Conditions for exemption from levy must have a nexus with the policy/object sought to be achieved. A condition that is arbitrary and has no relevance to the object of the exemption cannot be sustained.

( 1 ) WHETHER the petitioner is entitled to exemption from levy on rice produced by him is the only question involved in this writ petition.

( 2 ) IN exercise of the powers under Section 3 of the Essential Commodities Act, 1955 read with Government of India Ministry of Agricultural Order dated 9-6-1978 and with the prior concurrence of the Central Government, the Government of U. P. promulgated an order known as The U. P. Rice and Paddy (Levy and Regulation of Trade) Order, 1985 (hereinafter referred to as the Order ). Para 3 of the Order provides for compulsory levy on rice produced by the licensed miller at notified price. Para 5 contains a prohibition against the sale and/or disposal of the rice except in accordance with the release certificate issued by the prescribed authority in token of having sold the prescribed percentage of levy rice. Except for few districts of east U. P. , the prescribed percentage of levy rice of 60% of the rice milled by the licensed miller. For certain districts of east U. P. the prescribedpercentage of levy rice is 40%. Para 24 gives power to the State Government to exempt any rice from levy with the concurrence of the Central Government.

( 3 ) GOVERNMENT of U. P. vide its order dated 31-10-1991, while announcing levy programme for the year 1991-92, declared that if any rice mill is established after 1-10-1991 in any of those districts of east U. P. where levy has been fixed at 40%, it will be granted complete exemption from the levy in rice for a period of 5 years. By another order dated 7-1-1992 the State Government has issued further directions /clarifications in this connection. Vide order dated 14-9-1992 the Government has laid down that only those rice mills will be entitled for exemption from levy where all the following four things have been done after 1-10-1991. 1. Purchase of land for establishing the mill,2. Placement of the Order for machinery and the plant. 3. Application for loan before the Bank or other financial institution; and4. Application for grant of permit before the Regional Food Controller. It was further laid down that if any of the four things was not done after 1-10-1991, the new mill will not be entitled to exemption from levy. The aforesaid scheme of exemption was continued in the subsequent year 1992-93. However, in modification of its earlier order dated 31-10-1991, the Government of U. P. issued another order dated 16-12-1992 granting exemption from levy to the new rice mills with effect from 1-10-1991 on graded basis by granting complete exemption in the first year and thereafter in the next four years reducing the exemption to 40, 30, 20 and 10 percent respectively.

( 4 ) PETITIONER claims that in view of the announcement of the State Government for granting exemption for levy to the new rice mills established after 1-10-1991, he decided to set up mini rice mill with one rubber roller of 5 inches with a capacity of hulling 30 quintals paddy in eight hours at Sarai Inait, Allahabad and for this purpose he obtained a permit for establishing the new rice mill under the Rice Milling Industry (Regulation) Act, 1958, on 8-7-1992, which was initially valid up to 7-1-1993 but was extended subsequently. Petitioners mill was registered with the District Industries Centre, Allahabad and the certificate in that connection was issued to him on 31-7-1992. On 28-10-1992 petitioner placed the order for purchase of plant and machinery, which was delivered to him on 7-1-1993. He was also granted registration under the Central and State Sales Tax Acts on 10-12-1992 and vide order dated 16-11-1992 he was granted exemption from payment of purchase tax on paddy. On 26-7-1993 he applied for loan of Rs. 3,00,000. 00. The State Bank of India sanctioned a working capital loan of Rs. 1,00,000. 00 and a term loan of sum of Rs. 1,00,000,. 00. The electricity connection was sanctioned to him on 12-3-1993. On 15-6-1993 he was granted licence under the aforesaid 1958 Act and