Direct use in manufacture test sustained for input tax benefit; diesel used only for electricity generation was excluded.

An exemption or input-tax benefit under a sales tax notification can validly exclude high speed diesel where the fuel is used only to generate electricity for running the factory and is not directly used in the manufacture or processing of the final goods. The classification between goods directly used in manufacture and goods not so used was treated as rational and connected to the statutory object of granting relief only for qualifying input goods. On that basis, the exclusion was found to be within the power conferred by section 15-A and not violative of Article 14.

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Issues: Whether clause (3) of the notification issued under section 15-A of the Haryana General Sales Tax Act, 1973, excluding high speed diesel from the goods used for calculating input tax, was ultra vires or violative of article 14 of the Constitution of India.

Analysis: Section 15-A empowered the State Government to prescribe the formula, conditions and restrictions for reduction or refund of tax on goods used in manufacture or processing. The impugned clause excluded high speed diesel from the class of goods used as raw material, processing material, tools, stores, spare parts, accessories, lubricants or fuel for the purpose of computing input tax. The exclusion was upheld because the diesel was used for generating electricity to run the factory and was not shown to be directly used in the manufacture or processing of the final goods. The differentiation between goods used in manufacture and goods not so used was held to be a rational classification with a nexus to the statutory object.

Conclusion: The notification was within the power conferred by section 15-A and was not discriminatory or unconstitutional.

Final Conclusion: The challenge to clause (3) of the notification failed, and the writ petition was liable to be dismissed.

Ratio Decidendi: Goods used only for generating electricity for running an do not, without more, become goods used in the manufacture or processing of the final product for the purpose of input tax benefit; a statutory classification based on direct use in manufacture is a valid one.

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