Tax exemption for board-financed khadi and village industries cannot be denied on an unpleaded registration objection.

The notification dated 8 March 1988 exempted sales of products manufactured in Rajasthan by khadi and village industries institutions financed by the Rajasthan Khadi and Village Industries Board or the Commission. The petitioner-society, engaged in manufacture and sale of bricks and lime, was shown to be financed by the Board and therefore fell within the notified class. The State's contention that only societies registered under the Societies Registration Act were intended to benefit was not pleaded in its reply and could not support the exclusion. The exclusion of the petitioner from the exemption was consequently unjustified and discriminatory, and the petitioner was treated as entitled to the exemption and to claim refund of tax, if paid.

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Issues: Whether the petitioner-society, being financed by the Rajasthan Khadi and Village Industries Board and engaged in manufacture and sale of bricks and lime, was wrongly excluded from the tax exemption granted by the notification dated 8 March 1988, and whether such exclusion was discriminatory and violative of Article 14.

Analysis: The notification exempted sale of products manufactured in Rajasthan by khadi and village industries institutions financed by the Board or the Commission. The record showed that the petitioner was in fact financed by the Board. The objection that only societies registered under the Societies Registration Act were intended to benefit was not pleaded in the State's reply and could not justify the exclusion. The apparent purpose of the notification was to encourage the listed industries financed by the Board or the Commission, and the petitioner fell within that class.

Conclusion: The exclusion of the petitioner from the exemption was unjustified and discriminatory. The petitioner was held entitled to the exemption under the notification dated 8 March 1988 and to seek refund of tax, if paid.

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