North East Wood Supply vs. Union Of INDIA And 6 Ors.

Held

The Court held that the exclusion of the petitioner units from the budgetary support scheme, based on their not paying Central Excise Duty due to turnover below the threshold or exemption of manufactured goods, was arbitrary and unsustainable. The Court reasoned that the avowed object of the scheme was to provide financial support to eligible industries under the North East Industrial and Investment Promotion Policy (NEIIPP). The respondents' classification, which excluded units that were otherwise eligible under NEIIPP but did not pay Central Excise Duty, was found to be based on fiction and failed to achieve the scheme's objective. The Court found this classification to be arbitrary and violative of Article 14 of the Constitution of India. The clarification issued by the respondent authorities via circular dated 10.01.2019, to the extent it excluded such manufacturing units, was held to be beyond the purview of the budgetary scheme notification and was set aside. The Court directed the respondent authorities to examine the individual claims of the petitioners and extend the benefits of the budgetary support scheme if they satisfied the eligibility criteria laid down under NEIIPP, passing appropriate orders within 30 days.

Facts

The petitioners, including Shree Balaji Enterprise, North East Wood Supply, Prataap Snacks Ltd. (Unit-II), Prataap Snacks Ltd., Sajjan Kumar Jalan (HUF), Jalan Agro Products, Kishlay Savoury Foods, and Amiker Enterprises Pvt. Ltd., filed writ petitions challenging the denial of benefits under a budgetary support scheme. The scheme was intended to provide financial support to eligible manufacturing units in certain states, including those in the North East. The respondents, various authorities under the Union of India including the Ministry of Finance and the Central Goods and Service Tax department, denied benefits to the petitioners on the grounds that they had not paid Central Excise Duty. The petitioners argued that they were eligible for exemption from Central Excise Duty due to their turnover being below the threshold of 1.5 crores per annum or because the items they manufactured were already exempted. The amount in dispute is the budgetary support benefit denied to the petitioners.

Key Issues

1. Whether the exclusion of manufacturing units from the budgetary support scheme, solely on the basis that they did not pay Central Excise Duty due to their turnover being below the threshold or their goods being exempted, is arbitrary and violates Article 14 of the Constitution of India? Petitioner's arguments: The petitioners contended that the budgetary scheme's objective was to support eligible manufacturing units under industrial policies, and their ineligibility to pay Central Excise Duty did not render them ineligible for the scheme. They argued that the respondents' interpretation, particularly through a circular dated 10.01.2019, created an artificial classification not contemplated by the original scheme notification. They relied on the principle that the scheme should be interpreted to achieve its stated object. Revenue/State's arguments: The respondents argued that the budgetary scheme was intended for industries that had paid Central Excise Duty, implying a link between past duty payment and eligibility. They relied on the Supreme Court's judgment in Hero Motocrop (Supra) to uphold the validity of the budgetary scheme, though the specific issue of exemption-based ineligibility was not directly addressed in that case. They also referred to other judgments regarding the interpretation of exemption notifications.