Conditional tax rebate upheld where backward-area manufacturing and State fly-ash use had a rational nexus to the scheme's object.

A fiscal rebate granted in public interest under the U.P. Trade Tax Act, 1948 was held to be a conditional concession, not a tax burden. The requirement that the dealer have a manufacturing unit in specified backward districts and use fly-ash sourced from a thermal power station in the State was upheld as a reasonable classification with a rational nexus to the scheme's object of promoting industry in backward areas and utilising State-generated fly-ash. The Article 304 challenge failed, and the demand for refund of rebate already taken was sustained.

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Issues: Whether the condition in the rebate scheme requiring the dealer to have a manufacturing unit in the specified backward districts and to use fly-ash sourced from a thermal power station in the State was discriminatory or violative of Article 304 of the Constitution of India, and whether the demand for refund of rebate already taken was sustainable.

Analysis: Section 5 of the U.P. Trade Tax Act, 1948 empowered the Government to grant tax rebate in public interest. The rebate notification did not impose a tax burden; it granted a concession subject to conditions. The classification was based on backward districts and on use of fly-ash available within the State, both of which were held to bear a rational connection with the object of promoting industrial activity in backward areas and utilising State-generated fly-ash. Article 304 was held not to prohibit such a conditional concession, and no basis was found to treat the requirement as discriminatory merely because the dealer's unit was located outside the notified districts.

Conclusion: The rebate conditions were upheld and the refund demand was sustained; the challenge failed.

Ratio Decidendi: A fiscal concession granted in public interest may validly be restricted by a reasonable classification having a rational nexus with the object of the scheme, and such a conditional rebate does not amount to a discriminatory impost under Article 304 of the Constitution of India.

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