Sales tax exemption for small-scale footwear units upheld as a valid classification without territorial trade discrimination.

A sales tax exemption for footwear manufacturers was upheld because small-scale units formed a distinct class and the differentiation had an intelligible basis rationally connected to the object of giving tax relief to weaker producers. The challenge under Article 14 failed. The notification also did not breach Articles 301, 303 or 304 because it was not confined to Rajasthan-based manufacturers and was wide enough to cover small-scale footwear manufacturers across the country. The challenge on trade discrimination therefore failed.

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Issues: (i) Whether the notification restricting sales tax exemption on footwear up to a specified value to small-scale industries alone was discriminatory and violative of Article 14 of the Constitution of India. (ii) Whether the notification infringed Articles 301, 303 and 304 of the Constitution of India by conferring a localized trading advantage.

Issue (i): Whether the notification restricting sales tax exemption on footwear up to a specified value to small-scale industries alone was discriminatory and violative of Article 14 of the Constitution of India.

Analysis: The exemption was granted under Section 4(2) of the Rajasthan Sales Tax Act, 1954. Small-scale footwear manufacturers were treated as a separate class from large manufacturers, and the classification was held to be relevant to the object of giving tax relief to weaker units and enabling them to compete with larger producers. The differentiation was found to rest on an intelligible basis having a rational relation to the purpose of the exemption.

Conclusion: The notification was not violative of Article 14 and the challenge on discrimination failed.

Issue (ii): Whether the notification infringed Articles 301, 303 and 304 of the Constitution of India by conferring a localized trading advantage.

Analysis: The notification did not confine the exemption to manufacturers located in Rajasthan. Its terms were wide enough to cover all small-scale industries manufacturing footwear in the country. Since the benefit was not restricted by residence or location within the State, it could not be said to amount to a prohibited discrimination or an impermissible restriction on trade, commerce and intercourse.

Conclusion: The notification did not violate Articles 301, 303 or 304 of the Constitution of India and the challenge on this ground failed.

Final Conclusion: The writ petition was dismissed because the impugned exemption created a valid classification in favour of small-scale footwear manufacturers and did not amount to unconstitutional State-based discrimination.

Ratio Decidendi: A sales tax exemption framed for small-scale industries is valid if the classification is intelligible and bears a rational nexus to the object of the concession, and it does not offend the freedom of trade provisions unless it is confined to local manufacturers or otherwise creates a prohibited territorial discrimination.

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