2013 (3) TMI 789 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutional validity of including bone meal in Entry 57(V) of the first schedule to the K.G.S.T. Act.
2. Whether bone meal should be classified under Entry 17 of the third schedule as organic manure.
3. Arbitrariness and reasonableness of the legislative classification of bone meal.

Summary:

Issue 1: Constitutional Validity of Including Bone Meal in Entry 57(V) of the First Schedule to the K.G.S.T. Act
The appellants argued that bone meal should be classified under Entry 17 of the third schedule as organic manure, claiming that its inclusion in Entry 57(V) of the first schedule as fertilizers is repugnant to Art. 14 of the Constitution of India. The learned single Judge concluded that there is no arbitrariness in including bone meal in Entry 57(V) of the first schedule of the K.G.S.T. Act, and it cannot be treated as organic manure as mentioned in Entry 17 of the third schedule. The classification made by the legislature was found reasonable, and the petitioners were not entitled to the declaration or consequential reliefs sought.

Issue 2: Classification Under Entry 17 of the Third Schedule as Organic Manure
The counsel for the petitioners argued that bone meal involves a manufacturing process similar to neem cake and crushed neem fruit, which are classified as organic manure and granted exemption. The learned Government Pleader countered that the legislature's decision to exclude bone meal from the exemption was not arbitrary or unreasonable. The Court noted that bone meal, though it may grammatically fall under organic manure, has acquired commercial importance and is used similarly to chemical fertilizers, justifying its inclusion in Entry 57(V).

Issue 3: Arbitrariness and Reasonableness of Legislative Classification
The Court emphasized that the legislature has the power to classify items differently for taxation purposes, provided the classification is not unreasonable or discriminatory. The Court referred to various precedents to support the view that the classification of bone meal as a fertilizer in Entry 57(V) is not arbitrary or unjust. The Court found that the legislature might have intended to promote the use of organic manure listed in Entry 17 by granting exemptions and to treat bone meal differently due to its commercial significance.

Conclusion
The Court upheld the classification of bone meal under Entry 57(V) of the first schedule and found no grounds to declare it as organic manure under Entry 17 of the third schedule. The legislative classification was deemed reasonable, non-arbitrary, and not discriminatory. Consequently, the Writ Appeals were dismissed, affirming the learned single Judge's judgment.