Statutory exemption for organic manure rejected as bone meal failed the natural-origin test, with limited relief on interest.

Bone meal was held not to fall within "organic manure" under Entry 17 of the Third Schedule to the KGST Act because the statutory explanation confined that expression to manure produced or derived naturally from plants or animals, whereas bone meal was obtained by mechanical crushing and grinding of bones. The classification challenge to its inclusion in Entry 57 of the First Schedule also failed, as a discrimination plea could not succeed once the product did not satisfy the exemption entry; equality cannot be claimed to perpetuate illegality. Limited relief was recognised on interest: where assessment orders were stayed and tax was paid within the stipulated period, interest was not payable.

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Issues: (i) whether bone meal fell within the expression "organic manure" under Entry 17 of the Third Schedule to the KGST Act and was therefore exempt from tax, and (ii) whether its inclusion in Entry 57 of the First Schedule was arbitrary or discriminatory, with consequential relief on interest.

Issue (i): whether bone meal fell within the expression "organic manure" under Entry 17 of the Third Schedule to the KGST Act and was therefore exempt from tax.

Analysis: The expression "organic manure" was construed in the light of the statutory explanation, which confined it to manure produced or derived naturally from plants or animals or both. The material showed that bone meal was obtained by a mechanical process of crushing and grinding bones. Since the product was not produced or derived by a natural process, it did not satisfy the statutory definition.

Conclusion: Bone meal did not qualify as organic manure and was not entitled to exemption under Entry 17 of the Third Schedule.

Issue (ii): whether its inclusion in Entry 57 of the First Schedule was arbitrary or discriminatory, with consequential relief on interest.

Analysis: The plea of discrimination could succeed only if bone meal first answered the description of organic manure and was then singled out for different treatment. Once the product failed the statutory test, the challenge based on parity with other items in the Third Schedule could not be sustained. The Court also held that equality cannot be claimed in illegality, and therefore the presence of other entries that may have been differently treated did not justify inclusion of an ineligible item by judicial intervention. On the issue of interest, the assessment orders had been stayed and the petitioners were given time to pay the tax, so interest was not warranted if payment was made within the stipulated period.

Conclusion: The classification challenge failed, but the petitioners were relieved from liability to pay interest if the tax was paid within four weeks.

Final Conclusion: The writ petitions were dismissed on the merits of the tax classification challenge, while limited protection was granted against interest liability on timely payment of the assessed tax.

Ratio Decidendi: A product can claim exemption only if it satisfies the statutory definition in the relevant entry, and a discrimination challenge cannot succeed where the item itself is outside the exempted class; equality cannot be demanded to perpetuate an illegality.

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