Delhi HC: A GST-eligible Unit Can’t be Prohibited for Budgetary Support

The Delhi High court rendered the revenue heads to allow the budgetary support for the manufacturing units beneath the “Scheme of Budgetary Support under Goods and Services Tax (GST) Regime”, open for the qualified units situated in the mentioned states. The Court noted that the petitioner was qualified for a Central Excise Duty exemption before July 1, 2017, or before India’s implementation of the GST regime and that as a result, it qualified for budgetary support under the Scheme.

According to the second criterion outlined in the Scheme, the units must be receiving the benefit of exemption from Central Excise Duty immediately before July 1, 2017, under the bench of Justices Vibhu Bakhru and Amit Mahajan. The Court stated that, in light of the Revenue Department’s objections, the aforementioned requirement cannot be interpreted to exclude companies that have claimed their claim for such exemption from the outset but the same has flowed to them after the cut-off date.

The petitioner, M/s Special Cables Pvt Ltd., manufactures insulated wires and cables as a line of business.

Before the Delhi High Court, the applicant has furnished the writ petition against the refusal of the budgetary assistance beneath 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 stated scheme was specified in terms of the notification on the date 5/10/2017 which the Ministry of Commerce and Industry, Department of Industrial Policy and Promotion issued.

The petitioner, M/s Special Cables, asserted that it was qualified for an area-based exemption from central excise duty under Notification No.50/2003-CE, dated 10.06.2003, as revised with time (Exemption Notification).

It further stated that it was qualified for this exemption from the time that production at its Uttarakhand operation started till July 1, 2017. It said that the Exemption Notification was no longer in effect as of July 1, 2017, when the Goods and Service Tax (GST) system was implemented in India.

According to the petitioner, M/s Special Cables, the Scheme entitles it to fiscal support. It further said that, in accordance with the notifications indicated in the Scheme, financial help would be offered to all “qualified units” who were receiving exemptions under the previous schemes.

Because the petitioner was not utilizing the Area Based Exemption under the Exemption Notification, the revenue department refused to grant the petitioner financial support under the Scheme on the grounds that it did not meet the requirements of an “Eligible unit” under the Scheme.

Because the petitioner was not utilizing the Area Based Exemption under the Exemption Notification, the revenue department refused to grant the petitioner budgetary support under the Scheme on the grounds that it did not meet the requirements of an “Eligible unit” under the Scheme.

The High Court determined that the Exemption Notification, which granted Area Based Exemption from Central Excise, is clearly included in the Notification dated 05.10.2017, in terms of which the Scheme was notified. “Therefore, indisputably, those units, which were eligible for benefit of the Notification, would be eligible for the benefit under the Scheme,” the bench added.

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The Court noted that as per paragraph 4.1, a unit that qualified for a central excise duty exemption under the conditions of the notifications mentioned in the Scheme prior to July 1, 2017, would be regarded as an “eligible unit” under the Scheme. Additionally, the aforementioned “qualified unit” must have begun using the abovementioned exemption on or before July 1, 2017.

Referring to the case’s circumstances, the court noted that the tax authority had rejected the petitioner’s request for a Central Excise Duty exemption made pursuant to the Exemption Notification and that this request had been the subject of adjudication.

In the end, the Commissioner (Appeals) ruled in favour of the petitioner and determined that the petitioner was qualified for an excise duty exemption. By ruling dated November 7, 2017, the CESTAT has dismissed the revenue department’s appeal of the Commissioner’s order (Appeals). The department has not objected to the CESTAT’s order, the Court remarked.

As a result, the Court came to the conclusion that the dispute had been settled and that the petitioner was qualified to use the Area-Based Excise Exemption under the Exemption Notification.

The tax department argued before the High Court that despite the petitioner being qualified to receive benefits under the Exemption Notification, they were not being received by them before the deadline of 01.07.2017. The government claimed that the petitioner was not eligible for financial help under the Scheme as a result.

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Refusing the dispute of the department, the court stated that “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 such benefit from the 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 an exemption under the Notification. The petitioner had finally prevailed and was found entitled to the said exemption.”

The bench also noted that the petitioner’s plea for a refund of duty paid under protest was partially granted. “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,” the court stated.

The Court came to the conclusion that the second requirement in the Scheme—that the units must be receiving the benefit of the exemption immediately before 01.07.2017—cannot be interpreted to exclude entities that have asserted their claim for the GST exemption but have received it later because the Revenue has challenged it.

Permitting the writ petition, the bench held that “In view of the above, we direct the respondents to release the budgetary support amount as assessed to the petitioner in terms of the Scheme as expeditiously as possible but in any event within a period of six weeks from today.”