Optional composition scheme under trade tax law may validly limit benefits for outside-State goods and apply regular assessment to the balance.

Section 7-D of the U.P. Trade Tax Act, 1948 provides an optional composition mechanism in lieu of tax, and the scheme remains subject to State Government directions. On that basis, a clause limiting composition benefits for goods received from outside U.P. to 5 per cent of contract value was treated as a valid condition of the concession, not an illegality. The scheme could lawfully distinguish between goods within the prescribed limit and goods above it, with regular assessment applying to the balance. The circular implementing that restriction was also upheld, as a dealer was free to accept the composition scheme or opt for regular assessment.

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Issues: Whether clause (3) of the composition scheme under section 7-D of the U.P. Trade Tax Act, 1948, and the corresponding circular were invalid for restricting composition benefits in respect of goods received from outside the State of U.P. to 5 per cent of the contract value and for directing regular assessment on the balance.

Analysis: Section 7-D provides an optional composition mechanism in lieu of tax and expressly makes it subject to the directions of the State Government. The scheme was therefore a concession available only to a dealer willing to accept its terms. Since the dealer could either accept the composition scheme or proceed under regular assessment, the condition limiting composition for goods brought from outside the State could not be treated as illegal. The Court also accepted that section 7-D permits a composition arrangement for a specified class of goods, and the impugned restriction merely differentiated between goods within the stated limit and goods beyond it. In the circumstances, there was no illegality in the scheme or the circular.

Conclusion: The restriction in the composition scheme and the circular were upheld, and the challenge failed.

Ratio Decidendi: A composition scheme that is expressly made subject to Government directions and is optional in nature may validly impose class-based restrictions, and a dealer who is free to reject the scheme cannot successfully challenge such a condition on the ground that it is inconsistent with the regular method of assessment.

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