STATE OF U.P. AND ORS. versus JAIPRAKASH ASSOCIATES LTD.

Citation: [2013] 11 S.C.R. 943 · Decided: 18-10-2013 · Supreme Court of India · Bench: H.L. DATTU · Disposal: Disposed off

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Judgment (excerpt)

[2013] 11 S.C.R. 943 
STATE OF U.P. AND ORS. 
v. 
JAIPRAKASH ASSOCIATES LTD. 
(Civil Appeal No.3026 of 2004 ) 
OCTOBER 18, 2013, 
[H.L. DATTU AND SUDHANSU. JYOTI 
MUKHOPADHAYA, JJ.] 
Constitution of India, 1950: 
Articles 301 and 304(a) -
Inter-State Trade and 
Commerce -
Tax rebate - Granted by State Government 
(State.of U.P.) by Notification-, To cement manufacturing units 
- The first condition for getting benefit of the rebate was that 
A 
B 
c 
the units were established in the districts of that State and the 
D 
second condition was that the units were manufacturing 
cement by using fly-ash purchased from that State - The 
Notification whether in violation of Arts. 301 and 304(a) -
Held: The Notification is violative of Arts. 301 and 304(a) - It 
discriminated between imported goods and similar locally 
E 
manufactured goods (i.e. cement manufactured by using fly-
ash procured from the State of U. P.) -
Object of the 
Government was to grant rebate to provide incentive to the 
manufacturing units using fly-ash - Thus the first condition 
was discriminatory - If the first condition is severed from the 
Notification, it would not frustrate the object of the notification 
F 
- Therefore, using doctrine of severabi/ity, condition No. 1 is 
severed from the Notification - Uttar Pradesh Trade Tax Act, 
1948- s. 5. 
Art. 304(a) - Nature and scope of- Held: Article 304(a) 
G 
is an exemption to Art .. 301 - It does not prevent levy of tax 
on goods - But such levy of tax is prohibited, which would 
result in goods imported from other Sta,tes and similar goods 
produced or manufactured within the State. 
943 
H 
944 
SUPREME COURT REPORTS 
[2013) 11 S.C.R. 
A 
Art. 304 :- Powers under - Extent and Scope of - Held: 
The powers given to State Legislatures are not unrestricted, 
and are bound to function within limitations stipulated u!Art. 
304(a) - The power u!Art. 304(a), though an exception to Art. 
301, but is not a blanket power intended to be conferred to 
B the State Legislature - Powers u/Art. 304(b) also are to be 
exercised sparingly. 
Arts. 302 and 304(a) - Powers under - Distinction 
between. 
C 
Taxation - 'Rebate of tax' - Held: It is such a device or 
D 
weapon of taxation used by the Government, validity where 
of is tested on the touchstone of Article 304(a), in the 
circumstances under which they are used - Exemption or 
rebate of tax is within the puNiew of taxation. 
Constitutionalism - Test of constitutional validity of a 
statute - Held: Machinery provisions cannot be used. to test 
the constitutional validity of a statute - Issue of territoriality 
should a/so not be a factor to determine the constitutional 
E validity of a notification. 
F 
Doctrine - Doctrine of severability - Applicability of -
Discussed. 
Words and Phrases: 
'Discrimination' - Meaning of, in the context of taxation 
and in the context of Art. 304(a) of the Constitution of India, 
1950. 
'Rebate' - Meaning of - Explained in the context of 
G Taxation. 
H 
'Rebate of tax' and 'incentive' - Distinction between: · 
'Tax' and 'Taxation''- Meaning of, in the context of Article 
304(a) of the Constitution of India, 1950. 
STATE OF U.P. AND ORS. v. JAIPRAKASH 
945 
ASSOCIATES LTD. 
The State of Uttar Pradesh, to encourage A 
manufacturers of cement using fly-ash in manufacturing 
of their products, in exercise of its power u/s. 5 of Uttar 
Pradesh Trade Tax Act, 1948, issued Notification dated 
27.2.1998. The State imposed certain conditions on the 
manufacturers in order to take benefit of the rebate 
B 
provided in the Notification. The first condition was that 
the· goods should be manufactured in a unit established 
in the State of Uttar Pradesh. The second condition was 
that such goods shall be manufactured using fly-ash 
purchased from the thermal power stations· situated in the c 
districts of the State of Uttar Pradesh. The respondent-
cement industries situated in neighbouring States who 
were manufacturing cement in the State of Madhya 
Pradesh after procuring fly-ash from the State of Uttar 
Pradesh, filed writ petition, seeking quashing of the D 
Notification in so far as first condition of the Notification 
was concerned. 
High Court held that grant of rebate of tax by the 
State Government discriminated between the imported 
goods and the goods manufactured in Uttar Pradesh 
E 
restricting the free movement of goods from one State to 
the other and therefore impinges articles 301 and 304(a) 
cf the Constitution. The Cour

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