Industrial Units Can't Be Discriminated For Budgetary Support Based Turnover: Gauhati High Court

The Gauhati High Court recently held that the exclusion of industrial units who were eligible to avail benefits under the NEIIPP, on the classification that they did not pay Central Excise Duty either because their annual turnovers were below the threshold limit of 1.5 crores or that they had produced items which were already exempted, cannot be permitted to be a ground to deny the benefits of budgetary support scheme.The single judge bench of Justice Soumitra Saikia observed:“Such classification cannot be held to be a reasonable classification as it fails to achieve the object for which the classification is made, namely providing financial support to those industries availing benefits under the NEIIPP. The said classification of the respondent authorities is therefore arbitrary and is hit by Article 14 of the Constitution of India and the same is, therefore, held to be bad in law.”The Court was hearing a bunch of writ petitions which challenged the notification of Scheme of budgetary support dated October 05, 2017, issued by the Ministry of Commerce & Industries (Department of Industrial Policy and Promotion) as well as the subsequent circulars dated November 27, 2017; November 30, 2017 and January 10, 2019 issued by the Government of India whereby it was clarified that the benefit of the Budgetary Support shall not be available to the industrial units, which were under threshold exemption and/or were manufacturing exempted goods, who were required to pay GST under the GST regime. The petitioners who were eligible to receive benefits under the North East Industrial Investment Promotion Policy, 2007 (NEIIPP), challenged the above-mentioned scheme of budgetary support in so far as the budgetary support has not been extended to the petitioners because its industrial unit was not registered under the Central Excise Act, 1944 prior to introduction of the GST regime as the turnover of the industrial unit was below the threshold limit and/or the goods manufactured by the industrial unit were exempted from payment of excise duty at all.Dr. Ashok Saraf, Senior Advocate appearing for the industrial units (petitioners) submitted that the petitioner industrial units although got itself registered under NEIIPP, 2007 before coming into force of the GST regime, due to having turnover of less than 1.5 crores, which was the threshold limit, they were not registered under the Central Excise Law as the same was an option under the Central Excise laws under the Notification dated March 01, 2003 and thereby not collecting and paying Central Excise Duty.It was further submitted that after the enactment of the Goods and Service Tax Act, 2017, the items dealt in by the petitioner became taxable under the GST Act and thereby the petitioner got itself registered under the GST Act and started collecting tax and making payment of the same.Similarly, there are units which were not required to pay excise duty because they were manufacturing goods which were exempted under the Central Excise Act, have now become liable to pay GST after its introduction. It was the contention of the petitioners that such units have all been denied the budgetary support on the ground that they were not registered under the Central Excise Act prior to introduction of the GST Act and were not availing any benefits under Notification No.20/2007 dated April 25, 2007.It was submitted that the aforesaid action of the respondent authorities is absolutely illegal inasmuch as the petitioner industrial units were otherwise eligible units for availing various benefits as per Notification No.20/2007 but only because their turnover had not exceeded the threshold limit, the petitioners were not required to pay central excise duty. Therefore, the petitioners cannot be denied the benefits of the Scheme of Budgetary support provided by Government of India.Similarly, in case of the petitioners who were manufacturing items and were exempted under the Central Excise Act, were not liable to be registered under the Central Excise Act. If the said items would have been taxed under the Central Excise Act prior to July 01, 2017, these petitioners would have paid central excise duty and would have claimed refund as per NEIIPP, 2007 and Notification No. 20/2007. Dr. Saraf further submitted that denial of the benefits of Budgetary Support Scheme to petitioners is not a reasonable classification and is in complete violation of Article 14 of the Constitution. It was also submitted that the said denial of budgetary support by the respondents was also hit by the doctrine of promissory estoppel and the legitimate expectation.The Court noted that not claiming of any refund under Notification No. 20/2007 cannot be construed to mean that the said industrial unit was not eligible for benefits of Notification No. 20/2007 if the said industrial unit was established after fulfilling the conditions of the Industrial Policy of 2007 and is an eligible industrial unit for claiming the benefits as...

Industrial Units Can't Be Discriminated For Budgetary Support Based Turnover: Gauhati High Court

Udit Singh

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