Tax exemption discretion is not unconstitutional absent arbitrariness or hostile discrimination in treatment of comparable goods.

Section 4 of the U.P. Sales Tax Act, which empowered the Government to exempt goods from sales tax, was examined against Articles 14 and 19 and was not treated as an unguided or arbitrary delegation. The exemption power was described as a legitimate taxing discretion, and the record did not show hostile discrimination against competing goods in the same trade. The claim that sales tax on khandsari sugar was discriminatory because some other articles were exempted also failed, since those articles were not shown to stand on the same footing. The levy on khandsari sugar was therefore upheld.

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Issues: (i) Whether the power under section 4 of the U.P. Sales Tax Act to exempt goods from sales tax was unconstitutional as an unguided and arbitrary power offending Articles 14 and 19 of the Constitution. (ii) Whether the levy of sales tax on khandsari sugar, while certain other articles were exempted, amounted to improper discrimination.

Issue (i): Whether the power under section 4 of the U.P. Sales Tax Act to exempt goods from sales tax was unconstitutional as an unguided and arbitrary power offending Articles 14 and 19 of the Constitution.

Analysis: The power conferred by section 4 was a power to exempt goods from taxation, not a power imposing disability on the petitioners. The exemption power depended on diverse considerations and could legitimately be entrusted to the Government. The materials placed did not show that the exemption scheme operated against competing articles in the same trade, and the same rate of sales tax was applied to khandsari sugar and vacuum pan sugar.

Conclusion: The challenge to section 4 failed and the provision was not held unconstitutional.

Issue (ii): Whether the levy of sales tax on khandsari sugar, while certain other articles were exempted, amounted to improper discrimination.

Analysis: The exempted articles were of different kinds and were shown to have different considerations applicable to them. Even where certain similar articles such as gur, shakkar, jaggery and rab were exempted, the record did not establish that their circumstances were so similar to khandsari sugar as to make the tax levy discriminatory. A general policy of encouraging cottage industry did not require every cottage industry to be exempted from sales tax.

Conclusion: The allegation of improper discrimination was not proved.

Final Conclusion: The petition was rejected in its entirety, and the sales tax levy on khandsari sugar was upheld.

Ratio Decidendi: A taxation exemption policy does not become unconstitutional merely because the executive is given discretion to exempt certain goods, unless hostile discrimination or arbitrariness is established on the facts.

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