M/s Parvatiya Sahkari Bhaisaj Vikas Evem Kray Vikray Sangh Ltd. vs Sale Tax Officer, Khand I, Rishikesh and others

Barin Ghosh, C.J.—We have considered the averments made in the Applications for condonation of delay in preferring these Revision Applications and, being satisfied with the reasons furnished therein, allow the Applications for condonation of delay and, thereby, condone the delay in preferring these Revision Applications. Revisionist, in these Revision Applications, is an Association of registered cooperative societies of people, who reside in or around forest areas. On a licence granted by the Forest Department to the revisionist, people associated with the associated cooperative societies of the revisionist enter the forest permitted to be entered by such licence upon deposit of a sum of Rs. 10,000/-, as and by way of security, for the purpose of collection of Jhula Ghas (a variety of Lichen). The licence, thus granted by the Forest Department, permits those people to collect such lichen with obligation to store the same in the warehouse / godown of the Forest Department of the State. Forest Department of the State, thereupon, weighs such lichen and makes the same over to the revisionist upon the revisionist paying consideration therefor, termed as royalty, trade tax and other taxes. The property, in such lichen, passes on to the revisionist upon obtaining delivery thereof from the Forest Department after making payment of the consideration as mentioned above. The revisionist, thereupon, sells such lichen in the same condition as it receives the same from the Forest Department in the manner indicated above. In relation to such sale, no trade tax is collected by the revisionist. The revisionist, in its returns to the Department, held out so and the same was also accepted by the Trade Tax Department for a few of the assessment years. Later, at one point of time, it transpired that the assessee is selling such lichen at a very high price than the price of acquisition of the same. The Assessing Authority felt that the assessee must be adding value to lichen obtained by it from the Forest Department. After being convinced that the revisionist is not doing so, it felt that the collection of lichen is being done by the assessee upon payment of royalty and, accordingly, the activity of the assessee in collecting lichen is manufacture / production requiring the revisionist to pay trade tax. The Department, accordingly, re-opened the case u/s 21(2) of the U.P. Trade Tax Act.

The show-cause was not replied by the revisionist, nor the revisionist appeared before the Assessing Officer on the date fixed for hearing. The Assessing Officer, taking note of the fact that it was the assessee, who was collecting lichen from the earmarked forest and paying royalty on the basis of weight of removed lichen, held that licensee was carrying out manufacturing / production activity and one of the cost thereof was royalty and that, therefore, when such produce was sold by the revisionist, Trade Tax Act required the revisionist to pay trade tax thereon.

Against the assessment orders, appeals were preferred. The Appellate Authority also proceeded on the basis that it was the assessee, who was collecting lichen and, for that purpose, as was required, was also paying royalty. On that premise and by noting a judgment of the learned Single Judge of the Hon''ble Allahabad High Court rendered in the case of Gyaneshwar Nath and brothers vs. Commissioner of Sales Tax, reported in 1998 (1) UPTC 618, upheld the order of assessment. In that case, in the revision application filed by the assessee, the order of the tribunal, remitting back the matter to the assessing authority to ascertain whether Tendu Leaves dealt with by the assessee were being purchased by the assessee from the forest department or the same were being collected by the assessee from the forest on being licensed to do so having been declared the highest bidder in an auction, was challenged. The Hon''ble Court held that, where the material on record is not sufficient to take an effective decision in one way or the other in a given case and a further inquiry is called for, the concerned authority or the court may set aside the matter in exercise of its power of remand directing for a fresh order after the necessary inquiry is made. Holding thus, the Hon''ble Court dismissed the revision application. In the circumstances, the conclusion would be that the said judgment had no relevance to the questions that were required to be gone in by the Appellate Authority.

The revisionist, then, approached the Tribunal, when the Tribunal also upheld the order of the Appellate Authority based on the said judgment of the Hon''ble Allahabad High Court and also a judgment of the Hon''ble Supreme Court rendered in the case of State of H.P. and others vs. Gujarat Ambuja Cement Ltd. and another, reported in (2005) 6 SCC 499, and also proceeding on the basis that the privilege to collect lichen having been parted with in consideration of payment of royalty, which is not purchase price, the revisionist was liable to pay trade tax whether trade tax was or was not collected on the royalty.

In view of the pronouncement made by the Hon''ble Supreme Court in the case referred to above, there cannot be any dispute that royalty is not the purchase price. Royalty is consideration for grant of a right or a privilege. Therefore, in the instant case, in the event, concession to enter the jungle to collect lichen was granted by the Forest Department, then of course, what the Forest Department charged was in fact royalty; but, if the Forest Department intended to transfer lichen, though collected by the revisionist, but on account of the Forest Department, then, the Forest Department never intended to part with any privilege. It only intended to sell collected lichen to the revisionist, though collection of such lichen would be made by the revisionist on behalf of the Forest Department.

The fact as above, which is not in dispute, suggests that the Forest Department licensed the revisionist, upon deposit of security money of Rs. 10,000/-, to enter the earmarked forest for the purpose of collection of lichen, which was also earmarked for being transferred to the revisionist; but the revisionist was duty bound to collect such lichen, keep the same in the godown of the Forest Department before the same was transferred by the Forest Department to the revisionist upon payment of an agreed consideration. In such circumstances, the intention of the parties was not to grant a right or privilege to the revisionist, but to make the revisionist work for the Forest Department to collect lichen for and on behalf and for the use of the Forest Department in order to enable the Forest Department to transfer the proprietary right therein to the revisionist upon obtaining appropriate consideration in respect thereof. In the circumstances, the conclusion would be that, though the word "royalty" was used in the instant case, but, in fact, the same was nothing but consideration for transfer of proprietary right in the movable property of lichen upon payment of consideration fixed by the Forest Department. Knowing that it was a consideration for transfer of proprietary right in the movable property of lichen by the Forest Department to the revisionist, the Forest Department, as duty bound, charged trade tax as it was liable to do under the U.P. Trade Tax Act. We, accordingly, allow the Revision Applications, set aside the judgment and order of the Tribunal as well as of the Appellate Authority and the Assessing Authority, and restore the original assessment orders, which were sought to be re-opened u/s 21(2) of the U.P. Trade Tax Act and also set aside those assessment orders, which have been passed on the premise contrary to what has been stated above and direct assessment thereof on the basis of pronouncement as above.