T.L. Viswanatha Iyer, J.The challenge in this batch of seven writ petitions is to the inclusion of the fertiliser subsidy received by the petitioners in their taxable turnover of fertilisers under the Kerala General Sales Tax Act, 1963 ("the KGST Act", for brevity). The petitioner in O.P. Nos. 14991, 15020 and 15021 of 1992 and 6743 6744 of 1993 is the same, namely, the Madras Fertilisers Limited, while the petitioner in O.P. No. 16931 of 1992 is Krishak Bharathy Co-operative Limited, a Government of India enterprise. O.P. No. 3430 of 1994 is by the Rashtriya Chemicals and Fertilisers Ltd., a Government of India undertaking who, it is said, had fought an earlier bout of litigation in the Andhra Pradesh High Court on the same point, and won. O.P. Nos. 14991, 15020 and 15021 of 1992 challenge the revised orders of assessment for the years 1987-88, 1988-89 and 1989-90 respectively, after the original assessments were reopened to include the fertiliser subsidy as part of the taxable turnover, while the other two writ petitions filed by the same assessee, the Madras Fertilisers Ltd., challenge the original orders of assessment for the years 1990-91 and 1991-92. In O.P. No. 16931 of 1992, exhibits P1 and P2 are revised assessments for the years 1988-89 and 1989-90 while exhibit P3 is the original assessment for 1990-91. In O.P. No. 3430 of 1994, the challenge is to the original orders of assessment, exhibits P1, P4 and P7 for the years 1988-89, 1989-90 and 1990-91.

2. I shall state the facts in O.P. No. 14991 of 1992 which is typical of the controversy in all the cases.

3. Petitioner is a manufacturer and seller of urea and other complex fertilisers, which are essential commodities within the meaning of the Essential Commodities Act, 1955. The sale and distribution of fertilisers is now regulated by the Fertilizer (Control) Order, 1985 (which repealed and replaced a similar earlier order of 1957), made by the Central Government in exercise of the powers conferred on it by Section 3 of the Essential Commodities Act, 1955. Sub-clause (1) of Clause 3 which is in Part II relating to price control, authorises the Central Government to fix the maximum prices or rates at which any fertiliser may be sold by a dealer, manufacturer or a pool handling agency, by notification in the official gazette, with a view to regulate the equitable distribution of fertilisers and making fertilisers available at fair prices. Sub-clause (2) authorises the Central Government to fix different prices or rates for fertilisers having different periods of storage or for different areas or different classes of consumers, having regard to the local conditions of any area, the period of storage of fertilisers and other relevant circumstances. Sub-clause (3) prohibits the dealer, manufacturer or pool handling agency from selling or offering for sale any fertilisers at a price exceeding the maximum price or rate fixed under this clause. Petitioners are governed by this order and their sale of fertilisers is accordingly pegged to the maximum price fixed by the Central Government by notification issued in the gazette.

4. The operation of this order and the pegging down of the prices thereunder was likely to render some units sick or without adequate return on the investment. Therefore, pursuant to the recommendations of a committee constituted under the Chairmanship of Sri S.S. Marathe, Chairman of the Bureau of Industrial Cost and Prices, the Government of India introduced a scheme of retention prices for units in the nitrogenous fertiliser industry with effect from November 1, 1977. This scheme, as mentioned earlier, was introduced with a view to ensure a reasonable return on investment, and to facilitate the healthy development and growth of the fertiliser industry. The scheme was to be administered by the Fertiliser Industry Co-ordination Committee to be set up for the purpose, and the Committee was to operate a Fertiliser Price Fund Account, the purpose of which is explained in a letter D.O. No. l66/21/77-FA(A) dated October 24, 1977, addressed by the Government of India to the various fertiliser units. A substantial contribution was made from Government revenues for the purposes of the scheme. The scheme provided for an ex-factory retention price per tonne of fertiliser, net of excise duty and Fertiliser Pool Equalisation Charge (FPEC), and exclusive of the approved dealers margin and equated freight, for each plant, based on a capacity utilisation of 80 per cent and a combination of norms and actuals in regard to consumption efficiencies and maintenance and other costs, and providing for a post tax return of 12 per cent of net worth. This was to be known as "retention price". A standard ex-factory realisation, also net of excise duty and FPEC and exclusive of the dealers margin and equated freight for the industry as a whole was also to be fixed from time to time. This was referred to as the "transfer price". The scheme was to be so operated as to ensure that all units receive the transfer price either through adjustment of the excise duty and FPEC or through alternative means. The units whose retention price as fixed under the scheme was lower than the transfer price were required to credit the difference to the Fund Account. The amount will be calculated on the quantities of fertiliser cleared through excise in any given month from November 1, 1977. At the same time, units whose retention price under the scheme was higher than the transfer price will receive the difference from the Fund Account on the monthly submission of claims supported by excise clearance certificates. It was the amount so received from the Fund Account, constituted and administered by the Central Government, which was in the nature of a subsidy paid to the petitioners, that was brought to tax under the KGST Act as part of their taxable turnover of the fertilisers.

