The classification of goods under tax statutes should be based on their common commercial understanding and predominant use, even if it appears to fall under a specific entry.

ADARSH KUMAR GOEL :- This petition has been filed against order of the Haryana Tax Tribunal dated June 29, 2005 in S.T.A. No. 228 of 2004-05.

The respondents - assessee made application under section 56(2) of the Haryana Value Added Tax Act, 2003 (for short, "the Act"), seeking clarification whether caster de-oiled cake, neem de-oiled cake and mahua de-oiled cake are covered by entry 27 in Schedule B to the Act dealing with organic manure and chemical fertilizer, which were tax-free. Order dated May 24, 2004 was passed to the effect that the items in question were not covered by Schedule B and were not tax-free. The same were covered by entry 6 of Schedule C and were taxable. On appeal, the Tribunal reversed the said view and held that the said items will be covered by entry 27.

We have heard learned counsel for the parties.

The entries in question are reproduced below :

SCHEDULE B

"27. Organic manure and chemical fertilizer."

SCHEDULE C

"6. Oil-cakes and de-oiled cakes including de-oiled rice bran."

The Tribunal in support of its view that items in question were covered by entry 27, held as under :

"... Now the question arises whether (a) castor de-oiled rice cake, (b) neem de-oiled cake and (c) mahua de-oiled cake are organic manure not liable to tax falling within entry 27 of Schedule B to the Act or these are de-oiled cakes falling in entry 6 of Schedule C to the Act taxable at four per cent. In 'A.G. Technologies Manure and Fertilizer', 'organic manures' have been defined as natural products used by farmer to provide food (plant nutrients) for the crop plants. There are a number of organic manures like farm yard manure, green manures, compost prepared from crop residues and other farm wastes, vermin compost, oil-cakes and biological wastes - animal bones, slaughter house refuse.

2. How are organic manures beneficial in the cultivation of crops ?

Organic manures increase the organic matter in the soil; organic matter in turns releases the plant food in available form for the use of crops. However, organic manures should not be seen only as carriers of plant food. These manures also enable a soil to hold more water and also help to improve the drainage in clay soils. They provide organic acids that help to dissolve soil nutrients and make them available for the plants.

3. How are organic manures differing from fertilizers ?

Organic manures have low nutrient content and therefore need to be applied in larger quantities. For example, to get 25 kg. of NPK; one will need 600 to 2,000 kg. of organic manure whereas the same amount of NPK can be given by 50 kg. of an NPK complex fertilizer.

The nutrient content of organic manures is highly variable from place to place, lot to lot, and method of preparation. The composition of fertilizers is almost constant. For example urea contains 46 per cent. N regardless of which factory makes it any where in the world.

Oil cakes

There are many varieties of oil-cakes, which contain not only nitrogen but also some P and K along with large percentage of organic matter. These oil-cakes are of two types.

(i) Edible oil-cakes - suitable for feeding cattle.

(ii) Non-edible oil-cakes - not suitable for feeding cattle.

Oil-cakes are quick acting organic manure. Though they are insoluble in water, their nitrogen becomes quickly available to plants in about a week or in 10 days after application. Oil-cakes should be well powdered before application, so that they can be spread evenly and are easily decomposed by micro-organisms. Depending on crops, oilcakes are applied as broadcast, drilled or placed near root zone while earthing up.

Mineralization and slow release of N

The oil-cakes are slow in mineralizing and hence compliment quicker acting inorganic fertilizers whenever they are applied together. Gaseous N losses from oil-cakes applied to the plough layer are much smaller than losses from No. 3 fertilizers. Some of these oilcakes retard nitrification of the soil/urea and thereby increase N u