The above Trade Tax Revisions have been filed against the order of the Commissioner, Commercial Tax Tribunal dated 21.10.2013. The revisionist- M/S Godavari Fertilizers & Chemicals Ltd. is a multi State Cooperative Society under the control of the Ministry of Agriculture Department of Chemicals and Fertilizers, Govt. of India. It is engaged in the business of manufacture and sale of chemical fertilizers. The prices on which chemical fertilizers are required to be sold by the revisionists are also fixed by the Government of India and the company cannot sell the chemical fertilizer at any rate or price other than that fixed by the Government of India. For the various assessment years tax was imposed on the nitrogen component at the rate of 6.5% on the sale of NPK 10:26:26. The facts, which are not in dispute is that the NPK was being sold in the ratio 10:26:26. However, the Assessing Authority initiated reassessment proceedings under Section 41 (8) of the U.P. Trade Tax Rules, 1948 for levying tax on the entire price of NPK 10:26:26. The Assessing Authority by order dated 11.6.2010 held that although there was a tax liability on the Nitrogen component but since there is no exemption in respect of Phosphate and Potassium contents of the fertilizer, these items would also be liable for tax.
Aggrieved the revisionists filed an appeal before the Additional Commissioner, who has also dismissed the appeal by his order dated 3.3.2012. Thereafter the revisionist has filed a second appeal under Section 10 of the U.P Trade Tax Act read with Section 57 Value Added Tax before the Commissioner Tribunal Lucknow which too dismissed the appeal by the impugned order dated 21.10..2013.
Hence this revision.
I have heard Sri S.M.K. Choudhary, learned Senior Counsel assisted by Sri Saharsh for the revisionist and Sri Sanjieve Shankhdhar, learned counsel for the Revenue.
Sri S.M.K. Chaudhary has referred to the D.O. Letter 13.8.2002 written by the Special Secretary, Government of Uttar Pradesh addressed to the Special Executive Officer, Joint Secretary Kar Evam Sanshthagat Vitt Vibhag, U.P. Government, Krishi Anubhag wherein reference was made to earlier Government Notification dated 12.2.2001 and the notification of the Central Government dated 28.2.2002 and the letter of the Director Agriculture Notification dated 3.6.2002 whereby it has been informed that for trade tax the amount of tax on nitrogen has been changed and that NPK fertilizer, which is sold within the State of U.P. would be determined from time to time. So far as the Nitrogen component of NPK is concerned, the amount of tax was determined at 6.5% per metric ton. The NPK complex mentioned in the D.O. Letter dated 13.8.2002 was mentioned as 10-26-26.
Thereafter reference has been made to the D.O. Letter of the Joint Secretary, Government of Uttar Pradesh addressed to the Additional Commissioner (Legal) Trade Tax Uttar Pradesh dated 16.1.2003 wherein on the NPK complex the amount of tax on Nitrogen content has been determined at 6.5% per metric ton. In the said letter reference has been made to D.O. Letter dated 13.8.2002 Learned Senior Counsel has next referred to the Circular dated 14.2.2003 issued by the Additional Commissioner (legal) Trade Tax, U.P. Lucknow wherein also reference has been made to the earlier D.O. Letters dated 13.8.2013 and 16.1.2003 and with regard to the NPK complex it has been mentioned that the Nitrogen content would be liable to tax at 6.5% per metric ton.
Reference has also been made by learned Senior Counsel to the Departmental Circular issued by the Director, Agriculture, Uttar Pradesh addressed to the Special Secretary (Krishi Anubhag-2) Government of U.P., Lucknow dated 11.3.2013 wherein it has been stated that with reference to the year 2002 with regard to the supply of NPK fertilizer 10:26:26 it had been informed by G.O. dated 13.8.2002 that in the NPK 10:26:26 complex, content of the Phosphate and Potassium would be exempted from Trade Tax which was effective with effect from 28.2.2002 and the tax would be imposed only on the Nitrogen content of NPK at the rate of 6.5%. Before the Tribunal two issued were framed. Issue no.1 being as to whether tax exemption could be granted to Phosphate and Potassium content of NPK 10:26:26 and the Tribunal referring to the Government Order dated 12.2.2001 and the G.O. dated 13.8.2002 held that since these government orders did not mention NPK 10:26:26 the Phosphate and Potassium content of NPK, therefore, would not be exempted from tax.
