Facts of the Case

This batch of writ petitions, led by W.P.(C) No. 2664 of 2019 (Shree Balaji Enterprise vs. Union of India & Others), was filed by Assam industrial units set up under the North East Industrial and Investment Promotion Policy (NEIIPP), 2007, promising ten years' Central Excise exemption. Because turnover fell below the Rs. 1.5 crore threshold under Notification No. 8/2003-CE, or their goods were already exempt, the petitioners never registered under the Central Excise Act, 1944 or claimed excise refunds before excise duty was subsumed into GST from 01.07.2017. To compensate NEIIPP units, the Centre notified a Budgetary Support Scheme on 05.10.2017; a Circular dated 10.01.2019 then excluded units never registered under Central Excise, prompting this challenge.

Issues Involved

  1. Whether the Circular dated 10.01.2019, confining Budgetary Support eligibility to units that had actually paid Central Excise duty, correctly interprets the Notification dated 05.10.2017.
  2. Whether excluding NEIIPP-eligible petitioner-units — never liable to pay Central Excise because of the turnover threshold or exempted-goods status — violates Article 14.
  3. Whether the Supreme Court's ruling in Hero Motocorp, upholding the Scheme's validity, forecloses this narrower grievance.

Petitioner's Arguments

  • The petitioners were genuine NEIIPP-eligible units; they escaped Central Excise registration only because of the turnover threshold or exempted-goods status, not ineligibility for industrial-policy benefits.
  • The Circular dated 10.01.2019 impermissibly read a prior-registration-and-payment condition into a Notification that contained no such requirement.
  • With Central Excise wholly subsumed into GST, no mechanism exists to isolate an excise component from GST payments, making the classification artificial and without nexus to the Scheme's object.
  • Hero Motocorp upheld only the Scheme's validity, not exclusion of eligible non-excise-paying units — if anything it strengthens the petitioners' claim.

Respondent's Arguments

  • Mr. S.C. Keyal, learned CGC, submitted the Scheme's validity was already upheld in Hero Motocorp Ltd. v. Union of India, affirmed by the Supreme Court in Civil Appeal No. 7405/2022, concluding the matter.
  • The Scheme is a policy decision, not statute-backed, meant only for units that had actually paid Central Excise duty and claimed exemption under the erstwhile law.
  • Since petitioner-units never paid excise duty, they were never on the same footing as excise-paying units, so the classification was reasonable and non-arbitrary.

Court Order/Findings

  • The Court held Hero Motocorp decided only the Scheme's validity, not whether eligible NEIIPP units that never paid Central Excise could be excluded — a distinct question never before the Supreme Court.
  • The Notification dated 05.10.2017 nowhere restricts eligibility to units that actually paid and claimed refund of Central Excise duty; the Circular dated 10.01.2019 read in an extra-textual condition beyond the Notification.
  • With Central Excise wholly subsumed into GST and no statutory mechanism to isolate an excise component, the classification has no rational nexus to the Scheme's object and is arbitrary under Article 14.
  • The Circular was quashed to the extent it excludes such units; authorities were directed to examine each claim against NEIIPP eligibility criteria and extend benefit within 30 days if satisfied.

Important Clarification

  • A clarificatory circular cannot narrow a parent notification's eligibility by adding conditions the notification itself does not contain.
  • Once a tax stands wholly subsumed into GST, a scheme's benefit cannot be denied on the basis of a component the GST framework provides no mechanism to isolate or quantify.

Sections Involved

  • Central Goods and Services Tax Act, 2017 & Integrated Goods and Services Tax Act, 2017 — Central Excise stood subsumed under these from 01.07.2017; the Scheme computes reimbursement by reference to tax paid under them.
  • Central Excise Act, 1944 and Notification No. 8/2003-CE — governed the threshold-based excise exemption relied on by the petitioners.
  • Article 14 of the Constitution of India — the equality guarantee applied to strike down the exclusionary classification.

Decision – In Favour of

Clearly in favour of the Assessee/Petitioners. The batch was allowed; the Circular dated 10.01.2019 was set aside to the extent it excluded units like the petitioners, and authorities were directed to examine individual NEIIPP eligibility and extend Scheme benefits within 30 days.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: Gauhati High Court (Assam, Nagaland, Mizoram & Arunachal Pradesh)
  • Case No.: W.P.(C) No. 2664 of 2019 (lead case of a batch of 15 connected petitions)
  • CNR: GAHC010085942019
  • Coram: Justice Soumitra Saikia
  • Decision Date: 22 December 2023
  • Disposal Nature: Allowed and disposed of, with directions

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