IMPORTANT POINT
State has no doubt wide latitude in the matter of taxing statutes but the law must not be repugnant to Article 14 of the Constitution.

JUDGMENT

Tarun Chatterjee. J.—

1.Challenge in this appeal is to the judgment passed by the Division Bench of the High Court of Judicature at Allahabad.

2.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 UP Trade Tax Act (hereinafter called the ‘Act’) and the Central Sales Tax Act. The State of UP (the appellants herein) issued notification dated 2nd November, 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 that Section 25 of the U. P. Trade Tax Act ( U. P. Act No. 15 of 1948), the Governor is pleased to direct that from 1.11.1994 to 31.3.1995 no tax would be payable under the aforesaid Act on the sale of Potassium Phosphatic fertilizers.”

3.A reading of this notification indicates that no tax would be payable for the period from 1st November 1994 to 31st March 1995 under the Act on the sale of Potassium Phosphatic Fertilizers.

4.Subsequently a notification-dated 10th April, 1995 was issued which superceded the notification dated 2nd November, 1994. This notification runs as under:

“In exercise of powers under Section 25 read with Clause 21 of sub-section A of Section 4 of U. P. Trade Tax Act, 1948 (U.P. Act No. XV of 1948) and Section 21 of U. P. General Clauses Act, 1904 (U.P. Act No. 1 of 1904 superceding the Government Notification No. T. T.-2 - 3714/11-9( 856)/92-U. P. Act -15 -48Order - 94 dated 2nd November 1994 (S. No. 235) , the Governor is pleased to direct that during the period 1st November 1994 ending with 31st March 1995 no tax will be payable under the aforesaid U. P. Act No. XV of 1948 of the following chemical fertilizers:-

i.D.A.P.

ii.M.O.P.

iii.Super Phosphate

iv.N.P.K. 12:32:16

v.N.P.K. 15:15:15

vi.N.P.K. 20:20:0

vii.N.P.K. 14:35:14"

5.This notification was followed by another notification dated 15th May, 1995, which provided for exemption to the same category of fertilizers as mentioned in the previous notification dated 10th April, 1995. From a perusal of the aforesaid two notifications, we find that the exemption to NPK 23:23:0 (product of the respondent) was withdrawn.

6.Finding that the exemption to NPK 23:23:0 was not allowed by the aforesaid two notifications, the respondent had written a letter to the Commissioner, Trade Tax of the State of UP requesting him to include NPK 23:23:0 in the exemption list issued under the aforesaid two notifications. On 23rd November, 1995 the Trade Tax Department of UP asked by a letter to the respondent company, “why their product be included in the aforesaid two notifications?” as the exemption to the product of the respondent was not allowed and aggrieved by the issuance of these notifications withdrawing such exemption allowed by the 1994 notification, the respondent filed a writ petition in the High Court of Judicature at Allahabad challenging the validity of the aforesaid two notifications and prayed for 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.

7.In the writ petition, the first grievance of the respondent was that the notification dated 10th April, 1995 could not have been issued with retrospective effect. Relying on a decision of the Allahabad High Court, namely, Ganesh International & Anr. v. Assistant Commissioner and Ors. [(2001) 124 STC 600 (All)], the High Court held that the notification dated 10th April, 1995 shall apply prospectively and not retrospectively. The learned counsel appearing on behalf of the appellants have not seriously c