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2023 (5) TMI 1191 - HC - Central ExciseRejection of petitioner s claim for benefit of budgetary support - rejection on the ground that the benefit thereunder can only be allowed on goods manufactured under an 8-digit HSN code and cleared prior to 01.07.2017 - respondents rejected the claim of the petitioner on the ground that the goods manufactured by the petitioner under the Exemption Notification were different from those manufactured during the operation of the new Scheme - HELD THAT - The goods covered under the generic head of the Tariff item HSN code 3808 under Chapter 38 are further classified under sub-heads and sub-items with 6-digit HSN code and 8-digit HSN code. Thus, HSN Code 3808 is the broad classification of different goods enumerated in the Table of the different goods/items with 6-digit and 8-digit HSN codes - Under the broad category of 4-digit Tariff Item HSN Code 3808 under Chapter 38, all such goods with 8-digit HSN code falling under it would be eligible for the exemption from excise duty in the manner provided under the Exemption Notification. Thus, if the petitioner s unit manufactured any of the items with 8-digit code mentioned in the sub-items or sub-heads under the broad Tariff Item 3808, exemption could be sought under the aforesaid Notification in respect of the item with 8-digit HSN code. This classification structure would indicate that Tariff item HSN code 3808 is the umbrella covering all the sub-heads and sub-items under which these items with 6-digit and 8-digit HSN codes are categorised. But, there is no tariff rate mentioned against the broad items of 6-digit items like insecticides, or rodenticides, or fungicides etc. mentioned under the broad Tariff Head of 4-digit HSN code 3808. The different items under the aforesaid broad items with 6-digit HSN code (like insecticides) are further categorised with 8-digit HSN code items like Aluminium phosphite (3808 91 11), Calcium cyanide (3808 91 12), D.D.V.P. (Dimethyl-dichloro-vinyl-phosphate, 3808 91 13), Diagonal (3808 91 21) etc. and tariff rates are shown against each of these sub-items with 8-digit HSN code. Upon introduction of the new GST regime, all the notifications issued earlier under the Central Excise Act,including the Exemption Notification were rescinded. However, the Government of India took a policy decision to provide budgetary support to the existing eligible manufacturing units operating in the States of Jammu Kashmir, Uttarakhand, Himachal Pradesh and North Eastern States including Sikkim under different Industrial Promotion Schemes of the Government of India, for the residual period for which each of the units is eligible, and introduced and notified a new scheme on 5.10.2017 vide Notification dated 05.10.2017 - Under the new Scheme, all units which were eligible under the erstwhile schemes and were in operation through notifications issued by the Department of Revenue in the Ministry of Finance, including Exemption Notification for the State (now UT) of Jammu Kashmir were considered eligible. Under this new Scheme, the benefit is limited to the tax which accrues to the Central Government under Central Goods and Service Act, 2017 and Integrated Goods and Services Act, 2017, after devolution of the Central tax or the Integrated tax to the States, in terms of Article 270 of the Constitution. The new Scheme provides certain benefit by way of budgetary support to such units which were being granted excise duty exemption under earlier tax regime prior to introduction of GST regime. However, such budgetary support is conditional and not a blanket support. If the petitioner s unit is eligible, is it entitled to the benefit of budgetary support? - whether the petitioner s unit fulfils the conditions for the benefit of budgetary support? - HELD THAT - The eligible unit must be manufacturing the specified goods - Specified goods has been defined under para 4.2 of the Scheme notification, as to mean the goods specified under exemption notifications, which were eligible for exemption under the said notifications, and which were being manufactured and cleared by the eligible unit by availing the benefit of excise duty exemption from the premises under Central Excise with a registration number, as it existed prior to migration to GST etc. In order to qualify for the budgetary support, the eligible unit must fulfil the following (i) continue to manufacture the item covered by HSN 3808 which was manufactured earlier and, (ii) the manufacturing unit must have availed the benefit of the excise duty exemption under the Exemption Notification and, (iii) the said item must have been cleared by the manufacturing unit by availing the excise duty exemption upto 01.07.2017. Consequently, if the unit had not been manufacturing the item and had not been availing excise duty exemption under the Exemption Notification by clearing the same, the unit cannot avail the benefit of budgetary support in respect of the said item under the new Scheme. The unit must manufacture only the specified goods to avail the budgetary support and the specified goods has been defined under Para of 4.2 of the Scheme as those goods which were being manufactured and cleared by the eligible unit by availing the benefit of excise duty exemption. Thus, the specified good in respect of which the budgetary support is sought, not only, must have been manufactured by the unit and cleared by the unit by availing the benefit of excise duty exemption. Thus, manufacturing the item and availing the benefit of excise duty exemption