5. The petitioners objected to the inclusion of the amount in their taxable turnover pointing out, inter alia, that the Andhra Pradesh High Court had decided that the amount received, which was subsidy, was not taxable. But the objections did not find favour with the assessing authority who completed the assessments levying tax on the amount of subsidy as well. Petitioners challenge the assessments on the ground that the amount of subsidy cannot form part of their taxable turnover.

6. The facts in the other cases are similar, excepting that the exhibit numbers differ.

7. Petitioners have supported their submissions with reference to the decision of the Andhra Pradesh High Court [Yogeshwar Dayal, C.J. (as he then was) and Upendralal Waghray, J.] in Fertiliser Corporation of India Ltd. v. Commercial Tax Officer [1991] 83 STC 129 SC rendered under the provisions of the Andhra Pradesh General Sales Tax Act, 1957, which was applied to, and followed in, a case under the Central Sales Tax Act, 1956, in Coromandel Fertilisers Ltd. Vs. The Commercial Tax Officer (OFA), Punjagutta Division, Hyderabad., In the first of these cases, the Andhra Pradesh High Court referred to the definition of "turnover" in the Andhra Pradesh General Sales Tax Act, 1957, as it stood before and after the amendment of 1985, and observed that the assessees had not received any amount from the purchaser, or on his behalf, in connection with any sale transaction, that the amount received by way of subsidy from the Central Government under the scheme was in the larger interest of the industry as a whole, that it had no relation to any single sale transaction, and was determined on the basis of the several factors mentioned in the Central Governments letter dated October 24, 1977. In the circumstances the court held that the subsidy received cannot be treated as part of the taxable turnover of the assessees as defined in the Andhra Pradesh Act. Counsel for the petitioners reiterates this submission which found acceptance with the Andhra Pradesh High Court. On the other hand, learned Government Pleader Sri S. Vijayan Nair for the respondents, made a very serious attempt to confine the decision of the Andhra Pradesh High Court to the particular definition of "turnover" in the Andhra Pradesh Act as indicating the total amount set out in the bill of sale. But this submission omitted to take note of the fact that the decision was followed in the subsequent case of Coromandel Fertilisers Ltd. Vs. The Commercial Tax Officer (OFA), Punjagutta Division, Hyderabad., which arose under the Central Sales Tax Act in which the definition concerned was of "sale price" namely, the amount payable to the dealer as consideration for the sale of goods, and of "turnover" which meant the aggregate of the sale prices received. The distinction drawn by the learned Government Pleader does not therefore really affect the applicability of the decisions of the Andhra Pradesh High Court. They are directly in point and cover the cases in favour of the petitioners. I am in agreement with these decisions. I shall however consider the matter independently, having regard to the strenuous efforts which the learned Government Pleader has made to salvage the assessments.

8. What is given to the petitioners is subsidy from out of the Fertiliser Price Fund Account constituted by the Central Government to which substantial contribution had been made from Government revenues and which was augmented by contributions made by units whose retention prices were lower than the transfer price fixed under the scheme formulated by the Government of India. The purpose of the scheme was to come to the aid of those units which were affected by the fixation of maximum price under the Fertilizer (Control) Order and to ensure a fair return to them. The amount is payable in cases where the transfer price fixed for a particular unit is less than the retention price fixed under the scheme for that unit with reference to various factors like capacity utilisation, efficiency, etc. The payment is made for the purpose of ensuring a reasonable return on the investment, facilitating the healthy development and growth of the fertiliser industry. It is not paid as consideration for any sale of fertiliser effected by a particular unit.

9. Subsidy is a well-known term in the field of administration and economics. Chambers Twentieth Century Dictionary defines subsidy, inter alia, as a grant of public money in aid of some enterprise, industry, etc., or to keep down the price of a commodity. Websters New World Dictionary, inter alia, defines subsidy as a Government grant to a private enterprise, considered of benefit to the public. The Lexicon Webster Dictionary gives the meaning of the term as a sum of money granted by Government to an organisation, institution or industry, especially one benefiting the health and welfare of the country, as a charity or public service. Funk and Wagnal give the meaning of the term as a pecuniary aid directly granted by Government to an individual or commercial enterprise deemed productive of public benefit. Black in his Law Dictionary defines it as a grant of money made by Government in aid of the promoters of any enterprise which is considered a proper subject of Government aid because such purpose is likely to be of benefit to the public. Encyclopaedia Britannica, Volume 17, page 753 contains a detailed discussion on subsidies and it is stated that subsidies are implemented through a variety of financial techniques, such as (1) direct payments in cash and kind, (2) governmental provision of goods or services at prices below the normal market price, (3) governmental purchase of goods or services at prices in excess of the market price and (4) tax concessions and similar inducements.

