Himachal Pradesh High Court Quashes Order Rejecting Ultra Tech's Claim For Grant Of Budgetary Support Scheme

The Himachal Pradesh High Court has quashed the order rejecting Ultra Tech's claim for the grant of budgetary support.

The bench of Chief Justice M.S. Ramachandra Rao and Justice Satyen Vaidya has observed that the budgetary support scheme is governed by principles of natural justice, and one such principle is the necessity of providing an opportunity of hearing to the party who would suffer civil consequences. It held that principles of natural justice have to be read into the law considering the nature of the duty to be performed by the respondent and that the scheme does not bar the application of principles of natural justice.

Three months after the GST regime came into force, the Central Government issued a notification on October 5, 2017 called “Scheme of Budgetary Support” under the Goods and Services Tax Regime to the units located in the States of Jammu and Kashmir, Uttarakhand, Himachal Pradesh, and the North East, including Sikkim, through the Ministry of Commerce and Industry, Department of Industrial Policy and Promotion.

Prior to the introduction of the scheme, the Central Excise Regime was in force. Under the regime, units located in the State of Himachal Pradesh were eligible to avail exemption from payment of Central Excise Duty in terms of area-based exemptions under certain Excise Notifications issued under the Central Excise Act, 1944. The eligible units were exempted from paying Central Excise Duty for a period of 10 years from the date of commencement of commercial production, provided commercial production had commenced on or before March 31, 2010.

After the GST Regime came into force on July 1, 2017, there were some units in the State of Himachal Pradesh that had a residual period of In order to obviate the hardship faced by such units, the Central Government decided to provide budgetary support to such units by way of reimbursement of the Goods and Services Tax in a particular manner.

In order to obviate the hardship faced by such units, the Central Government decided to provide budgetary support to such units by way of reimbursement of the Goods and Services Tax in a particular manner. Under the scheme, 58% and 29% of the central tax and integrated tax can be paid in cash after utilizing the entire input tax credit and integrated tax. The scheme provided that if the eligible unit had not utilized the input tax credit, the sanctioning officer was required to reduce the amount of budgetary support to the extent of the credit not utilized for payment of tax. The reduction in budgetary support was to be a percentage of inputs procured from composition dealers.

Almost five months after the introduction of the GST regime, the respondent department issued a circular prescribing the procedure for registration and manual disbursement of the budgetary support. The Circular provided for the procedure to be followed in case an entity is carrying out its operations from multiple locations in a state under the same GSTIN as the eligible unit.

The petitioner/assessee is a company engaged in the manufacture of cement falling under Chapter 25 of the GST Tariff. It has two manufacturing units in the state of Himachal Pradesh, one at Village Baga and the other at Village Pandiyana (Tikri).

The unit of the petitioner- company located at Village Pandiyana (Bagheri Unit) and the other unit located in Village Baga filed separate applications for registration under the Budgetary Support Scheme with CGST Division Baddi and CGST Division Shimla, respectively. However, in respect of the Baga Unit, the application for registration was rejected.

The Department denied the petitioner the petitioner the benefit of the budgetary support scheme on the ground that there is a credit balance of Rs. 10,25,02,596 lying in the credit ledger at the end of the quarter of July to September, 2017. The department rejected the entire claim in terms of the notification on the ground that there was a closing CGST balance in the credit ledger that could have been utilized for payment of taxes for the eligible unit, and so the amount of budgetary support allowable to the petitioner was zero.

The petitioner filed an appeal before the Commissioner (Appeals), CGST, Chandigarh.

The Commissioner held that the support under the scheme is in the nature of a grant and not a refund, and that he had no jurisdiction to decide the same on the merits of the issue.

The assessee contended that the budgetary scheme is in respect of the eligible unit and not in respect of the GSTIN number. The petitioner had two manufacturing units registered under the same GSTIN, i.e., Bagheri Unit and Baga Unit, whereas only one Bagheri Unit was an eligible unit registered under the budgetary support scheme. In spite of the petitioner's specifically pointing out to the department that the credit balance lying in the electronic credit ledger account related to the petitioner's other unit of Baga Cement Works, No part of the credit balance pertains to the eligible Bagheri Unit; the department ignored it and incorrectly held that the input tax credit could have been utilized for payment of taxes for the eligible unit. He thus failed to notice that if the credit balance pertains to a non-eligible unit like the Baga Unit, though operating under the same GSTIN, such a credit balance should be ignored for the purpose of computing the budgetary support claim.

The court held that the department not only did not give any personal hearing to the petitioner, but he also did not assign reasons for rejecting a portion of the claim for budgetary support.

The court directed the department to reconsider the claim of the petitioner for budgetary support afresh after giving a personal hearing to the petitioner and pass orders in accordance with the law within three months.

Counsel For Appellant: Amrinder Singh

Counsel For Respondent: Balram Sharma

Case Title: Ultra Tech Cement Ltd. Versus UOI

Citation: 2024 LiveLaw (HP) 31

Case No.: CWP No.2437 of 2020

Click Here To Read The Order