The Supreme Court has clarified the position of law as to when a tax merely differentiates and not discriminates.
The Court was deciding a batch of Civil Appeals filed by the assessees against the separate Orders of the Rajasthan High Court, Jaipur Bench in three Writ Petitions.
The two-Judge Bench comprising Justice B.V. Nagarathna and Justice K.V. Viswanathan clarified the position of law as to when a tax merely differentiates and not discriminates, as under –
(i) Clauses (a) and (b) of Article 304 are to be read disjunctively, and hence, a tax cannot be said to merely differentiate only if the procedure under Article 304(b) is satisfied, but not Article 304(a) of the Constitution;
(ii) A tax imposed on goods imported from another State would not be discriminatory if no similar goods are produced within that State;
(iii) States are at liberty to design their fiscal legislations in such a manner to ensure that the tax burden on goods imported from other States is equal to the tax burden on those goods produced within the State. Therefore, a tax designed to impose equal burdens cannot be said to be discriminatory. However, whether the tax burden falls equally is a question of fact to be determined in each case when the question arises;
(iv) Further, a tax rebate or other relief in the form of incentives or set-off which is:
- granted to a specified class of dealers;
- for a limited period of time;
- in a non-hostile fashion;
- with a view to developing economically backward areas; would not be held to be discriminatory.
(v) However, the question whether a tax fulfils the above criteria is a question of fact to be determined depending upon the facts of each case.
Senior Advocates Nikhil Goel and Kavita Jha appeared for the Appellants while Senior Advocate Manish Singhvi appeared for the Respondents.
The issue for determination in this case was related to the validity of the notification issued by the Rajasthan Government in exercise of its powers conferred by Section 8(3) of the Rajasthan Value Added Tax Act, 2003 (RVAT Act). The issue was whether the said notification granting exemption from payment of VAT on sale of asbestos cement sheets and bricks, manufactured in the State of Rajasthan, having contents of fly ash 25% or more by weight subject to specific conditions, is violative of Article 304(a) of the Constitution of India being discriminatory vis à-vis goods imported from outside the State of Rajasthan.
Read more at: Verdictum
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