Delhi High Court: Budgetary Support to Manufacturing Units under GST Regime is available to all Eligible Units in specified States

Delhi High Court: Budgetary Support to Manufacturing Units under GST Regime is available to all Eligible Units in specified States

The Delhi High Court ordered the revenue authorities to impart budgetary support to a Manufacturing Unit under the "Scheme of Budgetary Support under Goods and Services Tax (GST) Regime to units located in State of Jammu and Kashmir, Uttarakhand, Himachal Pradesh and Northeastern States including Sikkim" (hereafter 'the Scheme') notified in terms of the Notification dated 5th October, 2017 issued by the Ministry of Commerce and Industry, Department of Industrial Policy and Promotion.

The division bench of Justices Vibhu Bakhru and Amit Mahajan while hearing a petition filed in the matter of M/s. Special Cables Pvt Ltd. vs Central Board of Indirect Taxes and Customs and others observed that the petitioner was eligible for exemption from Central Excise Duty prior to 1st July, 2017, i.e., before the introduction of the GST regime in India, and thus, in terms of the Scheme, it was entitled to avail budgetary support.

The petitioner was engaged in the business of manufacturing of insulated wires and cables. The petitioner was aggrieved by the denial of the budgetary support under the Scheme and claimed that in terms of Notification No. 50/2003-CE, dated 10th June, 2003, as amended from time to time (Exemption Notification), the petitioner was entitled to Area Based Exemption from Central Excise Duty. The petitioner asserted that it was entitled to such exemption from the date of commencement of production at its unit in Uttarakhand till 1st July, 2017.

From 1st July, 2017, the Exemption Notification ceased to apply with the roll out of the Goods and Service Tax (GST) regime in India, it stated. The petitioner's contention was that as per the Scheme, budgetary support would be available to all 'eligible units' who were availing exemption under the previous schemes in terms of the notifications listed in the Scheme.

The revenue department denied budgetary support to the petitioner under the Scheme on the ground that it did not fulfil the criteria of an 'Eligible unit' under the Scheme as it was not availing the Area Based Exemption under the Exemption Notification.

However, the Court referred para 1.2 of the notification dated 5th October, 2017 which indicated that units which were eligible under the erstwhile Schemes and were in operation through exemption notifications issued by the Department of Revenue in the Ministry of Finance, as listed under para 2 of the said Notification would be considered eligible under the Scheme.

Further the Court referring to para 4.1 which defined the term eligible unit as, "Eligible unit means a unit which was eligible before 1st day of July, 2017 to avail the benefit of ab initio exemption or exemption by way of refund from payment of central excise duty under notifications, as the case may be issued in this regard, listed in para 2 above and was availing the said exemption immediately before 1st day of July, 2017. The eligibility of the unit shall be based on application filed for budgetary support under this scheme with reference to:

(a) Central Excise registration number, for the premises of the eligible manufacturing unit, as it existed prior to migration to GST; or

(b) ST registration for the premises as a place of business, where manufacturing activity under exemption notification no. 49/2003-CE dated 10.06.2003 and 50/2003-CE dated 10th July, 2003 were being carried prior to 1st July, 2017 and the unit was not registered under Central Excise."

The Court opined that the petitioner was entitled to the benefit of the Notification. The Court observed that the petitioner's claim for exemption from Central Excise Duty under the Exemption Notification was denied by the revenue authority, and the same was, thus, the subject matter of adjudication. The adjudication had culminated with the Commissioner (Appeals) ruling in favor of the petitioner and holding the petitioner entitled to exemption from excise duty. The Customs, Excise and Service Tax Appellate Tribunal (in short CESTAT), by its order dated 7th November, 2017, had rejected the revenue department's appeal against the order of Commissioner (Appeals). The CESTAT's order has not been challenged by the department, the Court noted.

"The petitioner had aimed such benefit from commencement of commercial production and had pursued the matter with the concerned authorities. As noted above, the petitioner was not granted the benefit and therefore, had paid the duty of central excise under protest but at the same time, had continued to pursue its right to exemption under the Notification. The petitioner had finally prevailed and was found entitled to the said exemption," observed the bench.

With respect to petitioner's application for refund of duty paid under protest, the Court while partly allowing ruled, "since the petitioner has also secured an order sanctioning refund of the said duty, there can be no doubt that the petitioner has availed of the benefit under the Notification."

Thus, the Court reckoned that the second limb of the condition that the unit must be availing of the benefit of the Notifications as mentioned in paragraph 2 of the Scheme immediately prior to 1st July, 2017 is to merely distinguish those units that have elected not to avail of the area-wise exemption or the term for which such benefit was available has expired. Accordingly, the Court directed the respondents to release the budgetary amount as assessed to the petitioner in terms of the scheme.