Fiscal classification and retrospective withdrawal of exemption benefits: edible oil units' exclusion was upheld, but accrued relief could not be withdrawn.

Edible oil units were upheld as a separate class for exclusion from the section 41A exemption scheme because the legislature relied on an intelligible differentia and a rational nexus with the fiscal object, including concerns of inequity and revenue loss; the Article 14 challenge therefore failed, and the connected claims under Articles 19(1)(g), 300A and promissory estoppel could not succeed. Retrospective withdrawal of the exemption from 24 May 1985 was, however, found arbitrary to the extent it deprived edible oil units of benefits already validly enjoyed under the Ordinance, so the amendment was sustained only prospectively for that class from 1 August 1985.

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Issues: (i) Whether the exclusion of edible oil units from the exemption scheme under section 41A of the Bombay Sales Tax Act, 1959 offended Article 14 and, consequentially, Articles 19(1)(g) and 300A of the Constitution of India; (ii) Whether the provision could validly operate retrospectively so as to withdraw benefits already enjoyed under the Ordinance.

Issue (i): Whether the exclusion of edible oil units from the exemption scheme under section 41A of the Bombay Sales Tax Act, 1959 offended Article 14 and, consequentially, Articles 19(1)(g) and 300A of the Constitution of India.

Analysis: The classification of edible oil units as a separate class was upheld on the basis of the legislative materials showing that the industry was agro-based, largely rural, easily able to procure raw material, capable of recovering capital quickly, and subject to severe competition and revenue loss under the earlier unlimited exemption regime. The Court applied the settled test of reasonable classification, namely intelligible differentia and rational nexus with the object of the statute, and held that the legislature could withdraw a fiscal concession when experience showed it to be inequitable and against public interest. The challenge based on promissory estoppel was rejected insofar as it sought to control legislative action, and once the measure survived Article 14 scrutiny, the connected challenges under Articles 19(1)(g) and 300A also could not stand.

Conclusion: The exclusion of edible oil units from the exemption scheme was not unconstitutional.

Issue (ii): Whether the provision could validly operate retrospectively so as to withdraw benefits already enjoyed under the Ordinance.

Analysis: The Court held that the retrospective withdrawal of exemption from 24 May 1985, in relation to edible oil units that had lawfully enjoyed the benefit under the Ordinance until the statutory replacement, was arbitrary and unreasonable. The enactment was found severable, so the entire amending Act was not struck down; instead, the retrospective operation, to the extent it deprived such units of benefits already accrued under the Ordinance, was curtailed, and the Act was treated as operating only prospectively for that class from 1 August 1985.

Conclusion: Retrospective operation was invalid to the extent it withdrew benefits already enjoyed under the Ordinance; the provision was sustained prospectively only.

Final Conclusion: The challenge succeeded only in part: the classification-based attack failed, but the retrospective deprivation of accrued exemption benefits was not sustained, leaving the amendment operative prospectively for the affected edible oil units.

Ratio Decidendi: A fiscal classification survives Article 14 if it is founded on an intelligible differentia having a rational nexus with the legislative object, but retrospective withdrawal of a concession already validly enjoyed may be struck down as arbitrary where it destroys accrued benefit without adequate justification.

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