Turnover-based tax exemption classification upheld where selective exemption had a rational nexus and was not arbitrary.

A turnover-based exemption scheme under a taxing statute was held valid where the State had a rational basis for differentiating between dealers. Selective sales tax exemption for the Khadi Ashram, Panipat and its centralised units was upheld because their special features, combined with turnover thresholds applied to other co-operative societies, were not palpably arbitrary. The classification was found to have a sufficient nexus with the object of the exemption, and the Article 14 challenge failed.

---

---

Issues: Whether the notification granting full sales tax exemption to the Khadi Ashram, Panipat and its centralised units, while limiting exemption to other co-operative societies by reference to turnover, was discriminatory and violative of Article 14.

Analysis: In a taxing statute, classification is valid if it is not palpably arbitrary and if there is a rational basis for treating different dealers differently. The State may extend exemption selectively under Section 13 of the Haryana General Sales Tax Act, 1973, and the distinction based on turnover, together with the special features of the Khadi Ashram, Panipat and its units, furnished a sufficient basis for separate treatment. The challenge to the classification was also weakened by the absence of any challenge from other khadi units.

Conclusion: The classification was upheld as valid and non-discriminatory. The challenge under Article 14 failed.

Ratio Decidendi: A turnover-based classification in a taxing statute is permissible if it has a rational nexus with the object of the exemption and is not palpably arbitrary.

---