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TMI Blog1988 (9) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... cing units also. For all these reasons we hold that section 41 of the Bombay Sales Tax Act is not violative of articles 14, 19 and 21 of the Constitution as alleged by the petitioner. - Writ Petition No. 1521 of 1987 - - - Dated:- 19-9-1988 - SEN A.P. AND NATARAJAN S. JJ. V.S. Desai, Senior Advocate (A.S. Bhasme and A.M. Khanwilkar, Advocates, with him), for the respondents. Anil Dev Singh and G.L. Sanghi, Senior Advocates (Serva Mitter, Miss Vrinda Grover and T.V.S.N. Chari, Advocates, with them), for the petitioners. -------------------------------------------------- The judgment of the Court was delivered by S. NATARAJAN, J. -Writ Petition No. 1521 of 1987 has been filed under article 32 of the Constitution of India to challenge the constitutional validity of section 41 of the Bombay Sales Tax Act (hereinafter referred to as "the Act") on the ground it confers arbitrary powers of exemption on the State Government so as to exempt all types of new units from the payment of purchase tax, sales tax and Central sales tax under the Package Scheme of Incentives, 1979. On notice being issued in the writ petition, the respondent, State of Maharashtra, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f six months for any change or modification in the scheme, the modified scheme dated 5th July, 1982, was proposed to be brought into force in respect of small-scale units with effect from 10th January, 1983. The Government, however, noticed that during the intervening period of notice, a number of small-scale units, particularly the oil units, tried to take advantage of the unlimited incentives to the disadvantage of the existing units and also caused loss to the public exchequer in respect of the revenue from sales tax. The small-scale units also sought to take advantage of the decision of the Bombay High Court in Tapti Oil Industries v. State of Maharashtra [1984] 56 STC 193 (FB) by claiming benefit of tax exemption without any limit, thereby causing a continuing loss to the Revenue. The Government, therefore, considered it would not be expedient in the public interest to continue the concession and, that suitable provision must immediately be made in the Act so as to limit the benefit of the exemption from payment of sales tax under the Package Incentives Scheme to the extent of 100 per cent of the gross fixed capital investments of the eligible units as approved at the time o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to claim any benefit of exemption from payment of any tax beyond the period covered by the eligibility certificate and the provisions of sub-section (2) regarding surrender of the certificate of entitlement together with the unused form BC shall mutatis mutandis apply to such registered dealer." The Ordinance came to be replaced by the Amendment Act, 1985. Under the Amending Act the Government made certain modifications and directed that the withdrawal of the tax exemption benefit will stand confined to the edible oil units only. Section 41A, as introduced in the main Act by the Amending Act No. 15 of 1985 reads as follows: "41A. Notwithstanding anything contained in this Act or in any judgment, decree or order of any court or tribunal to the contrary, on and after the date of commencement of the Bombay Sales Tax (Amendment) Act, 1985 (hereinafter in this section referred to as 'the commencement date'), the eligibility certificate granted to any registered dealer of an edible oil unit in accordance with the provisions of any Package Scheme of Incentives shall cease to have any effect in relation to the exemption from payment of tax under this Act or under the Central Sales Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranted under the Package Scheme of Incentives, 1979, to all small-scale units newly started stood withdrawn only in so far as edible oil units are concerned, and not to small-scale units engaged in producing non-edible oils. By a trade circular No. DED 1485/259/ADM-3 dated October 15, 1986, it was clarified that an edible oil unit under the Act 15 of 1985 would mean a unit engaged in (i) delinting, decorticating or processing of groundnuts or other oil- seeds; (ii) crushing of groundnuts or other oil-seeds and manufacture of edible oil; (iii) refining of edible oil; or (iv) hydrogenation of edible oil. It was also clarified that the Act would not be applicable to "units producing and selling non-edible oils" and that units manufacturing and selling "washed cotton seed oil", "soyabean raw oil (Grade I)" and "unrefined sunflower cake oil" would not fall under the category of units manufacturing edible oil and as such those units will be entitled to avail of the tax benefits even after August 1, 1985, provided that the eligibility certificate specifically made mention of the particular oil as the finished product produced and sold by the concerned eligible unit. The trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision only to the units engaged in producing edible oils and has allowed the other eligible units to continue to have the unfair advantage of tax exemption benefit. The second argument was that washed cotton seed oil is also an item of edible oil although it required some processing for making it fit for human consumption and, therefore, the new units which were engaged in producing washed cotton seed oil should also be classified as units producing edible oils so that those new. units, should also pay purchase tax and sales tax in the same manner the petitioner was paying. By way of extension to the second contention it was pointed out that while the old units had to pay purchase tax, sales tax, turnover tax, etc., totalling Rs. 1,650 per metric tonne, the new units producing the same washed cotton seed oil got away scot-free without paying any tax and they stood placed in a very advantageous position. On an examination of the contentions we find that neither of them has any merit. Section 41 has been in the statute book ever since the Act was enacted. It has been provided in order to enable the State Government to grant exemption from payment of purchase tax and sales ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to occasion sufficient foothold in an established industry. I further submit that this classification is reasonable in all respects and is not at all arbitrary as established units have several advantages over new units inasmuch as the overhead assets are less and hence no fundamental right is infringed in any manner of the old units." It cannot, therefore, be contended that the old units should also have been granted the same benefit as new units since both the units are engaged in the manufacture of the same type of products. In fact such a policy, if followed by the Government, would not only fail to provide incentive to the new industries but would also place the new units at a comparative disadvantage in being made to face stiff competition with older units which have been established at lesser cost and which have stabilised themselves in the field by successfully running the units for a number of years. The words in section 41 "exempt any specified class of sales or purchases" could well be construed as applying to the grant of exemption to the new units because the sales and purchases effected by new entrants would constitute a specified class by themselves in contradisti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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