Tax exemption conditions must match the exemption's purpose; an exclusive-dealing requirement for footwear was struck down as arbitrary.

A sales tax exemption for footwear made of rubber or plastic was found to be undermined by a condition limiting the benefit to dealers dealing exclusively in such goods. The stated legal point is that a tax exemption condition is invalid where it lacks a reasonable nexus with the object of the exemption and materially defeats the benefit intended for consumers, particularly in villages and small towns where mixed-item shops are common. The text states that this restrictive requirement was arbitrary, the exemption could not be confined in that manner, and the offending word in the notification was struck down so the exemption continued without that limitation.

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Issues: Whether the condition requiring a dealer to deal exclusively in footwear made of rubber or plastic, as contained in the exemption notification under the sales tax law, was arbitrary and liable to be struck down.

Analysis: The exemption was granted in respect of a class of goods, namely footwear made of rubber or plastic, and the object was to benefit consumers of low-priced footwear. A restriction that confined the benefit only to dealers dealing exclusively in such goods had the effect of substantially defeating that object, especially because such dealers would be sparse and the intended beneficiaries in villages and small towns would often purchase from mixed-item shops. The condition, therefore, bore no reasonable nexus with the purpose of the exemption and lacked justification. The later notification granting a wider exemption further supported the view that the restrictive condition was misplaced.

Conclusion: The condition requiring exclusive dealing in such footwear was arbitrary and was liable to be quashed.

Final Conclusion: The writ petitions were allowed and the restrictive word in the exemption notification was struck down, leaving the exemption operative without that condition.

Ratio Decidendi: A condition attached to a tax exemption notification is invalid if it has no reasonable nexus with the object of the exemption and materially defeats the benefit the exemption was intended to confer.

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