1986 (12) TMI 346 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to validity of notification exempting purchase tax on wheat from Food Corporation of India.
Alleged discrimination between purchases from Food Corporation of India and open market.
Validity of exemption under section 4-B and power of State Government to grant exemption.

Analysis:
The writ petition challenged the validity of a notification exempting purchase tax on wheat from the Food Corporation of India. The petitioner argued that the exemption discriminated between purchases from the Food Corporation of India and the open market, alleging unjustified discrimination. The notification under scrutiny exempted roller flour mills from payment of tax on wheat purchased from the Food Corporation of India only. The petitioner contended that this distinction was arbitrary and hostile. However, the court found no substance in the petitioner's submission, emphasizing that the exemption was granted based on the conditions specified in the notification issued under section 4-B. The court highlighted that the notification treated all parties equally in terms of exemption if they purchased from the Food Corporation of India, while those purchasing from other sources were not entitled to the benefit.

The court discussed the nature of exemptions under section 4-B, stating that it was enacted to confer benefits on new industries, irrespective of the source of purchase. The court emphasized that the power to grant, modify, or withdraw tax exemptions was a form of subordinate legislation, and its validity could not be tested based on administrative action standards. Referring to a Supreme Court decision, the court clarified that the power to impose taxes was a legislative function, and courts could not direct the government to grant or withdraw exemptions unless specifically empowered by law. The court held that it lacked the authority to mandate the State Government to exempt purchase tax on wheat bought from the open market.

The court rejected the petitioner's argument that the exemption clause should be struck down due to unjustified distinctions between types of purchases. Citing a Supreme Court case, the court emphasized that the discretion of the State Government to issue exemptions must be exercised according to law and relevant considerations. The court noted that the intention behind the exemption was to make wheat products available at competitive rates and aid industry development. Given the changed circumstances where wheat could be procured from the open market, extending the exemption to open market purchases was deemed unnecessary. The court concluded that the petitioner's claim of arbitrariness lacked merit, as the exemption aimed to serve legitimate purposes.

Additionally, the court referenced previous cases to highlight the special treatment accorded to cooperative societies in certain matters. It was noted that the notification exempting purchase tax on wheat from the Food Corporation of India was justified considering the intention to boost wheat sales held by the Food Corporation of India. The court affirmed that the principle of equality did not restrict the State's authority to classify individuals for legitimate purposes. Despite the petitioner citing various decisions, the court found them irrelevant to the case at hand and dismissed the writ petition, lifting any interim stay order in place.