Article 14 classification in taxing law fails where works-contract goods are singled out without rational nexus to the statute's object.

The amendment to section 5 of the Assam Entry Tax Act, 2001 was held to create an arbitrary classification by denying exemption from local sales tax only to goods used in works contracts, although deemed sales under section 2(33) of the Assam General Sales Tax Act, 1993 stand on the same footing as actual sales for tax purposes. Because the Act's object remained prevention of evasion of local sales tax, the exclusion of works-contract transactions had no rational nexus with that object and violated article 14. The amendment was struck down, and exemption was held available to the extent entry tax had already been paid.

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Issues: Whether the amendment to section 5 of the Assam Entry Tax Act, 2001, excluding transactions covered by clause (ii) of section 2(33) of the Assam General Sales Tax Act, 1993, from the exemption from local sales tax, is discriminatory and violative of article 14 of the Constitution of India.

Analysis: The scheme of the Assam Entry Tax Act, 2001 was to levy entry tax on goods entering a local area and to prevent evasion of local sales tax. By virtue of article 366(29A) of the Constitution of India and the amended definition of sale in section 2(33) of the Assam General Sales Tax Act, 1993, transfer of property in goods involved in execution of a works contract is a deemed sale and stands on the same footing as an actual sale for tax purposes. The unamended section 5 of the Assam Entry Tax Act, 2001 granted reduction of tax liability where entry tax had already been paid and the importer became liable to pay sales tax on the same goods. The amendment introduced by the Assam Entry Tax (Second) Amendment Act, 2002 singled out goods used in works contracts and denied the benefit of exemption to that class alone, although both actual sales and deemed sales fall within the same genre for the purposes of the enactment. A taxing statute may classify, but the classification must rest on an intelligible differentia having a rational nexus with the object of the law. Here, the object of the Act remained prevention of evasion of local sales tax, yet the amended provision imposed an additional burden on importers using goods in works contracts even after entry tax had been paid. The classification was therefore found to be arbitrary and unrelated to the legislative object.

Conclusion: The amendment to section 5 was held unconstitutional and was struck down. The petitioners were held entitled to exemption from local sales tax on goods imported for use in works contracts to the extent entry tax had been paid.

Ratio Decidendi: A statutory classification in a taxing law is invalid under article 14 if it excludes persons who are similarly situated in relation to the object of the enactment and the differentia has no rational nexus with that object.

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