Nano Steel PVT. LTD. vs. Union Of INDIA And 6 Ors.

Held

The Court held that the exclusion of manufacturing units from the budgetary support scheme, based on their non-payment of Central Excise Duty due to turnover below the threshold or exemption of their goods, was arbitrary and violative of Article 14 of the Constitution of India. The Court reasoned that the primary object of the budgetary support scheme, as evident from its recitals and the NEIIPP, was to provide financial assistance to eligible manufacturing units. The petitioners were eligible under the NEIIPP, but their non-payment of excise duty was due to statutory provisions (turnover threshold or exemptions), not a lack of eligibility for the industrial policy benefits. The Court found that the respondents' interpretation, as clarified by the circular dated 10.01.2019, created an artificial classification that was not supported by the original notification and did not serve the scheme's objective. The Court distinguished the Hero Motocrop case, noting that the issue of units eligible but not paying excise duty was not decided therein. The Court found the subsequent clarification by circular dated 10.01.2019 to be beyond the purview of the budgetary scheme notification and therefore set it 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 the NEIIPP, passing appropriate orders within 30 days.

Facts

Several partnership firms and companies, 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 before the Gauhati High Court. The petitioners were challenging the action of the respondent authorities, primarily the Union of India and its subordinate departments and officers, in denying them benefits under a budgetary support scheme. The scheme was intended to provide financial support to eligible manufacturing units operating in various states, including the North Eastern States, under industrial policies. The petitioners argued that they were eligible manufacturing units under the relevant industrial policies but were denied the benefit because they had not paid Central Excise Duty, either due to their turnover being below the threshold limit of ₹1.5 crores or because their manufactured goods were already exempted from Central Excise Duty. The respondents, through a circular dated 10.01.2019, had clarified that only those units that had paid Central Excise Duty were eligible for the budgetary support.

Key Issues

1. Whether the exclusion of manufacturing units from the budgetary support scheme, solely on the ground that they did not pay Central Excise Duty due to their annual turnover being below the threshold limit of ₹1.5 crores or their manufactured goods being exempted, is arbitrary and violative of Article 14 of the Constitution of India, considering the object of the scheme is to provide financial support to eligible manufacturing units under the North East Industrial and Investment Promotion Policy (NEIIPP). Petitioner's arguments: The petitioners contended that the budgetary scheme's recital indicates it's for "eligible manufacturing units" under industrial policies, not necessarily those who paid Central Excise Duty. They argued that their non-payment of duty was due to statutory exemptions or turnover thresholds, not ineligibility for the industrial policy benefits. They asserted that the respondents' interpretation, as per the circular dated 10.01.2019, created an artificial classification not contemplated by the scheme's notification and was beyond its purview. They relied on the object of the scheme to provide financial support to eligible industries. Revenue/State's arguments: The respondents argued that eligibility for the budgetary support scheme was contingent upon having paid Central Excise Duty, as evidenced by the Hero Motocrop (Supra) judgment, which upheld the validity of such schemes. They interpreted the scheme to extend benefits only to those who had contributed to revenue through excise duty payments.