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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 ..... Dhruv Agarwal and Praveen Kumar, Advocates, for the respondent. -------------------------------------------------- The judgment of the court was delivered by TARUN CHATTERJEE J. Challenge in this appeal is to the judgment passed by the Division Bench of the High Court of Judicature at Allahabad Reported as Deepak Fertilizers and Petrochmicals Corporation Ltd. v. State of U.P. [2001] 124 STC 602. Deepak Fertilizers and Petrochemical Corporation Ltd. (respondent herein) is a company registered under the Indian Companies Act, 1956 which is engaged in the business of manufacture and sale of phosphatic fertilizers and allied chemicals the composition of which is 23:23:0, i.e., (nitrogen, 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 sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a direction upon the appellants not to discriminate NPK 23:23:0 and to include the same in the list of exempted items of the aforesaid two notifications. In the writ petition, the first grievance of the respondent was that the notification dated April 10, 1995 could not have been issued with retrospective effect. Relying on a decision of the Allahabad High Court, namely, Ganesh International v. Assistant Commissioner [2001] 124 STC 600, the High Court held that the notification dated April 10, 1995 shall apply prospectively and not retrospectively. The learned counsel appearing on behalf of the appellants have not seriously challenged this part of the impugned order of the High Court. However, since 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 notificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e aforesaid section. In our view, the High Court was justified in holding that exemption could not be withdrawn with retrospective effect by issuance of subsequent notification dated April 10, 1995, superseding the notification dated November 2, 1994. Restricting the exemption of tax to certain fertilizers in the same class of chemical fertilizers certainly amounted to increasing the liability to tax of the dealer with retrospective effect, which in our opinion, cannot be issued in view of the proviso to section 25 of the Act. Accordingly, we hold that the notification dated April 10, 1995, denying exemption to NPK 23:23:0 retrospectively is illegal and invalid and are in agreement with the view expressed by the 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 al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified the two commodities on a rational basis for the purpose of imposing tax. This court in the case of Tata Motors Ltd. v. State of Maharashtra [2004] 5 SCC 783 See [2004] 136 STC 1(SC)., has held: ". . . It is no doubt true that the State has enormous powers in the matter of legislation and in enacting fiscal laws. Great leverage is allowed in the matter of taxation laws because several fiscal adjustments have to be made by the Government depending upon the needs of the Revenue and the economic circumstances prevailing in the State. Even so an action taken by the State cannot be irrational and so arbitrary so as to introduce one set of rules for one period and another set of rules for another period by amending 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 g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is no reasonable nexus of such classification among various chemical fertilizers of the same class by the State. This court in the case of Arya Vaidya Pharmacy [1989] 2 SCC 285 held that two items of the same category cannot be discriminated and where such a distinction is made between items falling in the same category it should be done on a reasonable basis, in order to save such a classification being in contravention of article 14 of the Constitution of India. Before finally deciding this aspect of the matter, we need to consider a decision cited by learned counsel for the appellant in the case of Associated Cement Companies Ltd. v. Government of Andhra Pradesh [2006] 1 SCC 597. Learned counsel for the appellant, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stinguishing the facts of the Arya Vaidya Pharmacy(1), this court in Associated Cement case [2006] 1 SCC 597(2) made the following observations: "but in the present case, the rate of tax on cement is made dependent on whether the sale price of cement includes the cost of packing materials." From the above, we find that in Associated Cement case [2006] 1 SCC 597, it was held by this court that the rate of tax on cement was dependent on the question whether the price included the cost of packing materials whereas in the present case we are concerned with the exemption granted to the dealer of NPK 23:23:0. In view of our discussion made hereinabove, we are, therefore, of the view that the decision in the case of Associated 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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