1996 (9) TMI 569 - HC - VAT and Sales Tax

Summary

Issues: Challenge to the validity of clauses (iv)(a) and (iv)(b) added by an amending notification, discrimination in granting tax benefits to industries based on district categorization.

Analysis:
1. The petitioners challenged the validity of clauses (iv)(a) and (iv)(b) added by an amending notification, claiming discrimination in the grant of tax benefits to industries. The petitioner, a food processing unit in a backward district, argued that while advanced districts received tax exemptions for 11 years, their industry in a backward district only received a 7-year exemption. The petitioners contended that the inclusion of food processing units in the advanced districts under the amended notification resulted in discriminatory treatment.

2. The State Government defended its decision, stating that the tax concessions for 11 years were extended to industries in advanced districts, including food processing units, due to policy measures aimed at promoting industrial growth in those areas. The Government clarified that the criteria for granting the 11-year tax exemption was based on the industry's location in advanced districts, and industries in backward districts, like the petitioner's unit in a category C district, did not qualify for the extended benefit.

3. The Court held that the differentiation in tax benefits based on district categorization was not discriminatory. The Court emphasized that the policy decision to grant 11-year tax exemptions to industries in advanced districts, including food processing units, was a valid exercise of discretion to promote industrial development in those regions. The Court concluded that the petitioner's industry in a backward district was not similarly situated as those in advanced districts, justifying the differential treatment in tax benefits. Therefore, the Court found no illegality in extending the benefit to industries in advanced districts and dismissed the petition, ordering any security amount to be refunded to the petitioners and no costs to be awarded.

4. In summary, the Court upheld the validity of the amended notification and the differentiation in tax benefits based on district categorization, ruling that the policy decision to grant extended tax exemptions to industries in advanced districts was not discriminatory and served the legitimate purpose of promoting industrial growth in those areas. The Court's decision highlights the importance of location-based incentives in fostering regional industrial development and upholding policy measures aimed at economic advancement.