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TMI Blog2007 (5) TMI 323X X X X Extracts X X X X X X X X Extracts X X X X ..... , prosperous and potassium) in the State of U.P. and is registered under the U.P. Trade Tax Act, 1948 (hereinafter called, "the Act") and the Central Sales Tax Act, 1956. The State of U.P. (the appellants herein) issued notification dated November 2, 1994, which provided for exemption from payment of tax on the sale of potassium phosphatic fertilizers for a specified period. This notification reads as under: "In the exercise of the powers under clause (a) of section 4 read with section 25 of the U.P. Trade Tax Act (U.P. Act No. 15 of 1948), the Governor is pleased to direct that from November 1, 1994 to March 31, 1995 no tax would be payable under the aforesaid Act on the sale of potassium phosphatic fertilizers." A reading of this notification indicates that no tax would be payable for the period from November 1, 1994 to March 31, 1995 under the Act on the sale of potassium phosphatic fertilizers. Subsequently a notification dated April 10, 1995 was issued which superseded the notification dated November 2, 1994. This notification runs as under: "In exercise of powers under section 25 read with clause (a) of section 4 of U.P. Trade Tax Act, 1948 (U.P. Act No. XV of 1948) and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e this question arose before us and the High Court decided the same against the appellants relying on a decision of its court, we prefer to deal with the question in this judgment. Let us, therefore, examine whether, in the facts and circumstances of the case, the notification dated April 10, 1995, which denied exemption to NPK 23:23:0 retrospectively can be held to be invalid as held by the High Court in the impugned order. Before proceeding further we may reiterate that the notification dated November 2, 1994 as quoted herein earlier permits exemption from taxes on the sale of potassium phosphatic fertilizer from November 1, 1994 to March 31, 1995. In the notification dated November 2, 1994 exemption, therefore, was allowed on sale of all categories of potassium phosphatic fertilizer which, however, was withdrawn in respect of the product of the respondent, namely, NPK 23:23:0 by the notification dated April 10, 1995. Now the question arises whether by the notification dated April 10, 1995 retrospectively, the exemption granted to the product of the respondent, namely, NPK 23:23:0 could be withdrawn. The High Court held that such exemption could not be withdrawn by the notificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e High Court on this question. The second grievance of the respondent in the writ petition is that the notification dated May 15, 1995 is discriminatory as it exempts all kinds of phosphatic fertilizers of NPK except the NPK 23:23:0 fertilizer manufactured by the respondent-company. The learned counsel for the respondent contended that all the fertilizers of NPK category of various combinations are treated as phosphatic fertilizers not only by the Government of India but also by the various agricultural departments of the various State Governments, the farmers, the in-trade and in-common parlance. The High Court relying on a decision of this court in the case of Arya Vaidya Pharmacy v. State of Tamil Nadu [1989] 2 SCC 285 held that the two items of the same category cannot be discriminated. Hence, the High Court held that merely because of composition of NPK, discrimination could not have been made against the respondent. In Arya Vaidya Pharmacy decision [1989] 2 SCC 285 See [1989] 73 STC 346(SC), it was held that while it was open to the Legislature or the State Government to select different rates of tax for different categories, where the commodities belonged to the same class ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the laws in such a manner as to withdraw the benefit that had been given earlier resulting in higher burden so far as the assessee is concerned without any reason. Retrospective withdrawal of the benefit of set-off only for a particular period should be justified on some tangible and rational ground, when challenged on the ground of unconstitutionality." (Underlining is ours). The learned counsel for the appellants could not, however, satisfy us that there was a good reason to introduce the first set of notifications for one period and another set of notifications for another either by amending the notification or by introducing a new notification so as to withdraw the benefit that was given earlier, resulting in higher burden on the assessee without any reason. The learned counsel appearing for the State relying heavily on the case of Kerala Hotel & Restaurant Association v. State of Kerala AIR 1990 SC 913 See [1990] 77 STC 253(SC)., contended that the State has widest latitude where measures of economic and fiscal regulation are concerned. There is no dispute on this principle of law as enumerated in the aforesaid decision of this court. However, this same law must not be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, drawing inspiration from this judgment, submitted that no reliance could be placed on the decision of this court in the case of Arya Vaidya Pharmacy [1989] 2 SCC 285 See [1989] 73 STC 346(SC). wherein it was held that two items of the same category could not be discriminated and where such distinction was made between such items, it should be done in order to save such a classification being in contravention of article 14 of the Constitution. While examining the case of Arya Vaidya Pharmacy [1989] 2 SCC 285(1) this court in Associated Cement [2006] 1 SCC 597 See [2006] 144 STC 342(SC)., observed: "In Arya Vaidya Pharmacy v. State of Tamil Nadu [1989] 2 SCC 285, which is the sheet-anchor of the appellants' submission, the facts were: that the appellants were manufacturers of ayurvedic drugs and medicines, including arishtams and asavas. Arishtams and asavas contain alcohol, which according to the assessee was essential for the effective and easy absorption of the medicine by the human system and also because it acted as a preservative. While all other patent or proprietary medicinal preparations belonging to the different systems of medicines were taxed at the rate of seven per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cement [2006] 1 SCC 597 See [2006] 144 STC 342(SC) stands on a different factual situation. Therefore, we are unable to accept the contention of the learned counsel for the appellants that the decision in Arya Vaidya Pharmacy [1989] 2 SCC 285 See [1989] 73 STC 346(SC). and the principles laid down in that case cannot be applied in the present case. This being the position and in view of our discussion made herein earlier that the products of the respondent and the exemption granted in the notification in question which are similar in nature, we hold that the product of NPK 23:23:0 is also a similar commodity within the meaning of the notification of exemption dated April 10, 1995. Therefore, it would not be open for the appellants, as held by the High Court, to realise tax retrospectively on sale of NPK 23:23:0 from April 10, 1994 to March 31, 1995. Before parting with this judgment, it would be necessary for us to take into consideration another decision of this court in the case of State of Assam v. Shri Naresh Chandra Ghosh (decd. by Lrs.) [2001] 1 SCC 265 See [2001] 121 STC 294(SC). The learned counsel for the appellants relied on this decision in order to distinguish the de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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