Sri S.M.K. Choudhary referred to the G.O. dated 12.2.2001 which has also been referred by the Tribunal in its impugned order and which provides that no tax under the U.P. Trade Tax Act, 1948 shall be payable on the sale of Potash and Phosphate content of the chemical fertilizer mentioned in the said G.O. with effect from 1.1.2001. The NPK complex 10:26:26 however does not find mention in the said Government Order but the submission of learned Senior Counsel is that when specifically the Government itself in its various circulars has referred to rate of tax on Nitrogen content only at 6.5% per metric ton and in the D.O. Letter dated 11.3.2013 has specifically mentioned that Phosphate and Potassium contents of NPK 10:26:26 would be exempted from tax with effect from 28.2.2002 the Taxing Authorities were clearly discriminating between fertilizer of NPK 10-26-26 and fertilizer of any other complex.
Learned Senior Counsel has referred to the judgement of the Supreme Court in the case of Vadilal Chemicals Ltd. vs. State of A.P. And others (2005) 6 SCC 292.
Para 23 of the said judgment reads as follow:-
"23. There is another reason why the action of DCCT cannot be upheld. The primary facts relating to the processes undertaken by the appellant at its unit were known to the Department of Industries and Commerce and DCCT. The only question was what was the proper conclusion to be drawn from these. The Department of Industries and Commerce which was responsible for the issuance of the 1993 GO accepted the appellant as an eligible industry for the benefits. Apart from the fact that it can be assumed that the Department of Industries was in the best position to construe its own order, we can also assume that in framing the Scheme and granting eligibility to the appellant all the Departments of the State Government involved in the process had been duly consulted. The State, which is represented by the Departments, can only speak with one voice. Having regard to the language of the 1993 GO it was the view expressed by the Department of Industries which must be taken to be that voice."
Reference has also been made to the judgment of the Supreme Court in State of U.P. and others vs. Deepak Fertilizer passed in Appeal (civil) No.3511 of 2001 passed on 14.5.2007 wherein the Supreme Court while considering the different kinds of Phosphatic fertilizer of NPK held that the Notification dated 15.5.1995 is discriminatory as it exempts all kinds of Phosphatic content of NPK except 23:23:0. It also referred to the decision of the Division Bench of the High Court, which had in turn placed reliance upon the case of Ayurveda Pharmacy & another vs. State of Tamilnadu (1989) 2 SCC 285 and held that two items of the same category cannot be discriminated and in that case the High Court had held that merely because of different composition of NPK,discrimination could not have been made against NPK 23:23:0 and had ordered that appellants not to realise tax on the sale of NPK 23:23:0 from the respondents. Thereafter in para-13 of the judgment in the case of Depak Fertilizers the Supreme Court held that 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.
Para-13 of the judgment of the Supreme Court reads as follow:-
"13. From a perusal of the notifications in question, it is evident that other fertilizers of the NPK category i.e. N.P.K. 12:32:16; N.P.K. 15:15:15; N.P.K. 20:20:0; N.P.K. 14:35:14 are included in the exemption list, whereas it is a matter of fact that the NPK 23:23:0 fertilizer is also a fertilizer of the same category, but it is omitted from the list. According to the notification dated 2nd November, 1994, the intention of the State was not to tax the sale of "potassium phosphatic fertilizers" but when we go into enquiry of nomenclature of these chemical compounds, we find that the NPK 23:23:0 is a "nitro-phosphate fertilizer" which has no potassium (K) ingredient. The Notifications dated 10th April, 1995 and 15th May, 1995 clearly include NPK 20:20:0, which is also a nitro-phosphate fertilizer with zero content of potassium (K). This classification made under the notification dated 10th April, 1995 does not hold good on the rational basis and is hence subject to scrutiny. The fact remains stagnant that the notifications include a fertilizer NPK 20:20:0 which is of the same category as that of fertilizer NPK 23:23:0, because both are nitro-phosphate fertilizers. This shows that the state has not classified 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 and Ors. [(2004) 5 SCC 783], has held:
"It is no doubt true that the state has enormous powers of legislation and in enacting fiscal laws. Great leverage is allowed in the matter of taxation laws because several fiscal adjustments are 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 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 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."
