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TMI Blog2024 (8) TMI 828X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of availing of all non-tax benefits - For example, if a Small Enterprise becomes a Medium Enterprise [by virtue of its upward re-classification], for availing of all non-tax benefits, it will continue to be treated as a Small Enterprise for a period of three years from such upward change/re-classification. Similarly, if a Medium Enterprise is classified as not an MSME by virtue of its upward re-classification, for availing of all non-tax benefits, it will continue to be treated as a Medium Enterprise for a period of three years from such upward change/re-classification Even though the Petitioner was re-classified as not an MSME [by virtue of upward reclassification] w.e.f. 9th May 2023, for a period of three years from 9th May 2023, it was entitled to avail of all non-tax benefits available to a Medium Enterprise. Since the VSV Scheme is a non-tax benefit applicable even to a Medium Enterprise, in our view, the Petitioner was entitled to make a claim under the VSV Scheme. We are of the view that the emails dated 12th March 2024 and 13th March 2024 have wrongly held that the Petitioner was not entitled to make a claim under the VSV Scheme. WP allowed. - B. P. COLABAWALLA FIRDO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll and Medium Enterprise Development Act, 2006 ( the MSME Act ), the Ministry of Micro, Small and Medium Enterprise, on 26th June 2020, issued Notification No. S.O. 2119(E). Under this notification, the Government framed criteria, inter alia, for classifying an Enterprise as a Micro, Small and a Medium Enterprise under the MSME Act and also the form and procedure for filing the Memorandum known as Udyam Registration , which was to take effect from 1st July 2020. Clause 8 of the said Notification provided for updation of information and the transition period in classification. Clause 8 (5), and which is relevant for our purpose, stated that in case of an upward change in terms of investment in plant and machinery or equipment, or turnover, or both, and consequent re-classification, an Enterprise would maintain its prevailing status till the expiry of one year from the close of the year of registration. Thereafter, by another Notification dated 18th October 2022, Clause 8 (5) [of the Notification dated 26th June 2020] was substituted. The substituted Clause 8 (5) provided that in case of an upward change in terms of investment in plant and machinery or equipment, or turnover, or both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 11th April 2023, the date for submission of claims was extended to 30th June 2023 and which was further extended to 31st July 2023 [vide Office Memorandum dated 2nd June 2023], and thereafter to 31st March 2024 [vide Office Memorandum dated 22nd December 2023]. 10. In the Interregnum, on 9th May 2023, the Petitioner was upgraded/re-classified as not an MSME . In Order to take advantage of the VSV Scheme, in February 2024, the Petitioner tried to make a claim on the GeM portal. However, it was not permitted to make the claim on the ground that it was not an MSME. By an email dated 10th February 2024, the Petitioner conveyed the same to the GeM helpdesk informing them that it was unable to make the claim on the GeM portal and that an error cropped up stating that it was not an MSME. 11. Further, in this regard, the Petitioner also addressed a letter dated 13th February 2024 to the Director, Department of Expenditure, Ministry of Finance. By the said letter, the Petitioner brought to the attention of the concerned authority that the GeM portal was not facilitating the uploading of the claim. The Petitioner further stated that while it was trying to make use of the link of the VSV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shall continue to avail of all non-tax benefits of the category (micro or small or medium) it was in before the re-classification, for a period of three years from the date of such upward change. Mr. Kadam submitted that therefore, the Petitioner was to be considered as a Medium Enterprise for the purpose of the VSV Scheme for a period of three years from 9th May 2023. Consequently, in February 2024, the Petitioner had to be considered as a Medium Enterprise for the purpose of the VSV Scheme, and, therefore, was entitled to make a claim thereunder. 15. Mr. Kadam submitted that if one peruses the Notification dated 26th June 2020, as amended by the Notification dated 18th October 2022, it creates a legal fiction of treating a Micro or Small or Medium Enterprise as such, for a period of three years from an upward change in its status, despite the said upward change, for the purpose of availing of all non-tax benefits. Mr. Kadam submitted that when a statute creates a legal fiction saying that something shall be deemed to have been done which in fact and truth has not been done, even then, the Court has to give full effect to such a statutory fiction after examining and ascertaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 024, wherein it has taken the stand that the Petitioner would continue to avail of all non-tax benefits of the category Medium as it was in before the re-classification on 9th May 2023, for a period of three years till 8th May 2026. The relevant portion of the said Affidavit, reads as under:- It is pertinent to mention that M/s Marine Electricals (India) Limited (UDYAM-MH-19-0059391) graduated from Medium to Not a MSME on dated 09.05.2023. In view of the above fact, M/s Marine Electricals (India) Limited (UDYAM-MH-19-0059391) shall continue to avail of all non-tax benefits of the category Medium as it was in before the re-classification on 09.05.2023, for a period of three years till 08.05.2026. 21. Although, the Ministry of Micro, Small and Medium Enterprises, through its Affidavit in Reply dated 8th August 2024, has taken a stand in favour of the Petitioner, since the Ministry of Finance, by its Affidavit in Reply dated 5th April 2024, has taken a contrary stand, we have, despite the admission of the Ministry of Micro, Small and Medium Enterprises, decided to adjudicate this Petition on its merits. ANALYSIS AND FINDINGS 22. The short question that arises for our consideration is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent re-classification, an enterprise will maintain its prevailing status till expiry of one year from the close of the year of registration. (emphasis supplied) 26. The above Clause 8 (5) was thereafter substituted by Notification dated 18th October 2022 and reads as under: (5) In case of an upward change in terms of investment in plant and machinery or equipment or turnover or both, and consequent re-classification, an enterprise shall continue to avail of all non-tax benefits of the category (micro or small or medium) it was in before the re-classification, for a period of three years from the date of such upward change. (emphasis supplied) 27. By the substituted Clause 8 (5), it was made explicitly clear that whether an Enterprise was a Micro or Small or a Medium Enterprise, in case of an upward change and consequent reclassification, it would continue to avail of all non-tax benefits of the category it was in before re-classification, for a period of three years from the date of such upward change. The use of the word medium in the bracketed portion of Clause 8 (5) makes it clear that Clause 8 (5) applied to an upward change and re-classification of even a Medium Enterprise. If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 2 All ER 587] , Lord Asquith has said: If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. The statute says that you must imagine a certain state of affairs. It does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs. This Court in the cases of State of Bombay v. Pandurang Vinayak [(1953) 1 SCC 425 : AIR 1953 SC 244 : 1953 SCR 773] ; Chief Inspector of Mines v. Karam Chand Thapar [AIR 1961 SC 838 : (1962) 1 SCR 9] ; J.K. Cotton Spg. and Wvg. Mills Ltd. v. Union of India [1987 Supp SCC 350 : 1988 SCC (Tax) 26 : AIR 1988 SC 191 : (1988) 1 SCR 700] ; M. Venugopal v. Divisional Manager, LIC[(1994) 2 SCC 323 : 1994 SCC (L S) 664 : (1994) 27 ATC 84 : JT (1994) 1 SC 281] and recently in the case of Harish Tandon v. Addl. District Magistrate [(1995) 1 SCC 537 : JT (1995) 1 SC 290] has dealt with in detail the effect of a statutory fiction and the limitation of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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