LexM/S U.P. ASBESTOS LIMITED versus STATE OF RAJASTHAN & OTHERS
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[2025] 9 S.C.R. 1419 : 2025 INSC 1154 M/s U.P. Asbestos Limited v. State of Rajasthan & Others (Civil Appeal No. 3577 of 2008) 24 September 2025 [B.V. Nagarathna* and K.V. Viswanathan, JJ.] Issue for Consideration Issue arose as regards the validity of the Notification No. S.O.377, dated 09.03.2007, issued by the Government of Rajasthan in exercise of its powers conferred by s.8(3) of the Rajasthan Value Added Tax Act, 2003 granting exemption from payment of Value Added Tax 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 Art. 304(a) of the Constitution of India being discriminatory vis-à-vis goods imported from outside the State of Rajasthan; and whether the High Court was right in dismissing the writ petitions filed by the appellants-manufacturers of asbestos cement sheets and bricks by holding that the impugned notification dated 09.03.2007 did not violate Art. 301(a) of the Constitution. Headnotes† Constitution of India – Art. 301(a), 304 – Rajasthan Value Added Tax Act, 2003 – s.8(3) – Value Added Tax exemption on sale of asbestos cement sheets, if violative of Art. 304(a) – Notification No. S.O.377, dated 09.03.2007 issued by the Government of Rajasthan granting exemption from payment of Value Added Tax 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 – Notification restricted the exemption to those dealers who commenced commercial production in the State by 31.12.2006 and the exemption was available up to 23.01.2010,and later extended upto 23.1.2016 – Appellants-engaged in the business of manufacture and sale of fly ash based asbestos cement products and did not have their manufacturing units in * Author 1420 [2025] 9 S.C.R. Supreme Court Reports Rajasthan, but had their sales depots over there – Notification, if violative of Art. 304(a) being discriminatory vis-à-vis goods imported from outside the State of Rajasthan: Held: Notification dated 09.03.2007 violative of Art. 304(a) as it is discriminatory in nature – Impugned notification is bereft of any reason or justification – Impugned notification is not restricted to any specific district or a set of districts within the State of Rajasthan, rather, the notifications provide exemption to any dealer commencing production anywhere in the State – As regards the criterion of ‘non-hostile discrimination, the contours of discrimination of hostile nature, can be reduced to whether there are sufficient reasons to term such discrimination as ‘differentiation’ – If a legislation is discriminatory and discriminates one person or class of persons against others similarly situated and denies to the former the privileges that are enjoyed by the latter, it has to be regarded as “hostile” in the sense that it affects injuriously the interests of that person or class – High Court erred in holding that the instant case falls in the exceptional category covered by the case of Video Electronics, wherein the exemption was granted to new industries for a specified period – Said finding is incorrect inasmuch as the exemption was not granted to new industries and neither was it given for a limited period of time – Exemption was granted to those asbestos sheet and bricks manufacturers in the State of Rajasthan utilizing fly ash as its main raw material on the conditions namely that such fly ash constituted 25% or more in the contents by weight; and that the unit commenced commercial production by 31.12.2001 – First condition is an ingredient specific criterion – This would mean that any asbestos sheet product containing 25% fly ash manufactured outside the State of Rajasthan and sold in the said State would not have the benefit of the exemption – This would mean that the source of fly ash is not really the basis for the exemption – Asbestos products could be manufactured in the State of Rajasthan with fly ash obtained from outside the State and sold within the State – If the object of the exemption was to utilise the fly ash available in the State of Rajasthan itself, it should have been so spelt out in the impugned notification – Otherwise, a discrimination is found between asbestos products manufactured in the State of Rajasthan and manufactured outside, having content
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