Unit Undergoing Relocation, Expansion And Change Of Ownership Not Eligible Under Budgetary Support Scheme: Sikkim High Court

The Sikkim High Court has held that if the unit undergoes relocation, expansion, or change of ownership, it will not be eligible under the scheme of budgetary support.

The bench of Justice Bhaskar Raj Pradhan has observed that the intention of the Government of India in providing the Budgetary Support Scheme was to support those "eligible units" for the "residual period" not exceeding ten years of commercial production during which they would have been eligible to avail exemption for the specified goods under exemption notification no. 20/2007-CE in recognition of the hardship arising due to its withdrawal.

The Budgetary Support Scheme states that the Government had decided to provide budgetary support to the existing manufacturing unit operating in Sikkim under different Industrial Promotional Schemes of the Government of India for the "residual period for which each of the units is eligible". It was a support given to the existing manufacturing units operating in Sikkim since the said units had not been able to enjoy the full benefit of exemption notification no. 20/2007-CE for the entire period. The Budgetary Support Scheme therefore was a measure of goodwill only to the units that were eligible for drawing benefits under the earlier excise duty exemption and refund schemes but otherwise had no relation to the erstwhile schemes.

The two writ petitions were preferred by Zydus Wellness Products Limited and Alkem Laboratories Limited.

In the case of Zydus Wellness Products Limited, on February 28, 2019, Zydus Wellness-Sikkim, a partnership firm, was converted into Zydus Nutritions Limited, pursuant to Section 7 (2) of the Companies Act, 2013 and Rule 18 of the Companies (Incorporation) Rules, 2014. Zydus Nutritions Limited changed its name to Zydus Wellness Products Limited pursuant to Rule 29 of the Companies (Incorporation) Rules, 2014. Zydus Wellness Products Limited seeks budgetary support under the "Scheme of Budgetary Support dated 05.10.2017", for the "residual period" for which Zydus Wellness Sikkim was entitled to exemption under Notification No. 20/2007-C dated 25.4.2007.

In the case of Alkem Laboratories Limited, in October 2019, Unit-V was transferred by way of slump sale from Cachet Pharmaceuticals Private Limited, the transferee company, to Alkem Laboratories Limited on a running and going concern basis under Section 54 of the Transfer of Property Act, 1882. The petitioner seeks direction to allocate a fresh unique identity (UID) for Unit-V of the petitioner and to process the verification and claim applications under the Budgetary Support Scheme for the "residual period" for which Cachet Pharmaceuticals Private Limited was entitled to exemption under Notification No. 20/2007-C dated April 25, 2007.

The changes in the cases of Zydus Wellness Products Limited as well as Alkem Laboratories Limited entailed the grant of a fresh UID and a change in the registration number.

The issue raised was whether the petitioners were entitled to budgetary support under the Budgetary Support Scheme.

The petitioners contend that the change of ownership and, therefore, the grant of a fresh UID and registration number do not disentitle the units from availing of the budgetary support, as the Budgetary Support Scheme seeks to provide budgetary support to "eligible units" and not to the owners.

The department insisted that because of the change in ownership, the petitioners are not entitled anymore as ownership has changed and the petitioners are completely new legal entities.

The court dismissed the writ petition seeking a grant of ‘budgetary support’ on the grounds of a change of ownership.

Case Title: Zydus Wellness Products Limited Versus Union of India

Citation: 2023 LiveLaw (Sik) 8

Case No.: W.P.(C) No. 20 of 2022

Date: 12/09/2023

Counsel For Petitioner: Ashok Saraf

Counsel For Respondent: Sangita Pradhan

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