10. The uniform strand of meaning which runs through all these definitions of subsidy is that it is a grant made by the Government to an enterprise, inter alia, for the good or benefit of the public. One of its objects is the keeping down of prices of commodities. Benefit to the public is eventually the motivating factor for the grant of the subsidy. The question is whether such a grant could be treated as part of the price paid for the sale of products and can therefore form part of the turnover of the dealer liable to be taxed as such in his hands.

11. Sale is a bilateral transaction which stems out of a contract between the seller and the purchaser. An essential ingredient of a sale is "price". Fixation of the price is a matter of agreement between the parties. Sub-section (1) of Section 9 of the Sale of Goods Act, 1932, provides that the price in a contract of sale may be fixed by the contract, or may be left to be fixed in manner thereby agreed, or may be determined by the course of dealing between the parties. In cases where the price is not determined in accordance with these provisions, the buyer shall pay the seller a reasonable price. Therefore, price is an essential element of a contract of sale and is ordinarily a matter of agreement between the parties. What the purchaser of the fertiliser bargains when he purchases fertiliser from the petitioners is to obtain a certain quantity of fertilisers at a certain price which shall not exceed the price fixed by the Central Government by notification under the Fertilizer (Control) Order. The sale is not conditional on the Central Government paying any amount by way of subsidy. There is no agreement between the parties for any further amount to be paid, than what is paid by the purchaser at the time of the sale. "Turnover" is defined in Section 2(xxvii) of the KGST Act as meaning the aggregate price for which goods are either bought or sold, supplied or distributed by a dealer. "Sale" is defined in Section 2(xxi) as meaning every transfer, whether in pursuance of a contract or not, of the property in goods by one person to another in the course of trade or business for cash or for deferred payment or for other valuable consideration. The essential contract between the parties, namely, the seller and the purchaser of fertilisers, is only for payment of the price subject to the maximum fixed by the Central Government and not for any other. This being the contract, any other sum received by the seller-petitioners for a different purpose and not as consideration for the sale, is not part of the sale price, and therefore of their turnover. The fact that the amount of subsidy is determined with reference to the quantum of fertilisers cleared from the factory on which considerable stress was made by the Government Pleader, does not lead to any inference that the payment is made in consideration of the sale. The retention price and the transfer price are fixed with reference to various factors. The subsidy is paid for the benefit of the public, to keep the prices at a reasonable level, and at the same time to ensure a reasonable return on investment to the units, and not as consideration for the sales effected by them. I am therefore of the view that the amount of subsidy received by the petitioners for the purpose of their units, which is not related to any particular transaction of sale, but is related to other circumstances, cannot constitute turnover in their hands assessable under the KGST Act.

12. I am therefore in agreement with the view taken by the Andhra Pradesh High Court in the two decisions referred to earlier. The decision in State of Andhra Pradesh Vs. Ranka Cables Pvt. Ltd., (Jeevan Reddy and Bhaskar Rao, JJ.) also supports this view. In that case, excise duty charged in the bills, but deducted from the amount to be collected from the purchasers, in view of the reimbursement thereof under the Supplementary Cash Assistance Scheme of the Central Government, was held not part of the taxable turnover under the Central Sales Tax Act, 1956. The ratio of that decision must apply on all fours to these cases as well.

13. The assessments in question in so far as they impose tax on the amount of subsidy arc therefore illegal and unsustainable. The writ petitions have to be allowed. I do so. I quash exhibit P4 in O.P. Nos. 14991. 15020 and 15021 of 1992, exhibit P3 in O.P. Nos. 6743 and 6744 of 1993, exhibits P1 to P3 in O.P. No. 16931 of 1992 and exhibits PI, P4 and P7 in O.P. No. 3430 of 1994 to the extent tax is levied on the amount of subsidy. The assessments in O.P. Nos. 16931 of 1992 and 3430 of 1994 have been taken up in appeal u/s 34 of the KGST Act. Since I have dealt with the question in common with the other writ petitions, I do not think it necessary to relegate the parties to the appellate remedy inasmuch as I have held that the amount of subsidy is not part of the taxable turnover of the petitioners. The only other direction required in these two cases is to the Appellate Assistant Commissioners concerned to dispose of the appeals dealing with any other points that are raised therein in accordance with law. There will be no order as to costs.