M/S Keshari Udyog vs. The 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 the threshold of 1.5 crores or because their manufactured items were already exempted), was based on fiction and was arbitrary. The Court found that the avowed object of the scheme was to provide financial support to eligible industries under the NEIIPP, and this classification failed to achieve that object. The Court further held that the subsequent interpretation given by the respondent authorities via the circular dated 10.01.2019, which clarified this exclusion, 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 they satisfied the eligibility criteria laid down under the NEIIPP, to extend the benefits of the budgetary support scheme to them. The respondents were ordered to pass appropriate orders within 30 days of receiving the certified copy of the order.

Facts

The petitioners, various business entities including Shree Balaji Enterprise, North East Wood Supply, Prataap Snacks Ltd., Sajjan Kumar Jalan (HUF), Jalan Agro Products, M/s. 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, under industrial policies. The respondents, including various departments of the Union of India and GST authorities, denied benefits to the petitioners on the grounds that they did not pay Central Excise Duty. The petitioners argued that they were eligible for the scheme as they were existing manufacturing units operating under the relevant industrial policies, even if they were exempted from paying Central Excise Duty due to turnover below the threshold or exemption on manufactured goods.

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 the threshold or exemption on goods), is arbitrary and violates Article 14 of the Constitution of India, given that they were otherwise eligible under the North East Industrial and Investment Promotion Policy (NEIIPP)? Petitioner's arguments: The petitioners contended that the budgetary scheme's objective was to support eligible manufacturing units under industrial policies, not necessarily those who actively paid Central Excise Duty. They argued that their ineligibility to pay duty was due to statutory exemptions or turnover limits, not a lack of eligibility for the industrial policies themselves. They asserted that the respondents' interpretation, particularly through a circular dated 10.01.2019, created an artificial classification not envisaged by the original scheme notification and was beyond its purview. Revenue's arguments: The respondents relied on the Hero Motocrop (Supra) judgment to uphold the validity of the budgetary scheme. They argued that the scheme was extended only to industries that had paid Central Excise Duty, implying this was a criterion for eligibility. Other judgments regarding the interpretation of exemption notifications were also cited.