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2019 (9) TMI 700 - HC - VAT and Sales TaxBenefit of exemption on Single Super Phosphate (SSP) - Bifurcation of components of the Single Super Phosphate (SSP) to deny exemptions - whether any exception was created by law so as to exclude from exemption and thus subject to tax any part of the value of such Single Super Phosphate (SSP)? HELD THAT - On fact, there is no dispute that Calcium Sulphate is present in Single Super Phosphate (SSP). At the same time, it has not been resisted by the revenue that the presence of Sulphur in Single Super Phosphate (SSP) is only in the shape of Gypsum (CaSO4.2H2O) and not in it's elementary form. Exemption N/N. 440 dated 12.2.2001 - HELD THAT - It is clear that amongst others, Phosphatic component of Single Super Phosphate (SSP) and not Single Super Phosphate (SSP) as a commodity was exempt. As to the percentage of Phosphatic component in Single Super Phosphate (SSP), the legislature clearly provided that the guidelines issued by the Department of Agriculture, Uttar Pradesh, would be binding. Admittedly, no guidelines were ever issued by the Department of Agriculture, Uttar Pradesh to specify the percentage of Phosphatic contents in Single Super Phosphate (SSP). The clear legal position that emerges is, de hors notification No. 784 dated 31.3.1995, it may have been permissible to the revenue authorities to tax the value of Gypsum (CaSO4.2H2O) as Gypsum is a non-Phosphatic component of Single Super Phosphate (SSP) if such guidelines had been found existing. However, in absence of such exclusionary clause in that notification, it is not permissible for the revenue authorities to break the identity of Gypsum (CaSO4.2H2O) so as to determine the percentage value of Sulphur in Gypsum (CaSO4.2H2O) only with the object of imposing tax on the value of Sulphur. The questions of law are answered in the negative i.e. in favor of the applicant-assessee and against the revenue.
Issues Involved:
1. Taxability of Sulphur content in Single Super Phosphate (SSP) under exemption notifications. 2. Validity of the Commercial Tax Tribunal's decision upholding the taxability of Sulphur in SSP. 3. Applicability of guidelines issued by the Department of Agriculture, Uttar Pradesh, regarding the percentage of taxable components in SSP. 4. The legal justification for the levy of tax on Sulphur components in SSP. Detailed Analysis: 1. Taxability of Sulphur Content in Single Super Phosphate (SSP) under Exemption Notifications: The assessee challenged the orders passed by the Tribunal regarding the taxability of Sulphur in Single Super Phosphate (SSP). The Tribunal held that the Department of Agriculture, Government of U.P., had not issued any guidelines on whether tax may be imposed on the Sulphur content in SSP under exemption notification No. 1938 dated 02.05.2002. The Tribunal reasoned that Sulphur in SSP was present as Gypsum (CaSO4.2H2O), which was exempt for agricultural use under notification No. 784 dated 31.03.1995. However, the Tribunal concluded that the Sulphur content in SSP was taxable. 2. Validity of the Commercial Tax Tribunal's Decision Upholding the Taxability of Sulphur in SSP: The Tribunal's decision was based on the absence of specific guidelines from the Department of Agriculture, U.P., regarding the taxability of Sulphur in SSP. The Tribunal relied on a communication from the Department of Agriculture, U.P., which stated that Sulphur was present in SSP as Gypsum. The assessee argued that since Gypsum for agricultural use was exempt, the Sulphur in SSP should also be exempt. The Tribunal, however, upheld the taxability of Sulphur, reasoning that the assessee did not sell Gypsum for agricultural use separately. 3. Applicability of Guidelines Issued by the Department of Agriculture, Uttar Pradesh, Regarding the Percentage of Taxable Components in SSP: The exemption notification No. 440 dated 12.02.2001 provided that the percentage of different components of chemical fertilizers, including SSP, would be determined according to guidelines issued by the Department of Agriculture, U.P. The assessee argued that no such guidelines were issued, and thus, the entire SSP should be exempt. The revenue authorities relied on an administrative order issued by the Central Government, which specified the composition of SSP, including 11% Sulphur. The Court found that the Central Government's order did not satisfy the requirement of the exemption notification, as it was not issued by the Department of Agriculture, U.P. 4. The Legal Justification for the Levy of Tax on Sulphur Components in SSP: The Court examined whether any exception to the exemption existed in law to subject any part of SSP to tax. The Court found that the exemption notification No. 440 dated 12.02.2001 exempted the Phosphatic component of SSP but did not specify the percentage. The Court also noted that Gypsum for agricultural use was exempt under notification No. 784 dated 31.03.1995. Since the Sulphur in SSP was present as Gypsum, which was exempt, the Court held that the Sulphur content in SSP should also be exempt. The Court concluded that the revenue authorities could not independently determine the percentage of Sulphur in SSP for taxation purposes without guidelines from the Department of Agriculture, U.P. Conclusion: The Court answered the questions of law in favor of the assessee and against the revenue. The revisions arising from the final assessment orders were allowed, and the other revisions arising from provisional assessment orders were disposed of accordingly. The Court held that the Sulphur content in SSP, present as Gypsum, was exempt from tax under the relevant notifications.
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