Industrial tax incentive upheld where time-bound exemption for specified units was found non-discriminatory under Article 304(a).

Sub-clauses (ii) and (iii) of the exemption notification were upheld because they formed part of a permissible industrial incentive scheme rather than discriminatory taxation. The notification continued an earlier tax relief framework for fly-ash based asbestos cement sheets and bricks after the VAT regime, and validly limited the benefit to units commencing commercial production by a specified date and to a fixed exemption period. On the facts, the distinction was between a defined class of locally established industrial units eligible for a time-bound incentive, not between imported and local goods, so it did not amount to unconstitutional discrimination under Article 304(a).

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Issues: Whether sub-clauses (ii) and (iii) of the exemption notification, which limited the benefit to units commencing commercial production by a specified date and confined the exemption up to a fixed date, were unconstitutional as discriminatory under Article 304(a) of the Constitution of India.

Analysis: The exemption was issued under the statutory power to grant tax relief in public interest. The earlier exemption regime for fly-ash based asbestos cement sheets and bricks had already been in force under the predecessor sales tax law, and the challenged notification substantially continued that incentive after the new VAT regime commenced. The distinction drawn by the notification was not between imported goods and local goods as such, but between a specified class of locally established industrial units entitled to a limited incentive package for a defined period. The governing authorities on Part XIII show that a State may grant tax concessions to promote industrial development, provided the measure does not amount to intentional discriminatory taxation against imported goods. On the facts found, the notification fell within the permissible category of industrial incentive and did not create the kind of constitutional discrimination prohibited by Article 304(a).

Conclusion: The impugned sub-clauses were upheld and held not to violate Article 304(a) of the Constitution of India.

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