BEG, J. - (1.) THE following questions have been referred to us under section 11 of the U.P. Sales Tax Act : "1. Whether the petitioner was liable to pay any sales tax on Chilean nitrate, a fertilizer, even though it could be used for purposes other than fertilizer ? 2. Whether the Chilean nitrate imported by the petitioner is a mineral imported in the natural form, there being no chemical process involved in it and it is dug from the sun-baked earth in North Chile (South America) and packed in bags as such ? 3. Whether the commodity which the petitioner deals is a fertilizer pure and simple or a chemical or even chemical fertilizer ? 4. Whether the word 'fertilizer' mentioned in Notification No. ST-119/X-928, dated 7th June, 1948, includes 'chemical fertilizer' as such ?"
(2.) THE circumstances under which the above-mentioned questions arose are as follows : The assessee M/s. Girja Shanker Dubey and Company describes itself as "chemical dealers" at Firozabad, but it claims to be "an agriculturist holding substantial agricultural farms" and "as such appointed agents of various companies for the imports and redistribution of Chilean nitrate which is used as manure". It was assessed on an estimated turnover of Rs. 40,000 for each of the two years 1954-55 and 1955-56 for payment of sales tax on sales of imported Chilean nitrate which were treated as chemicals. The contention on behalf of the assessees was that the Chilean nitrate sold by them was a "fertilizer" exempt under the provisions of Notification No. ST-119/X-1948 dated 7th June, 1948. This notification was issued under section 4 of the U.P. Sales Tax Act exempting from the provisions of section 3 of the U.P. Sales Tax Act a number of goods including fertilizers which are mentioned as item No. 11 on the List which came into effect from the 1st of April, 1948. The term "fertilizer" is used here without any qualification whatsoever, and, prima facie, it includes all kinds of fertilizers. On behalf of the department, reliance is placed upon another Notification No. ST-117/X-923-1948 dated 8th June, 1948. Item No. 11 in the List No. I of this notification is : "Chemicals of all kinds". These are made taxable at the rate of 6 pies per rupee. On 16th July, 1956, another Notification No. S.T. 3470/X was issued, under section 4 of the U.P. Sales Tax Act, 1948, by which four items were exempted from the payment of sales tax. The last of the items in this notification was : "Fertilizers other than chemical fertilizers". There is no express mention in this last notification that the previous Notification No. S.T. 118/X-1948 was superseded by it so far as fertilizers are concerned. Nevertheless, it can be inferred that the reason for this fresh notification of 1956 was that the State Government realised that the first notification regarding exemption of fertilizers was wide enough to include chemical fertilizers. Apparently, it was for this reason that the last-mentioned notification of 1956 clearly excluded chemical fertilizers from the category of exempted fertilizers altogether. It also appears that for the assessment years 1952-53 and 1953-54, the two years preceding the years with which we are now concerned, Chilean nitrate was considered by the Sales Tax Authorities themselves to be exempt from sales tax as it was a fertilizer. Again, if Chilean nitrate is a chemical fertilizer, it would not be exempt from sales tax after the last-mentioned notification of 1956. We are, however, concerned only with the period prior to the notification of 1956 declaring that chemical fertilizers did not fall in the category of fertilizers exempt from sales tax. The Sales Tax Officer held that the turnover of the assessee to be taxable under the head : "Chemicals of all kinds". The Judge (Appeals) also took the view that Chilean sodium nitrate was used as a fertilizer, but it could also be used as a chemical for preparing glass. He made a general observation that the Chilean nitrate sold at Firozabad openly was being used as a chemical for preparing glass which was a combination of acids, oxide and nitrates. The assessee went up in revision. The learned Judge (Revisions) disposed of the revision applications appertaining to the two years mentioned above by a single order. He held that even if Chilean nitrate was a fertilizer it could only be held to be a "chemical fertilizer". He took the view that the Notification No. S.T. 119/X-928-1948 dated 7th June, 1948, did not mentioned chemical fertilizers but only dealt with "fertilizers" which excluded chemicals fertilizers. The learned Judge observed that a chemical fertilizer is prepared through some chemical process whereas Chilean nitrate of soda is basically a chemical which is used for purposes other than that of a manure or fertilizer. Hence, the learned Judge considered the case of Chilean nitrate to be outside the category of fertilizers. He thought that it was covered more properly by the broader category of "chemicals of all kinds" mentioned in Notification No. S.T. 117/X-923-1948 dated 8th June, 1948, taxable at 6 pies per rupee. He held that this entry was wide enough to include chemical fertilizers. Thereafter, the assessee applied for reference of a number of questions to this Court. The questions mentioned above were selected out to these for reference to us by the learned Judge (Revisions).
(3.) MR . Swami Dayal, on behalf of the assessee, contended that Chilean nitrate was not a chemical at all but was a mineral used for purposes of fertilization. He referred to an article on Chile in the Encyclopaedia Britannica, Volume V, where, under the heading "Mining", the following passage occurs : "There are various theories to account for the deposits in Chile of caliche, the grey, rock-like substance containing sodium cholride, sodium nitrate and iodine salts. Caliche is found in a narrow strip about 10 to 50 mi. wide between latitudes 19 degree and 25 degree S., along the eastern slope of the coast range. The deposits vary in thickness from a few inches to several feet. It is uncertain who first realised that nitrate had commercial value, whether Jesuit priests or Thaddeus Haenke, the German explorer. With recognition of its value as a fertilizer and in the manufacture of explosives, exportation began in 1830s; by 1860 a flourishing business had been established." ;