A.K. Jayasankaran Nambiar, J.

1. The issue involved in all these Writ Petitions is whether amounts received by the petitioners by way of subsidy from the Central Government on the sale of fertilizers effected by them, can be included in the taxable turnover on which they have to discharge their tax liability under the Kerala Value Added Tax Act [hereinafter referred to as the 'K.V.A.T. Act']. The petitioners in these Writ Petitions comprise of both manufacturers and importers of fertilizers, who sell the fertilizers so manufactured/imported by them to consumers within the State. In respect of those fertilizers as are notified under the Fertilizer Control Order, the Central Government fixes the MRP at which the fertilizers can be sold by the petitioners and the petitioners cannot charge a price in excess of the price so fixed by the Central Government when they sell the said fertilizers. To compensate the petitioners for the loss suffered by them, consequent to the requirement of selling the fertilizers only at the prices fixed by the Central Government, the Central Government disburses certain amounts to them by way of subsidy. The computation of this subsidy amount is based on a formula that is stated to be arrived at in the following manner:

"For computing subsidy say for the month of January, 2009, Department of Fertilizers first considers the mid point average Free on Board Tampa, USA price as published in 4 weekly issues of FMB (Fertilizer monitoring Bulletin) as well as 4 weekly issues of Fertecon which are two internationally recognized business publications of this Sector.

To this FOB number, they add ocean freight from Tampa (US) to West Coast of India as quoted in FMB from Berry time sources which is a shipping magazine published from Oslo and is considered an authentic guide on ocean freight rates.

Sum total of the above two is the Cost and Freight (C&F) India Price.

Department of Fertilizers as a matter of routine, also asks all the importers of potassic/phosphatic fertilizers to furnish details of their imports on a monthly basis which they also corroborate from ports/customs authorities, etc. A weighted average of all industry imports for the month of January, 2009 is then worked out on C & F India basis.

C&F price derived from publications of December, 2008 as explained above is compared with actual industry average as explained above for the month of January, 2009 and whichever is the lower number is taken as the basis for computing subsidy.

This number taken for subsidy purpose is then compared with the actual price of each shipment of every importer. If price of any shipment is less than USD 30 per MT vis-à-vis the number taken for subsidy then outlier principle is applied under which 35% of this difference is mopped up by the Government and importer is left with only 65 per cent.

However the reverse is not true since if the price of any shipment is higher than the subsidy number men no compensation is given by the Government.

In as much as these rates are in USD, the monthly exchange rate for the month of import as notified by Reserve Bank of India is adopted for conversion. To the above, customs duty of 0.06% is also added. In addition to the above, Government includes Rs. 668/- for Muriate of Potash and Rs. 779/- for Di-Ammonium Phosphate towards other expenses. This broadly includes Port charges, C&F cost, cost of packing materials, handling loss and nominal return of` 30/-. Thus if the cost incurred by any individual company is more man what has been notionally added for concession, the company has to incur loss. Besides, handling loss allowed is on fixed basis while this value can vary depending on the import cost of fertilizers."

2. While completing the assessments of the petitioners, under the KVAT Act, for the relevant assessment years, the assessing authorities included the subsidy amounts received by them in their taxable turnover, by relying on the provisions of Explanation VII to S. 2(lii) of the