UP tax rebate found to be discriminatory

The state government of Uttar Pradesh has long granted cement manufacturers within the state a tax rebate for utilising flyash in the cement mix. It has not extended the same rebate to manufacturers importing into the state from elsewhere within India. Following a petition from manufacturers procuring flyash from UP power stations and manufacturing cement in Madhya Pradesh before selling back into the UP market, the Supreme Court has held that this policy is discriminatory and in violation of the Constitution because it restricts free trade across India.

The government of Uttar Pradesh initially issued a notification granting a tax rebate to those selling cement manufactured in the state using flyash purchased within UP in 1997. The state government argued that it could not extend the rebate to imported cement because it had no way of verifying whether or not manufacturers outside of the state satisfied the conditions of the notification. Now, the Supreme Court has declared: “We do not agree. The explanation appended to the notification authorises the assessing authorities to verify the claim that may be made by manufacturers including the fact whether an assessee(s) satisfy the conditions prescribed in the notification. If they do not fall within the parameters of the notification, the assessing authority can always reject the claim of the manufacturers,” it said.

Following the ruling by the Supreme Court, manufacturers such as Jaiprakash Associates, Diamond Cements, Century Textile & Industries and Maiher Cement could all stand to benefit.

Edited from various sources by Katherine Guenioui