1993 (2) TMI 277 - HC - VAT / Sales Tax

Gypsum sold to farmers qualifies as tax-free fertilizer under Entry 27 of Schedule B

The HC ruled that gypsum sold to farmers constitutes a fertilizer under entry No. 27 of Schedule B of the Haryana General Sales Tax Act, 1973, making it ... Levy of sales tax - sale of gypsum by the Corporation - gypsum can be considered a fertilizer within the meaning of entry No. 27 of Schedule 'B' of the Haryana General Sales Tax Act, 1973 - meaning of word 'gypsum' - HELD THAT:- From the dictionary meanings noticed, gypsum in our opinion is a material which if added to the soil will result in better growth of plant. Gypsum is thus, a fertilizer when put by the farmers in the earth either before or after sowing the crop. The literature produced by the Corporation also supports the conclusion that gypsum sold to the farmers by the Corporation is used in the earth as a fertilizer or manure. It is a substitute for the chemical fertilizer. It contains calcium and sulphate. Both are essential plant nutrients. Fertilizers now used are mostly chemical fertilizers whereas gypsum is a mineral fertilizer and sold in the form of powder to the farmers. According to the respondent-State, gypsum is used to improve alkali soil and is, therefore, not a fertilizer. The use of gypsum improves alkali soil by reducing salt contents of the soil and thereby makes it fertile for giving higher yield of the crop. It cannot be accepted that gypsum is used only for correction of soil and not as a fertilizer. It is proved from the references noticed above that gypsum is also used in the fields as a direct fertilizer where other fertilizers, such as superphosphate or sulphur in elementary form or otherwise are not available or the nature of soil so requires. It is, however, made clear that we may not be understood to mean that sale of all gypsum falls under entry No. 27 of Schedule 'B' attached to the Act. The sale of such gypsum made to farmers or co-operative societies, dealing with the sale of fertilizers and sold to farmers and co-operative societies of farmers will be tax-free under entry No. 27 of Schedule 'B ' ibid, it being used and understood in common parlance as a fertilizer. Thus, the question referred for the opinion of this Court is answered in the affirmative, i.e., in favour of the assessee. The parties will, however, bear their own costs as the question was not free from doubt. Reference answered in the affirmative. Issues Involved:1. Whether gypsum is considered a fertilizer within the meaning of entry No. 27 of Schedule 'B' of the Haryana General Sales Tax Act, 1973.2. Whether the sale of gypsum by the Corporation should be exempted from sales tax.Issue-wise Detailed Analysis:Issue 1: Whether gypsum is considered a fertilizer within the meaning of entry No. 27 of Schedule 'B' of the Haryana General Sales Tax Act, 1973.The court examined whether gypsum falls under the definition of 'fertilizer' as per entry No. 27 of Schedule 'B' of the Haryana General Sales Tax Act, 1973. The Act itself does not define 'fertilizer' or 'gypsum,' necessitating reliance on dictionary meanings and expert literature. Various dictionaries, including Webster's and Oxford, define 'fertilizer' as a substance that enhances soil fertility, and 'gypsum' as hydrous calcium sulfate used in soil amendment. Expert literature, such as 'Commercial Fertilizers' by Gilbeart H. Collings, supports the use of gypsum as a fertilizer, noting its historical and practical applications in agriculture. The Punjab Agricultural University also recommends gypsum as a fertilizer, particularly in sulphur-deficient soils.Issue 2: Whether the sale of gypsum by the Corporation should be exempted from sales tax.The court scrutinized whether the gypsum sold by the Corporation to farmers qualifies for tax exemption under entry No. 27 of Schedule 'B.' The Assessing Authority, appellate authority, and Sales Tax Tribunal had previously ruled that gypsum is not a fertilizer and, therefore, not exempt from sales tax. However, the court found that gypsum, when sold to farmers, is used as a fertilizer containing essential plant nutrients like calcium and sulphate. The court emphasized that gypsum improves soil fertility and is used as a direct fertilizer when other chemical fertilizers are unavailable. The court concluded that gypsum sold to farmers or cooperative societies dealing in fertilizers should be tax-free under entry No. 27 of Schedule 'B.'Conclusion:The court answered the referred question in the affirmative, ruling in favor of the assessee. It was determined that gypsum sold by the Corporation to farmers is indeed a fertilizer under entry No. 27 of Schedule 'B' and should be exempt from sales tax. The parties were directed to bear their own costs as the question was not free from doubt.Reference answered in the affirmative.