1983 (7) TMI 296 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutionality of Section 5CC of the Rajasthan Sales Tax Act, 1954.
2. Alleged violation of Article 14 of the Constitution.
3. Rational basis for the classification of industries based on the date of commissioning.

Issue-wise Detailed Analysis:

1. Constitutionality of Section 5CC of the Rajasthan Sales Tax Act, 1954:
The petitioner challenged the constitutionality of Section 5CC, arguing that it was discriminatory and violated Article 14 of the Constitution. Section 5CC, introduced by the Amending Act No. 5 of 1970, provided tax remission on raw materials for industries commissioned on or after March 1, 1970, but before March 31, 1974. The petitioner contended that this classification was arbitrary and lacked a rational basis.

2. Alleged violation of Article 14 of the Constitution:
The petitioner argued that the fixation of March 1, 1970, as the starting point for the benefit under Section 5CC was arbitrary and discriminatory. The petitioner cited several Supreme Court cases, including D.R. Nim v. Union of India, Union of India v. Parameswaran Match Works, Jaila Singh v. State of Rajasthan, and D.S. Nakara v. Union of India, to support the claim that the classification based on an arbitrary date was unconstitutional. The petitioner asserted that there was no rational object behind fixing this date, and it created an unjust distinction between old and new industries.

3. Rational basis for the classification of industries based on the date of commissioning:
The State Government defended the classification, arguing that Section 5CC was introduced to encourage the establishment of new industries in Rajasthan. The legislative intent was to provide incentives for new industrial units, and the date of March 1, 1970, was chosen because the legislative policy was formulated around that time. The State Government issued a notification on July 1, 1970, treating all new industrial units as notified industries for the purpose of Section 5CC.

The court examined the object of Section 5CC, which was to promote industrialization by providing tax concessions to new industries. The court noted that Article 14 permits reasonable classification for legislative purposes, provided it meets two conditions: (1) the classification must be based on an intelligible differentia, and (2) the differentia must have a rational relation to the object sought to be achieved.

The court found that the classification made by Section 5CC was reasonable and had a direct nexus with the legislative intent of encouraging new industrial undertakings. The court cited the Supreme Court's decision in D.G. Gouse and Co. (Agents) Pvt. Ltd. v. State of Kerala, where the historical background justified the chosen date for tax imposition. Similarly, the court found ample justification for the date fixed in Section 5CC, as it was aligned with the State's policy to boost industrial growth and provide employment opportunities.

The court concluded that the provisions of Section 5CC were not violative of Article 14, as they were neither arbitrary nor discriminatory. The tax concession was intended to support new industries during their infancy and was available for a limited period. The classification between old and new industries was reasonable and related to the object of encouraging industrialization.

Conclusion:
The writ petition was dismissed, and the court upheld the constitutionality of Section 5CC of the Rajasthan Sales Tax Act, 1954. The parties were left to bear their own costs.