2024 (11) TMI 1206 - HC - GST

Vehicle Purchase in UP: Local Tax Exemption Rule Validated as Legally Permissible Economic Policy Measure

M/s Batra Henlay Cables Versus State of U.P. and 2 Others

M/s Batra Henlay Cables Versus State of U.P. and 2 Others - 2024:AHC:177401 - DB Issues:1. Validity of exemption notification imposing condition on vehicle purchase location for tax exemption.Analysis:The petitioner filed a writ petition challenging an exemption notification dated 02.03.2023, which required vehicles to be purchased in the State of Uttar Pradesh to qualify for tax exemption. The petitioner argued that this condition was contrary to the U.P. Motor Vehicle Taxation Act, 1997, as road tax is levied for operating vehicles within the state, not based on the purchase location. The petitioner sought to quash the condition as it was unfair to those who purchased vehicles from outside the state and were denied the exemption. The government contended that the condition was valid as it ensured revenue for the state through GST on in-state vehicle purchases.The court examined Section-3 of the Act, which grants the State Government the power to exempt vehicles from tax subject to specified conditions. The notification in question provided 100% tax exemption for vehicles purchased and registered in Uttar Pradesh. The court noted that the Act did not limit the state's power to impose conditions for granting exemptions. Therefore, the condition regarding the purchase location of the vehicle was deemed valid by the court.The court rejected the petitioner's argument that the condition based on the purchase location was unreasonable. It agreed with the government's stance that in-state vehicle purchases generated revenue for the state through GST, unlike purchases from outside the state. The court held that the state was justified in imposing the condition to ensure revenue retention. Ultimately, the court dismissed the petition, finding no grounds for interference in the matter.