1996 (4) TMI 465 - HC - VAT and Sales Tax

Issues Involved
1. Validity of the impugned notification dated May 21, 1994.
2. Interpretation and application of Section 4-B of the Uttar Pradesh Trade Tax Act, 1948.
3. Classification of manufacturers and goods under the impugned notification.
4. Requirement of notifying goods under Section 4-B.
5. Reasonableness and arbitrariness of the impugned notification.
6. Impact of the impugned notification on previous notifications.
7. Claim of exemption as a matter of right.

Detailed Analysis

1. Validity of the Impugned Notification Dated May 21, 1994
The petitioners challenged the impugned notification on various grounds, including its ultra vires nature and arbitrary classification. The court upheld the validity of the notification, stating that it was issued to rationalize the tax structure and eliminate confusion among dealers. The notification was found to be intra vires of Section 4-B of the Uttar Pradesh Trade Tax Act, 1948.

2. Interpretation and Application of Section 4-B
Section 4-B provides for special reliefs to certain manufacturers, allowing the State Government to grant exemptions or concessional rates of tax through notifications. The court emphasized that the power to grant relief under Section 4-B is broad and can encompass any goods required for manufacturing. The heading "special reliefs to certain manufacturers" does not restrict the relief to a few manufacturers but to ascertainable manufacturers.

3. Classification of Manufacturers and Goods Under the Impugned Notification
The petitioners argued that the impugned notification's classification of all manufacturers and raw materials into one class was arbitrary. The court rejected this argument, stating that the notification's residuary nature was valid. The notification excluded distilleries and breweries, thereby implicitly notifying all other goods. The court noted that residuary notifications had been issued in the past and were valid.

4. Requirement of Notifying Goods Under Section 4-B
The petitioners contended that the impugned notification was invalid as it did not specify the goods for which raw materials were required. The court held that the notification's residuary nature effectively notified all goods except those manufactured by distilleries and breweries. The requirement of notifying goods was fulfilled in a broad sense, making the notification valid.

5. Reasonableness and Arbitrariness of the Impugned Notification
The petitioners claimed that the impugned notification was unreasonable and arbitrary. The court disagreed, stating that the notification aimed to rationalize the tax structure and reduce litigation. The court highlighted that the notification created a uniform tax rate of 2%, benefiting some manufacturers while imposing a new liability on others. The court found the notification reasonable and consistent with Article 14 of the Constitution.

6. Impact of the Impugned Notification on Previous Notifications
The petitioners argued that the impugned notification only affected those under Annexure III of the previous notification dated August 29, 1987. The court clarified that the impugned notification superseded the previous notification in its entirety. The intention behind the impugned notification was to create a new tax liability and rationalize the tax structure, not to confer benefits.

7. Claim of Exemption as a Matter of Right
The court reiterated that exemption cannot be claimed as a matter of right. Exemption implies that the goods are taxable, and it can only be claimed when granted. The petitioners had no grievance if the exemption was withdrawn or if purchases of paddy were subjected to tax. The court emphasized that the power to grant exemption was exercised within the scope of Section 4-B.

Conclusion
The court dismissed the petition, upholding the validity of the impugned notification. The court found that the notification was issued to rationalize the tax structure, was not arbitrary, and was consistent with the provisions of Section 4-B. The petitioners' arguments were rejected, and the impugned notification was deemed valid. The parties were ordered to bear their own costs.

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