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Judgment
M. Katju, J.—Heard Sri Bharat Ji Agrawal, learned counsel for the petitioner and Sri R.D. Gupta, learned Standing Counsel, for the respondents.
The petitioner is a company registered under the Indian Companies Act, 1956 which is engaged in the business of manufacture and sale of phosphatic fertilisers and allied chemicals, and it is registered under the U.P. Trade Tax Act, 1948 and Central Sales Tax Act, 1956. The petitioner is selling phosphatic fertilisers within the State of U.P. and composition of the same is N.P.K. 23:23:0 (the letters N.P.K. standing for nitrogen, phosphorous and potassium) respectively.
A notification dated November 2, 1994, annexure No. 4 to the writ petition was issued by the State Government u/s 4(a) of the U.P. Trade Tax Act, 1948, exempting potassic and phosphatic fertilisers till March 31, 1995. However, subsequently a notification dated April 10, 1995, vide annexure 5 to the writ petition, was issued superseding the earlier notification dated November 2, 1994 and stating that only certain categories of fertilisers (mentioned therein) will be exempted and not all kinds of fertilisers. This was followed by another notification dated May 15, 1995 specifying seven varieties of fertilisers to be exempted u/s 4(a) vide annexure 6. In the notifications dated April 10, 1995 and May 15, 1995 there is no mention of the fertilisers sold by the petitioner viz., N.P.K. 23:23:0. Hence the petitioner wrote a letter dated November 23, 1995 to the Commissioner, Trade Tax, pointing out the discrimination meted out to the petitioner by non-inclusion of N.P.K. 23:23:0 in the exemption notification dated May 15, 1995. A true copy of the said letter is annexure 7.
However, the Trade Tax Officer issued a notice dated November 16, 1995 to the petitioner to show cause why tax be not imposed on the petitioner''s sale of fertiliser N.P.K. 23:23:0, vide annexure 8. Thereupon on November 29, 1995 the petitioner''s representative and counsel appeared before the Trade Tax Officer and prayed for adjournment since the matter relating to exemption for N.P.K. 23:23:0 was pending before the State Government. However, the said authority issued notice dated November 29, 1995 to the petitioner, vide annexure 9. He also stopped issuing form 31 to the petitioner.
The petitioner challenges the validity of impugned notifications dated April 10, 1995 and May 15, 1995, annexures Nos. 5 and 6 respectively to the writ petition. The petitioner has also prayed for a mandamus directing the respondents not to discriminate N.P.K. 23:23:0 and to include the same in the exemption notifications. Exemption has been granted to N.P.K. 20:20:0 and some other N.P.Ks. vide annexure 6 to the writ petition.
The first grievance of the learned counsel of the petitioner is that this notification dated April 10, 1995 could not have been issued with retrospective effect. In view of the decision of this Court rendered in Civil Misc. Writ Petition No. 1152 of 1995 (Ganesh International v. Assistant Commissioner [2001] 124 STC 600) decided on July 6, 2000 this point has to be decided in favour of the petitioner. Hence, we hold that notification dated April 10, 1995 will only apply prospectively and not retrospectively.
Shri Agrawal''s second submission is that the notification dated May 15, 1995, is discriminatory. The notification dated May 15, 1995, vide annexure 6 to the writ petition, was issued by which the fertilisers except N.P.K. 23:23:0 were exempted till April 1, 1996, Subsequently, on April 1, 1996 again all kinds of phosphatic fertilisers of N.P.K. combination have been exempted.
In paras 20 and 21 of the writ petition it has been alleged that there is discrimination against N.P.K. 23:23:0 in the notification dated May 15, 1995. All the fertilisers mentioned in the notifications dated April 10, 1995 and May 15, 1995 are phosphatic and potassic fertilisers. All the fertilisers of N.P.K. of various combinations are treated as phosphatic fertilisers not only by the Government of India but also by the State Government''s Agriculture Department, the farmers, the trade, and in common parlance. Hence, it is submitted that there is no rational basis for discriminating against N.P.K. 23:23:0.
The learned counsel for the petitioner has relied upon a decision of the Supreme Court rendered in the case Ayurveda Pharmacy and Another Vs. State of Tamil Nadu, and has submitted that two items of the same category cannot be discriminated. Relying upon this decision he has submitted that merely because of the composition of N.P.K. discrimination could not have been made against the petitioner.
On the other hand, the learned Standing Counsel appearing for the respondents has relied upon a decision of the Supreme Court in Kerala Hotel and Restaurant Association and others Vs. State of Kerala and others, wherein it has been held that the State enjoys the widest latitude where measures of economic and fiscal regulation are concerned.
In our opinion, the decision of the Supreme Court in Ayurveda Pharmacy and Another Vs. State of Tamil Nadu, squarely applies to the facts of the present case. In that decision it was held by the Supreme Court that while it is open to the Legislature or State Government to select different rates of tax for different categories, where the commodities belong to the same class or category there must be a rational basis for discriminating between one commodity and another for the purpose of imposing tax (vide para 6) (page 350 in STC). We therefore, hold that merely because of different compositions of N.P.K. discrimination could not have been made against N.P.K. 23:23:0 sold by the petitioner. Hence, we allow the petition and direct that the respondents shall not realise tax on the sale of N.P.K. 23:23:0 from the petitioner from April 10, 1995 to March 31, 1996.