STATE OF U.P. & ORS. versus DEEPAK FERTILIZERS & PETROCHEMICAL CORPORATION LTD.

Citation: [2007] 6 S.C.R. 525 · Decided: 14-05-2007 · Supreme Court of India · Bench: TARUN CHATTERJEE · Disposal: Dismissed

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

STATEOFU.P. &ORS. 
A 
v. 
DEEP AK FERTILIZERS & PETROCHEMICAL CORPORATION LTD. 
MAY 14, 2007 
[T ARUN CHATTERJEE AND V .S. SIRPURKAR, JJ.] 
B 
U.P. Trade Tax Act 1948-s.25, proviso-Tax on sale of chemical 
fertilizers-Exemption granted by Notification in regard to fertilizer sold by 
Respondent-Held: Could not be withdrawn with retrospective effect by C 
issuance of subsequent notification superseding the earlier notification since 
it amounted to increasing the tax liability of Respondent with retrospective 
effect, which could not be done in view of proviso to s.25-Subsequent 
notification also discriminatory being not able to strike a rational balance 
of classification between items of the same category since fertilizer sold by 
Respondent was not given exemption though all other fertilizers of the same D 
category were exempted-No reasonable nexus of classification among 
chemical fertilizers of the same class by the State-Notification-Tax 
Exemption Notification-Constitution of India, 1950-Article 14. 
Respondent-company is engaged in the manufacture and sale of a E 
chemical fertilizer NPK 23:23:0. In terms of Notification dated 2nd November, 
1994 issued by Appellant-State in exercise of its powers under the U.P. Trade 
Tax Act, NPK 23:23:0 was exempted from payment of sales tax for the period 
1st November 1994 to 31st March 1995. 
Superseding the said Notification, a set of two notifications, one dated F 
10th April, 1995 followed by another dated 15th May, 1995 were issued in 
terms of which tax exemption to NPK 23:23:0 as allowed by the Notification 
dated 2nd November, 1994 was withdrawn with retrospective effect. In terms 
of the said two subsequent notifications all fertilizers of the NPK category 
except NPK 23:23:0 were exempted from payment of tax. 
In appeal to this Court the questions which arose for consideration are 
1) Whether exemption granted to NPK 23:23:0 by Notification dated 2nd 
November, 1994 could not be withdrawn by subsequent notifications with 
retrospective effect and 2) Whether the subsequent two notifications were also 
525 
G 
H 
526 
SUPREME COURT REPORTS 
(2007] 6 S.C.R. 
A discriminatory as they exempted all kinds of fertilizers of NPK category except 
NPK 23:23:0. 
Dismissing the appeal, the Court 
HELD: 1. A bare perusal of the proviso to Section 25 of the U.P Trade 
B Tax Act would clearly show that no notification having the effect of increasing 
the tax liability shall be issued with retrospective effect under the aforesaid 
section. The High Court was justified in holding that exemption could not be 
withdrawn with retrospective effect by issuance of subsequent notification 
dated I 0th Apri~ 1995, superseding the notification dated 2nd November, 1994. 
C' 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 cannot be issued in view of the 
proviso to Section 25 of the Act. Accordingly, it is held that the notification 
dated 10th April, 1995, denying exemption to NPK 23:23:0 retrospectively is 
illegal and invalid. [Para 10) [53'0-E-G) 
D 
Ganesh International & Anr. v. Assistant Commissioner and Ors., (2001) 
124 STC 600 (All), referred to. 
2.1. 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; 
E 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. [Para 13) (531-E] 
2.2. Every law has to pass through the test of constitutionality, which is 
F nothing but a formal name of the test of rationality. Whenever there is to be 
made any type of law for the purpose of levying taxes on a particular commodity 
or exempting some other commodity from taxation, a sought of classification 
is to be made. Certainly, this classification cannot be a product of a blind 
approach by the administrative authorities on which the responsibility of 
delegated legislations is vested by the constitution. In a nutshell, the 
G notifications issued by the Trade Tax Department of the State ofU.P., dated 
10th April, 1995 and 15th May, 1995 lack the sense of reasonability because 
it is not able to strike a rational balance of classification between the items 
of the same category. As a result of this, N

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