Judgment Intelligence
Petition Allowed- Court
- Supreme Court of India
- Date of Decision
- 24 September 2025
- Bench
- Justices B.V. Nagarathna and K.V. Viswanathan
- Relevant Acts & Sections
- Constitution of India — Articles 301, 304(a); Rajasthan Value Added Tax Act, 2003 — Section 8(3)
Appeals allowed: Notification S.O.377 of 09.03.2007 quashed as violating Article 304(a); no costs. The appeals were posted for directions on whether the amounts deposited under the interim order of 09.05.2008 were collected from customers; if not, refund with 6% interest (paras 12.19-12.20).
Source Supreme Court of India, www.sci.gov.in — judgment dated 24 September 2025 · Court's copy
Key holdings
- An exemption tied to manufacture in Rajasthan, not to the use of fly ash from Rajasthan, discriminated against the same products made elsewhere (para 12.17.1).
- The reasons for an exemption notification are judged by the notification itself; a counter affidavit cannot supply them (paras 12.13, 12.15).
- The Video Electronics exception, resting on its peculiar facts, did not cover an exemption that was neither for new industries nor for a limited period (paras 12.17, 12.19).
- Jaiprakash Associates, which struck down a fly-ash rebate confined to units in Uttar Pradesh, squarely applied (para 12.18.7).
Case explainer by NyayVidhan: an account of this judgment and the law it laid down, not the court's text. The judgment itself is the authoritative version.
Brief Facts
Court's Findings
Legal Principle
NyayVidhan's view · Practice note
Why It Matters
For States designing tax incentives, and for manufacturers outside a State competing with its local units, this judgment turns the Jindal Stainless test into a working checklist: a specified class, a limited period, no hostile purpose and an aim of developing backward areas (para 12.1). Two lessons stand out. The reasons should appear in the notification or a policy behind it, because a counter affidavit filed later will not do (paras 12.14-12.16). And if the object is to use a raw material found in the State, the benefit should follow that material, not the place of manufacture (para 12.17.1). Refund claims will turn on whether the tax was passed on to customers (para 12.20).
Editorial comment by the NyayVidhan Editorial Desk. It is not part of the Court's judgment and is not legal advice.
Precedents Relied Upon
- Jindal Stainless Ltd. v. State of Haryana (2017) 12 SCC 1
The nine-Judge Bench's reading of Article 304(a) supplied the test applied: a tax relief granted to a specified class of dealers, for a limited period, in a non-hostile fashion, to develop economically backward areas is mere differentiation, not discrimination; the impugned notification failed it.
- Video Electronics Pvt. Ltd. v. State of Punjab (1989) Supp. 2 SCR 731
The High Court relied on its exception for limited exemptions; this Court held that exception rests on the peculiar facts there (incentives to attract industry to Punjab in a difficult phase) and does not apply to an exemption that was neither for new industries nor for a limited period.
- Shree Mahavir Oil Mills v. State of J&K (1996) Supp.9 SCR 356
Held that taxation cannot be used to discriminate against imported goods and that the limited Video Electronics exception cannot be enlarged; among the judgments by which the impugned notification was held to be hit.
View all precedents (12)
- State of U.P. v. Jaiprakash Associates Ltd. (2014) 4 SCC 720
Struck down a tax rebate to cement units using fly ash established only in Uttar Pradesh as violating Articles 301 and 304(a); the Court said this judgment squarely applies to the present cases.
- Mohinder Singh Gill v. Chief Election Commissioner (1978) 1 SCC 405
An order of a public authority must be judged by the reasons stated in it and cannot be supplemented by fresh reasons in an affidavit; applied to reject the State's reliance on its counter affidavit for the notification's reasons.
- Commissioner of Police v. Gordhandas Bhanji AIR 1952 SC 16
Public orders made under statutory authority must be construed objectively by their own language, not by later explanations of what the officer meant; cited on the reasons behind a notification.
- Firm A.T.B. Mehtab Majid and Co. v. State of Madras (1963) Supp. 2 SCR 435
Sales tax that discriminates between goods of one State and another may offend Article 301 and is valid only within Article 304(a); among the judgments by which the impugned notification was held to be hit.
- Weston Electronics v. State of Gujarat (1988) 2 SCC 568
A 1% sales tax on television sets made in Gujarat against 10% on those from outside was struck down as discriminatory; among the judgments by which the impugned notification was held to be hit.
- Atiabari Tea Co. Ltd. v. State of Assam AIR 1961 SC 232
Discussed in the survey of Part XIII case law on the object of Article 301 and the State's power under Article 304(a) to tax imported goods without discrimination; noted as partly overruled in Jindal Stainless.
- Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan AIR 1962 SC 1406
Discussed in the survey of Part XIII case law on compensatory and regulatory taxes under Articles 301 and 304(b).
- State of West Bengal v. Anwar Ali Sarkar (1952) 1 SCC 1
Cited on the meaning of 'hostile' discrimination: a law that discriminates against a class similarly situated and injuriously affects its interests.
- Twyford Tea Co. Ltd. v. State of Kerala (1970) 1 SCC 189
Cited on classification without unreasonable discrimination: differences in treatment must be reasonably explained in the light of the law's object.