New Delhi, Sept 26: The Supreme Court has dismissed appeals by U.P. Asbestos Ltd. and Everest Industries, upholding a Rajasthan government notification that granted tax exemptions to local manufacturers of fly-ash based asbestos sheets and bricks. A bench led by Justice B.V. Nagarathna held that the 2007 notification did not violate the constitutional guarantee of free trade across states.
Background
The dispute arose from a Rajasthan Finance Department notification dated March 9, 2007. It exempted from Value Added Tax the sale of asbestos cement sheets and bricks manufactured within Rajasthan, provided they contained at least 25% fly ash and the unit began production before December 31, 2006. U.P. Asbestos and Everest Industries, which operate depots in Rajasthan but manufacture elsewhere, argued the scheme discriminated against out-of-state goods in breach of Article 304(a) of the Constitution. The Rajasthan High Court had already rejected their petitions.
Court’s Observations
“The differentiation here is to encourage use of fly ash and promote new industry, not to create a trade barrier,” the bench observed. It noted that fly ash is plentiful in Rajasthan and costly to transport, making the policy economically sensible. Citing earlier rulings like Video Electronics and the nine-judge verdict in Jindal Stainless, the Court said a limited-period exemption aimed at environmental and industrial goals is “differentiation, not discrimination.”
The judges rejected the plea that reasons for the exemption were absent in the notification itself, pointing to supporting material in state affidavits and long-standing policy to utilise fly ash. They also dismissed the argument of “perpetual” benefit, stressing that the exemption window and eligibility dates kept it finite.
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Decision
The Court affirmed the Rajasthan High Court’s orders and upheld the 2007 notification and its 2010 amendment extending the benefit’s duration. “The appeals fail and stand dismissed,” the judgment concluded, ensuring Rajasthan’s fly-ash incentive scheme remains intact.
Case: U.P. Asbestos Ltd. & Everest Industries Ltd. vs. State of Rajasthan & Others
Citation: 2025 INSC 1154
Judgment Date: 26 September 2025
