil coupled with several ancillary rights and is thus a grant of a profit a prendre. It is equally not possible to view it as a composite contract one - an agreement relating to standing bamboos agreed to be severed and the other - an agreement relating to bamboos to come into existence in the future. The terms of the Contract make it clear that it is one, integral and indivisible contract which is not capable of being severed. The terms and conditions of the contract confers upon the respondent-company a benefit to arise out of land, and it would thus be an interest in immovable property. It is a grant by the government of an interest in land. The grant of such right, not being for the beneficial enjoyment of any land of the respondent- company, would not be an easement. As the respondent-company was entitled, under the agreement, to take away the bamboos grown even in the departmentally extrac....