Constitutional challenge to sales tax exemption clause required fresh High Court review on Factories Act registration-based discrimination.

The Supreme Court noted that the High Court had examined the challenge to clause (c) of section 4-A(5) of the U.P. Sales Tax Act, 1948 mainly on alleged discrimination caused by delay in registration under the Factories Act and had read the clause as directory. It further observed that the broader contention, based on section 2(m) of the Factories Act, that units employing fewer than ten workers would not be registrable and could be excluded from exemption if benefit depended on registration date, had not been directly adjudicated. The constitutional challenge therefore required fresh consideration by the High Court on that basis.

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Issues: Whether the challenge to clause (c) of sub-section (5) of section 4-A of the U.P. Sales Tax Act, 1948, based on the language of section 2(m) of the Factories Act, 1948 and the alleged discrimination against units not registrable under the Factories Act, required fresh consideration by the High Court.

Analysis: The Court noted that the High Court had examined the provision mainly on the footing that delay in registration under the Factories Act could create discrimination, and had also read down the clause as directory. It further observed that the High Court had not squarely dealt with the broader contention that units employing fewer than ten workers would not be registrable under section 2(m) of the Factories Act and would therefore be excluded from the exemption if benefit were tied to the date of registration. Since that aspect of the challenge had not been directly adjudicated, a fresh examination by the High Court was necessary.

Conclusion: The matter was required to be remitted to the High Court for reconsideration of the constitutional challenge on the basis of section 2(m) of the Factories Act, 1948.

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