to the dealers in UP excluding other dealers manufacturing cement outside the state using fly-ash purchased in the state. Later, the state government issued a fresh notification in February 1998 reducing the tax liability of the dealers by 25% on goods having fly-ash contents between 10 to 30% weight and has reduced the tax liability of the dealer by 50% on goods having fly-ash contents exceeding 30% by weight.
The notification restricted the benefit of rebate only to the units manufacturing and producing cement using fly-ash in UP.
The cement industries sought quashing of the notification in the High Court, which held that the grant of rebate of tax by the state government discriminated between the imported goods and the goods manufactured in the state, restricting the free movement of goods and, therefore, impinges articles 301 and 304(a) of the Constitution of India.
Besides, the HC declared a portion of the notification as arbitrary and illegal that violated freedom of trade and commerce and restricted tax rebate to the districts in UP alone.