in respect of the said good by clearing it by the unit when the Exemption Notification was in operation are condition precedents for availing budgetary support under the new Scheme, when the unit continues to produce the same good. As a corollary, if the unit had not been manufacturing the particular item covered under Chapter 38, and had not been availing the benefit of excise duty exemption by clearing it, the unit cannot seek budgetary support in respect of the item under the new Scheme - merely producing an item which is covered under the broad Tariff of 3808 will not suffice. The unit must have availed excise duty exemption by clearing it from the unit in respect of the said good to come within the meaning of specified goods . What is important to be noted is that the budgetary support is to be given with reference to the specified goods only. What can further be noted is that under the definition of specified goods , it does not stop by merely the item being mentioned in the Exemption Notification. There are other conditions for the item being qualified as specified good , i.e., the good must find mention in the Exemption Notification and it must not only have been manufactured by the unit when the Exemption notification was in operation, excise duty must have been also availed in respect of the said good by clearing it from the unit. Only, when these conditions are fulfilled, such good will qualify to be a specified good under the new Scheme to avail budgetary support - only such goods having the attributes of being manufactured earlier and in addition, having the benefit of excise duty availed earlier which fell under the broad Tariff Head of 3808 under Chapter 38 of the Excise and Tariff Act under the early Exemption Notification, would qualify for getting the benefit of budgetary support under the Scheme. It would not suffice as contended by the petitioner that any good being manufactured now, which fall within the category of Tariff Head of 3808 would qualify for availing the budgetary support. More is required of such good to be qualified for getting the budgetary support. If the provisions of the Scheme Notification are given the meaning as sought to be done by the petitioner, every unit which was eligible to avail exemption under any specified notification and started manufacturing new items after 01.07.2017 would claim to be eligible for budgetary support under the new Scheme, which would result in the creation of uneven playing field in respect of new units which start production/clearance of similar products but would not be entitled for the benefit of budgetary support - the respondents have clearly mentioned that goods under Tariff Headings 38089113, 38089199, 38089290, 38089340, 38089350, 38089390, 38089910 and 38089990 manufactured after 01.07.2017, were not manufactured/cleared by the petitioner prior to 01.07.2017 and as such there is no question of availing excise duty exemption prior to 01.07.2017 in respect of these goods. As these goods were not manufactured earlier and consequently, no exemption of excise duty was availed in respect of these goods, these goods are not eligible for budgetary support. The decision taken by the respondents does not suffer from any illegality or arbitrariness which would warrant interference - Petition dismissed.
Issues Involved:
1. Eligibility for budgetary support under the new GST regime. 2. Definition and scope of "specified goods" under the new Scheme. 3. Interpretation of the Exemption Notification and its applicability post-GST. Summary: Eligibility for Budgetary Support: The petitioner, a partnership firm registered under the MSME Act, 2006, challenged the rejection of its claim for budgetary support under a scheme introduced post-GST. The firm argued that it was entitled to the benefit as it was manufacturing goods under Chapter 38 of the Central Excise Tariff Act, 1985, and had availed excise duty exemptions prior to the introduction of GST. Definition and Scope of "Specified Goods": The court examined whether the petitioner's goods fell under the definition of "specified goods" as per the new Scheme. The Scheme provides budgetary support for goods that were being manufactured and cleared by the eligible unit by availing excise duty exemption before the introduction of GST. The petitioner contended that any goods under Chapter 38 should qualify, while the respondents argued that only goods with the same 8-digit HSN code as those manufactured and exempted earlier would be eligible. Interpretation of the Exemption Notification: The court noted that the Exemption Notification under the Central Excise Act, 1944, specified "all goods" under Chapter 38 for excise duty exemption. However, the new Scheme required that the goods must have been manufactured and cleared with excise duty exemption prior to GST to qualify for budgetary support. The court emphasized that the classification structure under the Excise Tariff Act involves specific 8-digit HSN codes, and the exemption could only be claimed for these specific items. Judgment: The court held that the petitioner's interpretation was incorrect. To qualify for budgetary support, the goods must have been manufactured and cleared with excise duty exemption under the same 8-digit HSN code prior to GST. The court agreed with the respondents that the petitioner did not manufacture and clear the specific goods under the required HSN codes before GST and thus was not eligible for budgetary support. The petition was dismissed, affirming the respondents' decision.
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