Permissible tax classification upheld where deletion of a manufacturing exemption did not breach equality or trade rights.

Deletion of a sales tax exemption for goods purchased for use in manufacture or production of taxable goods was upheld as a permissible revenue measure. The Court held that the affected goods were not similarly situated for Article 14 purposes, and that the equality guarantee targets discrimination between persons rather than mere distinctions between articles. It further held that the increased tax burden did not amount to an unreasonable restriction on the right to carry on trade under Article 19(1)(f), because the choice of taxable goods remained a matter of legislative policy within competence. The constitutional challenge therefore failed and the amendment was sustained.

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Issues: (i) Whether the deletion of the exemption for goods purchased for use in manufacture or production of taxable goods violated Article 14 of the Constitution of India; (ii) Whether the amendment and its effect on the petitioner's liability offended Article 19(1)(f) of the Constitution of India.

Issue (i): Whether the deletion of the exemption for goods purchased for use in manufacture or production of taxable goods violated Article 14 of the Constitution of India.

Analysis: The amendment was part of a revenue-raising sales tax scheme, and the Legislature was entitled to select the articles to be taxed. The Court held that goods supplied under contracts and goods manufactured and sold by the petitioner were not similarly situated for the purpose of the exemption, and the prohibition against discrimination is directed to persons and not to articles. The classification was therefore based on a permissible legislative choice and not on arbitrary differentiation.

Conclusion: The amendment did not violate Article 14 and was valid against the petitioner.

Issue (ii): Whether the amendment and its effect on the petitioner's liability offended Article 19(1)(f) of the Constitution of India.

Analysis: The increased tax burden on raw materials used in manufacture was not shown to be an unreasonable restriction on the petitioner's right to carry on trade. The Court treated the choice of taxable goods as a matter of policy within legislative competence and declined to interfere merely because the petitioner might face competitive disadvantage.

Conclusion: The amendment did not infringe Article 19(1)(f) and was valid against the petitioner.

Final Conclusion: The constitutional challenge failed, and the tax exemption amendment was upheld.

Ratio Decidendi: A taxing amendment does not offend equality merely because it differentiates between classes of goods or uses, so long as the classification is based on a permissible legislative policy and the goods or persons compared are not similarly situated.

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