M/S. Rhino Print O Packs 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 the criterion that they did not pay Central Excise Duty (either due to turnover below ₹1.5 crores or exemption of manufactured goods), was arbitrary and unsustainable. The Court found that the avowed object of the budgetary support scheme was to provide financial support to eligible industries under the NEIIPP. The respondents' classification, which excluded units that were otherwise eligible under the industrial policies but did not pay Central Excise Duty, was deemed to be based on fiction and failed to achieve the scheme's objective. Such classification was found to be unreasonable and hit by Article 14 of the Constitution of India. The Court further held that the clarification issued by the respondent authorities via the circular dated January 10, 2019, was beyond the purview of the original budgetary scheme notification and was therefore bad in law and set aside. The Court directed the respondent authorities to examine the individual claims of the petitioners and, if found to satisfy the eligibility criteria laid down under the NEIIPP, extend the benefits of the budgetary support scheme to them, similar to other similarly situated units. The respondents were ordered to pass appropriate orders within 30 days of receiving the certified copy of the order.

Facts

The petitioners, including Shree Balaji Enterprise, North East Wood Supply, Prataap Snacks Ltd. (Unit-II), Prataap Snacks Ltd., Sajjan Kumar Jalan (HUF) and Jalan Agro Products, and M/s. Kishlay Savoury Foods, 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 Board of Excise and Customs, denied the benefits to the petitioners on the grounds that they had not paid Central Excise Duty. The petitioners argued they were eligible for exemption from Central Excise Duty due to their turnover being below the threshold of ₹1.5 crores or because their manufactured goods were already exempted. The respondents' action was based on a subsequent clarification issued via a circular dated January 10, 2019.

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 turnover below ₹1.5 crores or exemption of manufactured goods), is arbitrary and violates Article 14 of the Constitution of India, considering the stated object of the scheme is to provide financial support to eligible manufacturing units under industrial policies like the North East Industrial and Investment Promotion Policy (NEIIPP)? Petitioner's arguments: The petitioners contended that the respondents' interpretation and the subsequent clarification via the circular dated January 10, 2019, were beyond the purview of the original budgetary scheme notification. They argued that the scheme was meant for "eligible" manufacturing units, and their ineligibility to pay Central Excise Duty did not render them ineligible for the scheme itself, as they were still operating under the industrial policies. They relied on the object of the scheme to provide financial support to such industries. Revenue/State's arguments: The respondents argued that the budgetary scheme was extended only to those industries that had paid Central Excise Duty, implying that non-payment disqualified units from the benefit. They relied on the Apex Court's judgment in Hero Motocrop (Supra) to uphold the validity of the budgetary scheme, though the specific issue of units not paying duty due to exemptions was not directly addressed in that judgment.