M/S Knk Chemicals Igc Samba vs. U T Of J And K Th State Taxes Officer Circle Samba Ii Excise And Taxation Complex Jammu

Held

The Court held that the respondent was not justified in refusing reimbursement on the ground that M.S. Scrap is not a specified good. The definition of 'specified goods' in SRO 519 means goods manufactured by the industrial unit, excluding those in Annexure-A. The petitioner is registered for manufacturing TMT/CTD Bars, and the scrap is a necessary residue of this process. Since scrap is not listed in Annexure-A, the exclusion does not apply. The Court acknowledged that the scrap undergoes the identical manufacturing process as the primary TMT/CTD Bars. The Court found the respondent's order dated 01.07.2022 unsustainable and quashed it. The respondent is directed to reconsider the petitioner's claim afresh, keeping in view the Court's observations, and pass a reasoned order within one month.

Facts

The petitioner, M/s Vijay Steel Industries, established a unit for manufacturing steel products and was initially entitled to excise duty exemption under Notification No. 56/2002-CE and later Notification No. 01/2010-CE. After substantial expansion, they commenced production on 26.05.2015. With the introduction of GST, these notifications were rescinded, and a budgetary support scheme was introduced via Central Notification No. 10(1)/2017-DBA-II/NER dated 05.10.2017 and corresponding State Notifications (SRO 519 and 521 dated 21.12.2017). The petitioner applied for this support. The respondent rejected the petitioner's claim for reimbursement of budgetary support for periods between April 2018 and April 2021, on the grounds that M.S. Scrap, generated during their manufacturing process, did not fall under "specified goods" as defined in the State notification.

Key Issues

1. Whether M.S. Scrap, generated as a residue from the manufacturing process of TMT/CTD Bars, qualifies as "specified goods" under Notification SRO 519 dated 21.12.2017 for the purpose of availing budgetary support under the Goods and Services Tax regime? (Question of law) Petitioner's arguments: The petitioner contended that M.S. Scrap, comprising edge cuttings from TMT/CTD Bars, is not mere waste but a manufactured product that has undergone the entire manufacturing process. They argued that these goods were cleared during the pre-GST regime on payment of Central Excise Duty and thus qualify as "specified goods." They also noted that Central Tax Authorities had granted similar reimbursement for M.S. Scrap. Respondent's arguments: The respondent argued that the petitioner is registered for manufacturing TMT/CTD Bars, not Scrap. They contended that while scrap is an "inherent residue," it is not among the "specified goods" for which the petitioner is registered, making it ineligible for reimbursement under the scheme. They relied on Clauses 2.1 and 2.2 of SRO 519 dated 21.12.2017.