Budgetary Support Under GST Regime Can’t Be Denied To An Eligible Unit: Delhi High Court

The Delhi High Court has directed the revenue authorities to grant budgetary support to a manufacturing unit under the “Scheme of Budgetary Support under Goods and Services Tax (GST) Regime”, available to ‘eligible units’ located in specified States. The Court took note that the petitioner was eligible for exemption from Central Excise Duty prior to 01.07.2017, 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 bench of Justices Vibhu Bakhru and Amit Mahajan noted that as per the second condition specified in the Scheme, to be eligible for budgetary support, the units must be availing the benefit of exemption from Central Excise Duty immediately prior to 01.07.2017. The Court remarked that the said condition cannot be read to exclude entities that have asserted their claim for such exemption from inception but the same has flowed to them post the cut-off date, in view of the Revenue Department contesting the same. The petitioner, M/s Special Cables Pvt Ltd., is engaged in the business of manufacturing insulated wires and cables. The petitioner filed a writ petition before the Delhi High Court against the denial of budgetary support under the “Scheme of Budgetary Support under Goods and Services Tax (GST) Regime to units located in State of Jammu & Kashmir, Uttarakhand, Himachal Pradesh and North-Eastern States including Sikkim”. The said Scheme was notified in terms of Notification dated 05.10.2017, issued by the Ministry of Commerce and Industry, Department of Industrial Policy and Promotion. The petitioner, M/s Special Cables, claimed that in terms of Notification No.50/2003-CE, dated 10.06.2003, as amended from time to time (Exemption Notification), the petitioner was entitled to Area Based Exemption from Central Excise Duty. It added that it was entitled to such exemption from the date of commencement of production at its unit in Uttarakhand till 01.07.2017. From 01.07.2017, the Exemption Notification ceased to apply with the roll out of the Goods and Service Tax (GST) regime in India, it averred. The petitioner, M/s Special Cables, submitted that it was entitled to budgetary support in terms of the Scheme. It added that as per the Scheme, budgetary support would be available to all ‘eligible units’ who were availing exemption under the erstwhile 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. Referring to the Notification dated 05.10.2017, in terms of which the Scheme was notified, the High Court reckoned that the Exemption Notification, which granted Area Based Exemption from Central Excise, is specifically mentioned in the Notification dated 05.10.2017. “Therefore, indisputably, those units, which were eligible for benefit of the Notification, would be eligible for the benefit under the Scheme,” the bench said. The Court took note that as per Paragraph 4.1 of the Scheme, a unit which was eligible for exemption from central excise duty before 01.07.2017 in terms the notifications listed in the Scheme, would be considered an ‘eligible unit’ under the Scheme. Further, the said ‘eligible unit’ must be availing the said exemption immediately before 01.07.2017. Referring to the facts of the case, 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 favour of the petitioner and holding the petitioner entitled to exemption from excise duty. The CESTAT, by its order dated 07.11.2017, 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. Thus, the Court concluded that the controversy has been resolved and the petitioner has been held to be entitled to avail Area Based Excise Exemption under the Exemption Notification. The revenue department contended before the High Court that notwithstanding that the petitioner was eligible to avail the benefits under the Exemption Notification, the petitioner was, in fact, not availing the benefits prior to the cut-off date of 01.07.2017. Therefore, the department averred that the petitioner was disentitled to the budgetary support under the Scheme. Rejecting the contentions of the department, the Court said, “The fact that the petitioner was denied the benefit at the material time, cannot be read to mean that the petitioner was not availing the same. The petitioner had claimed...

Budgetary Support Under GST Regime Can’t Be Denied To An Eligible Unit: Delhi High Court

Parina Katyal

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