Exemption of Excise Duty not availed on Chemical Products  manufactured after 01.07.2017 not eligible for budgetary support: Jammu & Kashmir and Ladakh HC

The Jammu & Kashmir and Ladakh High Court has held that budgetary support is not allowable since the exemption of excise duty is not availed on chemical products manufactured after 01.07.2017.

M/s Best Crop Science Industrial Area, Kathua, the petitioner is a partnership firm registered under the Micro Small and Medium Enterprises Development Act 2006 (MSME Act) and is engaged in the manufacturing of chemical products namely emulsifiers, micronutrients/bio-zymes, water-soluble/NPK fertilizers, pesticides, plant growth regulators, bio-pesticides and bio-pesticides fertilizers, etc.

This petition has been filed being aggrieved by the orders dated 03.09.2020 and the letter dt. 07.12.2020 issued by respondent no.4, the office of the Assistant Commissioner Central Goods and Services Tax Division rejected the petitioner’s claim for the benefit of budgetary support under a scheme on the ground that the benefit thereunder can only be allowed on goods manufactured under an 8- digit HSN code and cleared before 01.07.2017, and thus the petitioner is not eligible for the refund.

The said claim was made by the petitioner under a scheme prepared by the Government of India in 2017 for providing budgetary support, instead of excise duty tax exemption granted earlier for manufacturing certain goods by the manufacturing units in the State of Jammu and Kashmir as per the exemption notification issued earlier in this regard in 2010.

The Central Government in the exercise of powers conferred under Section 5A (1) of the Central Excise Act, 1944, issued a Notification bearing No. 1/2010-CE on 06.02.2010 (Exemption Notification) which exempted from payment of excise duty or additional excise duty leviable on such goods as specified in the First and Second Schedules to the Central Excise Tariff Act, 1985 for a period of 10 years when these goods were cleared from a unit located in the State (now UT) of Jammu and Kashmir to boost industrial growth in the State (now UT). This exemption was limited to the Central Excise duty paid by the manufacturer of goods other than by utilization of CENVAT credit and was available by way of a refund mechanism.

The petitioner set up a manufacturing unit at Kathua, Jammu & Kashmir for the production of the permitted goods namely emulsifiers micronutrients/biozymes and water soluble/NPK fertilizers falling under the 4-digit HSN code 3808 under Chapter 38 of the Central Excise Tariff Act, 1985, which is described as “insecticides rodenticides fungicides herbicides anti sprouting products and plant growth regulators common disinfectants and similar products put up in the forms or packing for retail sale or as preparations or articles” under Chapter 38 of the Tariff Act.

The benefits given under the Excise Act were also withdrawn including the exemption granted under the aforesaid Act to the units under the Exemption Notification mentioned above. However, the Central Government to offset the losses that may have been incurred by the manufacturing units which were granted certain exemptions under the Excise Act, notified a “Budgetary Support Scheme” under the Goods and Services Tax regime to units located in the States of Jammu& Kashmir, Uttarakhand, Himachal Pradesh and the Northeast States including Sikkim.

It was evident that the new Scheme provides certain benefits by way of budgetary support to such units which were being granted excise duty exemption under earlier tax regimes before the introduction of the GST regime.

A two-judge bench comprising Chief Justice N. Kotiswar Singh and Justice Vinod Chatterji Koul observed that the goods were not manufactured/cleared by the petitioner before 01.07.2017 and as such there is no question of availing excise duty exemption before 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 Jammu & Kashmir and Ladakh High Court held.

To Read the full text of the Order CLICK HERE

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