Discretionary tax exemption policy must match statutory purpose; blanket preference for co-operative sugar factories was impermissible.

Section 21(3) conferred a discretionary power that could be guided by general policy, but the policy had to bear a rational nexus to the statutory object of encouraging new and substantially expanded sugar factories. A blanket restriction confining purchase tax exemption only to co-operative sugar factories was held to be irrelevant to that object, because it excluded other eligible factories without individual consideration. The State was required to apply its mind to each application on its merits and could not refuse consideration through an inflexible classification. The applications were therefore to be reconsidered without relying on the impugned policy.

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Issues: Whether the Government could, while exercising its discretion under section 21(3), confine exemption from purchase tax only to co-operative sugar factories and refuse to consider other eligible factories on their individual merits.

Analysis: The power under section 21(3) was held to be discretionary, not mandatory. The Government was entitled to adopt a general policy for the exercise of that discretion, but the policy had to be relevant to the object of the provision, namely, encouraging new and substantially expanded sugar factories to increase sugar production. The exclusion of other new or expanded factories, while favouring only co-operative sugar factories, was found to have no rational nexus with that object. At the same time, the State had to apply its mind to individual applications and could not disable itself from genuine consideration by a blanket exclusion based on an irrelevant classification.

Conclusion: The policy limiting exemption to co-operative sugar factories was not a legally relevant basis for refusing to consider the applications on merits, and the applications were required to be reconsidered without relying on that policy.

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