Turnover-based sales tax concession upheld as valid fiscal classification; explanatory amendment also sustained against Article 14 challenge.

Turnover-based concessional sales tax for small-scale industrial units was upheld as a permissible fiscal classification under Article 14 because turnover is a relevant indicator of capacity and the State may confine tax incentives to a defined class. The explanatory amendment protecting units in the first year when turnover first crossed the Rs. 50 lakhs limit was also treated as valid and beneficial. Practical difficulty in predicting year-end turnover did not invalidate the notifications, and the court declined to interfere with the Government's policy choice on exemption and concession.

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Issues: Whether the notifications granting concessional sales tax to small-scale industrial units only up to a turnover of Rs. 50 lakhs, and limiting the benefit in the first year of crossing that limit, were arbitrary or violative of Article 14.

Analysis: The concessional rate was framed as a fiscal incentive under section 10 of the Kerala General Sales Tax Act, 1963, with the object of assisting small-scale industrial units. The classification based on turnover was treated as a permissible tax classification, because turnover is a relevant indicator of capacity and the State may choose to extend fiscal benefits only to a defined class. The explanation added by Notification S.R.O. No. 585 of 1996 was viewed as beneficial inasmuch as it protected units in the first year when turnover first crossed the limit. Practical difficulty in predicting year-end turnover did not render the notification invalid, and the court declined to interfere with the Government's policy choice on exemption and concession.

Conclusion: The turnover-based limit and the explanatory amendment were held to be valid and not violative of Article 14, and the appellants were not entitled to a direction extending the concessional rate beyond the terms of the notifications.

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