M/S. KHADI AND VILLAGED SOAP INDUSTRIES versus STATE OF HARYANA & OTHERS

Citation: [1994] SUPP. 2 S.C.R. 675 · Decided: 17-08-1994 · Supreme Court of India · Bench: J.S. VERMA, K. RAMASWAMY · Disposal: Dismissed

Judgment (excerpt)

M/S. KHADI AND VILLAGED SOAP INDUSTRIES 
v. 
STATE OF HARYANA & OTHERS 
AUGUST 17, 1994 
[J.S. VERMA AND K. RAMASWAMY, JJ.) 
Hal)•a11a General Sales Tax Act, 1973-Section 13 (/}-Exemption 
from paymem of Sales Tax grallted to Khadi Ashram, Panipat and its 
ce11tralised units-Limit of exemption to other cooperative societies 
raised--Classification made between KJ1adi Ashram and other cooperative 
societies-f'ennissible and valid classification. 
A 
B 
c 
Constitution of lndi~Article /~Sales Tax-Exemption granted to 
Kliadi Ashram, Pa11ipat a11d its units under Sectio11 13 (I) of Haryana 
Ge11eral Sales Tax Act, 1973-Classification made between Khadi Ashram, 
Pa11ipat and other cooperative societies-Held: not discriminatory and viola-
D 
tive of Anicle 14. 
Notification No. S.O. 153/H.A. 20/73/S.13/87 dated 30.12.1987 with 
grants exemptions from the payment of sales tax to the Khadl Ashram 
· Panipat and its centralised units functioning within the State of Haryana E 
in exercise of the powers conferred by sub-section (1) of Section 13 of the 
Haryana General Sales Tax Act, 1973, but limits the exemption to the other 
cooperative societies and persons to their turnover not exceeding five lakbs 
in a year was challenged as ·invalid. The question raised before the High 
Court as whether the classification made between the Khadi Ashram, 
Panipat and its units and the other co-operative societies was dis-
F 
criminatory and violative of Article 14 of the Constitution of India. 
The High Court held that there was no discrimination inasmuch as 
the total exemption granted to the Khadi Ashram and its units while 
granting a limited exemption to others is a permissible and valid clas- G 
sification. 
In these appeals by special leave, appellants reiterated the ground 
of discrimination to challenge the limit Imposed. In reply it has been stated 
that it is for the Government to determine whether a particular industry 
falls within the category to which exemption can be granted under Section H 
675 
676 
SUPREME COURT REPORTS (1994) SUPP. 2 S.C.R; 
A 
13 of the Act. Distinguishing features to justify the classifications have 
been indicated and it has also been stated that accounts of Khadl Ashram, 
Panipat in Haryana are duly audited and their activities monitored effec-
tively. 
B 
Dismissing the matter, this Court 
HELD : The principles for determining the vali1iity of classification 
in taxing statutes are well-settled and so also the limits of judicial review 
in testing the validity thereof on the touchstone of equality under Article 
14. The test applicable for striking down a taxing provision on this ground 
C 
is one of palpable arbitrariness in the context. A classification is permis· 
sible in a taxing statute of dealers on the basis of different turnovers for 
levying va11ing rates of sales tax. Thus, a classificatio.n made on the basis 
of turnover apart from the other distinguishing featur"s of Khadl Ashram, 
Panipat and its units justifies putting them in a distinct class for the grant 
of total exemption from payment of sales tax particularly when there is no 
D challenge by the other Khadi units. [677-H, 678-A-C] 
E 
F 
Kera/a Hotel and Restaurant Association and Ors. v. State of Kera/a 
and Ors., [1990) 2 sec 502, relied on. 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4236 of 
1991 etc. 
From the Judgment and Order dated 14.11.90 of the Punjab 
& 
Haryana High Court in C.W.P. No. 14563 of 1'990. 
G. Vishwanatha Iyer and Prem Malhotra Advs. for the Appellants. 
LS. Goyal, Indu Malhotra and Uma Datta for the Respondents. 
The Judgment of the Court was delivered by 
VERMA, J. The challenge in these appeals is to a part of the 
G Notification No. S.O. 153/H.A. 20173/S.13/87 dated 30.U.1987 (Annexure 
P-2) which grants exemption from the payment of sales tax to the Khadi 
Ashram, Panipat and its centralised units functioning within the State of 
Haryana in exercise of the powers conferred by sub-section (1) of Section 
13 of the Haryana General Sales Tax Act, 1973 (for short "the Act"), but 
H limits the exemption to the other cooperative societies and persons to their 
I 
KHADI SOAP INDS. ASSN. v. STATE (\:'ERMA, J.] 
677 
turnover no exceeding rupees five lakhs in a year. An earlier Notification A 
dated 10.8.1973 (Annexure P-1) granting exemption to this extent by An-
nexure P-2. Annexure P-2 has been brought into force w.e.f. 1.1.1988. 
Thereafter, by Notification dated l4.9. 1992 brought into force w.e.f

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