1987 (6) TMI 376 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to the word "exclusively" in a notification granting tax exemption for footwear made of rubber or plastic.

Analysis:
The High Court of Madhya Pradesh considered the challenge to the word "exclusively" in a notification granting tax exemption for footwear made of rubber or plastic. The notification, issued under the M.P. General Sales Tax Act, exempted sales of footwear made of rubber or plastic from tax up to a certain price for a specified period, subject to conditions. The petitioners argued that the word "exclusively" in the notification was arbitrary and contrary to the purpose of the exemption. The State Government defended the notification, stating that the grant of exemption is a policy decision and must be availed of as specified in the notification.

The Court analyzed the provisions of section 12 of the Act, which allows the State Government to grant exemptions to classes of dealers or goods. It noted that while dealers not falling within the exempted class may not claim exemption, those falling within the class can challenge conditions that discriminate between them. In this case, the exemption was granted for footwear made of rubber or plastic below a certain price, indicating a benefit for consumers. The Court emphasized that conditions or restrictions should not defeat the purpose of the exemption and must be justified.

The petitioners argued that the exemption was intended for the benefit of poor consumers, as supported by the budget speech of the Law Minister. They contended that the word "exclusively" in the notification hindered the accessibility of the exemption to the intended beneficiaries. The Court agreed, stating that the word "exclusively" had no nexus with the exemption's purpose and was arbitrary. It highlighted that the use of this word could force consumers to seek exempted footwear only from dealers exclusively selling such items, causing inconvenience and defeating the exemption's purpose.

Consequently, the High Court ruled in favor of the petitioners, quashing the word "exclusively" from the notification. It held that the word was arbitrary and did not align with the intended purpose of the exemption. The Court ordered the refund of the security amount to the petitioners and made no ruling on costs.