NORTH KOEL KENDU LEAVES AND MAHULAM LEAVES SOMESHWAR PRASAD CHANDRA KUMAR PANDEY RABINDRA PRASAD AND ARBIND PRASAD Vs. UNION OF INDIA

JUDGEMENT

(1.) The common question of law is involved in all the five cases and as such they have been heard together and are being disposed of by this common judgment.

(2.) The petitioners, assessees under the Income-tax Act and traders in kendu leaves, have filed the present writ applications for a declaration that the main provision of Sub-section (1) of Section 206C of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), is not applicable and their case is covered by the proviso to the said sub-section and, accordingly, a direction may be issued to respondents Nos. 2 and 3 (CIT, Ranchi and Income-tax Officer, Daltonganj Ward) to give exemption certificate in terms of the proviso to the aforesaid section read with rule 37C of the Income-tax Rules, 1962 (hereinafter referred to as "the Rules"), in the prescribed Form No. 27C and for quashing the decision taken by the Government of India, Ministry of Finance, Department of Revenue (respondent No. 1) on January 10, 1996, holding that the provision of Section 206C(1) shall be applicable in the case of kendu leaves traders as the exception carved out in the proviso to Sub-section (1) of Section 206C is not applicable in their case.

(3.) The petitioners' case is that they purchase the kendu leaves from the forest department or from the Bihar State Forest Development Corporation (hereinafter referred to as "the Corporation") and after processing the same they sell them to manufacturers of bidis. The Corporation invites tenders for advance sale of kendu leaves on lump sum basis every year in accordance with the terms and conditions of the tender notice read with the relevant rules. The successful tenderers have to take delivery of the kendu leaves within 48 hours after the same are plucked from the bushes or brought to the collection centre. If delivery is not taken within the aforesaid period there is every chance of deterioration of the leaves. After taking delivery they dry the leaves for a period of five days, The drying process is to be skillfully done so that the whole kendu leaves may be dried from all the sides. After drying, water has to be sprinkled on the dried kendu leaves for maintaining the requisite moisture. Thereafter, the leaves are sorted out and screened after discarding the damaged leaves. After screening, the properly dried and sprinkled leaves are packed in bundles and thereafter they are transported to airtight godown for further preserving the quality and colour of the bidi leaves, which are kept in the godown for a period of one month and thereafter sold in the market. Due to the aforesaid activities or processes the kendu leaves are converted into bidi leaves of reddish colour. In other words, by adopting the entire process the kendu leaves are converted into a marketable commodity known as bidi leaves.