Fiscal exemption cut-off dates must have rational nexus with the scheme; arbitrary classification was struck down under Article 14.

A fiscal exemption condition fixing an ownership cut-off date must have a rational nexus with the object of the notification; otherwise it creates an arbitrary classification contrary to Article 14. The Court found no satisfactory material to justify 9 November 1963 as the date on which factory ownership had to exist for concessional excise duty, and rejected reliance on an unsupported reference to an earlier notification. Clause (a) of proviso (3) was therefore struck down as ultra vires Article 14, and the exemption remained available to the affected manufacturer.

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Issues: Whether clause (a) of proviso (3) of the excise exemption notification, by fixing 9 November 1963 as the ownership cut-off date for the factory, was arbitrary and violative of Article 14, and therefore invalid.

Analysis: The exemption notification granted concessional excise duty to a class of manufacturers, but clause (a) denied the benefit to manufacturers whose factories were not owned on 9 November 1963. No satisfactory material was shown to explain the selection of that date or to connect it with the object of the notification. A cut-off date may be valid where it is linked to the purpose of the measure, but a date chosen without rational basis, and which divides an otherwise covered class into two groups without a relevant differentia, is discriminatory. The reasoning that some earlier notification may have referred to 9 November 1963 was unsupported and could not justify the classification.

Conclusion: The impugned cut-off date was held arbitrary and unconstitutional. Clause (a) of proviso (3) was struck down as ultra vires Article 14, and the exemption was held available to the respondent.

Ratio Decidendi: A fiscal exemption condition fixing a cut-off date must have a rational nexus with the object of the notification; if the date is arbitrary and creates an unreasonable classification within the benefited class, the condition is void under Article 14.

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