Conditional sales tax exemption on turnover-linked fees upheld as a valid exercise of statutory power

A conditional exemption under the U.P. Sales Tax Act was treated as valid where it applied only to specified dealers who obtained exemption certificates on payment of fees linked to turnover. The scheme was held to fall within the Government's power to exempt sales by specified dealers and to prescribe fees in lieu of tax, because the fee operated as capitalised tax rather than a mere administrative charge. The notification did not create a general exemption for all dealers in foodgrains; a dealer could either accept the conditional benefit or remain governed by the general charging provision. The challenge therefore failed.

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Issues: Whether the notification issued under section 4 of the U.P. Sales Tax Act, granting exemption from sales tax on foodgrains only to dealers who obtained exemption certificates on payment of fees linked to turnover, was valid and within the power conferred on the State Government.

Analysis: The notification did not grant a general exemption from tax on foodgrains to all dealers. It operated only in favour of dealers who satisfied the prescribed conditions and obtained exemption certificates. That scheme fell within section 4(b) of the U.P. Sales Tax Act, which empowered the Government to exempt sales by specified dealers and to prescribe fees in lieu of tax. The prescribed fees were treated as capitalised tax rather than mere certificate charges, and the turnover-based scale adopted in the notification was consistent with the statutory object. The dealer was free either to accept the benefit of the notification by paying the prescribed amount or to remain outside it and be governed by section 3.

Conclusion: The notification was held to be valid and within the competence of the Government, and the challenge to it failed.

Final Conclusion: The writ petition was dismissed because the impugned notification was a lawful exercise of the State Government's power to grant conditional exemption on prescribed terms.

Ratio Decidendi: A conditional exemption scheme that applies only to specified dealers and authorises fees in lieu of tax under the enabling provision is valid if it remains within the statutory power and does not amount to a general exemption beyond the Act.

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