2015 (1) TMI 807 - HC - VAT and Sales Tax

Tax liability on the Nitrogen component - Exemption in respect of Phosphate and Potassium contents of the fertilizer available or not Held that - In State Of UP. and others Versus Deepak Fertilizers & Petrochemical Corporation Ltd. 2007 (5) TMI 323 - SUPREME COURT OF INDIA it has been held that the Notification dated 15.5.1995 is discriminatory as it exempts all kinds of Phosphatic content of NPK except 23 23 0. - fertilizer of the NPK category such as NPK 12 32 16; NPK 15 15 15; NPK 20 20 0;, NPK 14 35 14 are included in the exemption list whereas it is a mater of fact that the NPK 23 23 0 fertilizer is also a fertilizer of the same category but it has been omitted from the list and, therefore, the classification made under the Notification 1995 does not hold ground on a rational basis thus, in view of the Circular dated 11.3.2013 issued by the Director of Agriculture, U.P. Lucknow and the revisionist is entitled to grant of exemption on the phosphate and potassium of NPK 10-26-26 in the light of the said circular and in the circumstances it is not necessary to relegate the assessee to the Tribunal thus, the order of the Tribunal is set aside Decided in favour of revisionist assessee.

Summary

Issues Involved:
1. Tax liability on the nitrogen component of NPK 10:26:26.
2. Exemption status of phosphate and potassium contents of NPK 10:26:26.
3. Binding nature of circulars issued by the Taxing Authority.

Issue-wise Detailed Analysis:

1. Tax Liability on the Nitrogen Component of NPK 10:26:26:
The revisionist, a multi-state cooperative society engaged in the manufacture and sale of chemical fertilizers, was subjected to a tax rate of 6.5% on the nitrogen component of NPK 10:26:26 as per government regulations. The Assessing Authority, through an order dated 16.1.2003, initiated reassessment proceedings under Section 21 of the Act, 1948, and imposed tax on the entire price of NPK 10:26:26, not just the nitrogen component. This decision was upheld by the Additional Commissioner and the Commissioner Tribunal, leading to the present revision.

2. Exemption Status of Phosphate and Potassium Contents of NPK 10:26:26:
The primary contention was whether the phosphate and potassium contents of NPK 10:26:26 were exempt from tax. The Tribunal, referring to government orders dated 12.2.2001 and 13.8.2002, concluded that these orders did not specifically mention NPK 10:26:26, thereby denying the exemption. However, the revisionist argued that various circulars, including a D.O. Letter dated 11.3.2013, indicated that phosphate and potassium contents of NPK 10:26:26 were exempt from trade tax effective from 28.2.2002. The Supreme Court judgment in Deepak Fertilizer was cited, emphasizing that similar fertilizers were exempt and that discriminatory taxation was not permissible.

3. Binding Nature of Circulars Issued by the Taxing Authority:
The revisionist argued that circulars issued by the Taxing Authority are binding on the authorities. The Supreme Court judgments in Commissioner of Sales Tax A.P. vs. M/s Indra Industries and other cases were referenced, establishing that while circulars are not binding on courts or assessees, they are binding on the Taxing Authority. The court held that the circular dated 11.3.2013, which exempted phosphate and potassium contents of NPK 10:26:26 from trade tax, was binding on the Assessing and Appellate Authorities.

Conclusion:
The court concluded that the revisionist was entitled to an exemption on the phosphate and potassium contents of NPK 10:26:26 based on the circular dated 11.3.2013. The orders of the Tribunal dated 7.3.2013, the appellate order dated 23.12.2010, and the assessing authority dated 16.1.2003 were set aside. The revisions were allowed, granting the requested exemptions.