Thereafter in para 21 the Supreme Court held that the products of the respondents Deepak Fertilizers (supra) and the exemption granted in the notification, which are similar in nature, the product of NPK 23:23:0 is also a similar commodity within the meaning of the notification of exemption dated 10.4.1995 and it would not be open for the appellants (State of U.P.) to realise tax retrospectively on the sale of NPK 23:23:0.
Para 21 of the judgement reads as follows:-
"21. 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 10th April, 1995. Therefore, it would not be open for the appellants, as held by the High Court, to realise tax retrospectively on the sale of NPK 23:23:0 from 10th April, 1994 to 31st March, 1995."
Sri S.M.K. Choudhary next submitted that the circulars issued by the Taxing Authority from time to time are binding upon them and, therefore, Circular dated 11.3.2013 which specifically states that Phosphate and Potassium contents of the NPK 10:26:26 were exempted from trade tax with effect from 2002 was binding upon the Assessing Authority as well as to Appellate Authority and no tax liability would have been imposed on IFFCO. He has also placed reliance upon a decision of the Supreme Court in the case of Commissioner of Sales Tax A.P. vs. M/s Indra Industries (2000 U.P.T.C-472) wherein the Supreme Court in para-4 held that though the circular of Taxing Authority is not binding on the courts and is not binding on the assessee, however, the interpretation that is thereby placed by the Taxing Authority on the law is binding on that Taxing Authority.
Paras-3 and 4 of the said judgment reads as follows-:
"3. The said circular issued on 19th January, 1991 by the Commissioner of Sales Tax remains in effect till date. It has not been shown that it has been withdrawn. It is, therefore, very remarkable that it should be contended on behalf of the very Sales Tax department whose Commissioner issued that circular that it is erroneous. It is very remarkable that the Sales Tax Authorities should instruct their Assistant Commissioners who deal with tax assessment in a manner which is according to them, contrary to the law.
4. A circular by tax authorities is not binding on the courts. It is not binding on the assessee. However, the interpretation that is thereby placed by the taxing authority cannot be heard to advance an argument that is contrary to that interpretation.
Learned Senior Counsel next referred to the jugement given by this Court in M/s Dabar India Ltd., Ghaziabad vs. Commissioner of Trade Tax 2005 UPTC 666 wherein the Court relied upon the judgment of the Supreme Court in the case of M/s Indira Industries and held that when there was a government opinion and circular issued by the Commissioner, Trade Tax granting exemption under Section 8(2-A) of the Central Sales Tax Act on inter-State sales to canteen stores treating such sales exempted generally under the State law whether any different view can be taken and such circulars are held binding.
Next judgment referred to is the Division Bench judgment of this Court in Super Fine Processors Pvt. Ltd. vs. State of U.P. and others (2013) 58 VST 99 (All) wherein the Division Bench of this Court relying upon several decisions of the High Court and Supreme Court has held that Circulars issued by the Central Excise Customs are binding upon the department. The Court further relied upon a judgment of division Bench of this Court in Raghunatyh Laxminarayan Spices Pvt. Ltd. vs. State of U.P. 2000 UPTC 554 and held that circulars issued by the Commissioner are binding upon the authorities and they cannot contend it is not binding on them. Reference has also been made to the judgment of the Supreme Court in the case of Indra Industries (supra).
Sri Sanjieve Shankhdhar on the other hand submitted that other than the circular of 11.3.2013, the earlier circulars have not referred to the fertilizer composition of NPK 10:26:26 and it has not been held that Phosphate and Potassium content of NPK fertilizer would be exempted from trade tax. He further submitted that this exemption has been mentioned for the first time in the Circular of the Director of Agriculture dated 11.3.2013 and that this circular was not before the Taxing Authority or before the Tribunal and therefore, the order of the Tribunal cannot be said to be bad and if at all the matter should be remanded to the Tribunal for reconsideration.
However, having considered the facts and circumstances of the case in the light of the judgement of this Court as well as the Supreme Court referred to above and particularly that of Deepak Fertilizer (supra) and the Division Bench of this Court in the case of Super Fine Processors Pvt. Ltd. (supra), in my opinion, the law is very clear that 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.
The order of the Tribunal dated 21.10.2013, the appellate order dated 3.10.2012 and of the assessing authority dated 11.6.2010 are accordingly set aside in the light of the observations made above.
The revisions are allowed.
Dt. 25th September, 2014 Asha