Exemption notifications cannot create fresh tax classifications for plastic goods where the statute supplies no such definition.

An exemption notification could not be used to introduce a fresh substantive classification of plastic articles by defining them as "rigid" or "flexible" where the statute itself contained no such definition. The Bombay High Court held that the power to grant exemption does not extend to creating a new taxation classification through delegated legislation, because classification must derive from the parent statute and its ordinary or commercial meaning. The notification was therefore invalid to the extent it substituted its own classification for the legislative scheme, and the exemption remained available to the petitioners.

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Issues: Whether the exemption notification inserting a definition of "rigid" and "flexible" plastic articles was valid, or whether it amounted to an impermissible exercise of the power of classification reserved to the legislature.

Analysis: The dispute turned on whether the Central Government, while issuing an exemption notification under the rule-making power, could itself introduce a substantive norm that determined which plastic articles would fall within or outside the exemption. The Court held that the earlier position had treated the expressions "rigid" and "flexible" according to their ordinary and commercial meaning, and that the Government could not, by a notification issued for exemption, effectively reclassify the goods in a manner that altered the statutory basis of taxation. Such classification had to be found in the statute itself and not created through delegated exemption machinery.

Conclusion: The notification was invalid to the extent it sought to define and classify the goods in substitution of the legislative classification, and the petitioners were entitled to the exemption.

Final Conclusion: The challenge succeeded, the exemption was upheld in favour of the petitioners, and the impugned departmental stand could not be sustained.

Ratio Decidendi: A power to grant exemption by notification does not authorise the executive to create a fresh substantive classification for taxation where the statute itself contains no such definition.

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