The Supreme Court, on Monday, rejected the plea of Hero Motorcorp Ltd wherein the Company pleaded to allow 100% Budgetary Support after the enactment of GST.
While dismissing the plea, Justice B.R. Gavai and Justice B.V. Nagarathna directed the State Governments and the GST Council to consider such representations, if made, in accordance with what has been observed herein above in an expeditious manner.
The appellant, Hero Motocorp Ltd., was aggrieved by the action of the department rejecting theirclaim of 100% budgetary support in lieu of the pre-existing 100% outright excise duty exemption for ten years from the date of the commencement of commercial production, as provided for by the said O.M. of 2003 issued by the Government of India.
Before the advent of the new GST regime, both of the appellant’s units were enjoying a full refund of the central excise duties paid by them as provided for in the exemption notification dated 25th June, 2003, pursuant tothe Office Memorandum dated 17th February, 2003. After the commencement of the new GST regime, here too, the benefit being enjoyed by the appellant – Sun Pharma Laboratories was reduced to 58% through the implementation of the Budgetary Support Policy.
Rejecting the plea, the Apex Court observed that the Central and State Governments had given various incentives of Central Excise and Value Added Tax (VAT) and Central Sales Tax (CST) so as to encourage investment in those States.
“It also took notice of the fact that such incentives could not be continued as supplies would need to be made on payment of tax to permit flow of tax to the destination state. The solution that was suggested was to provide for budgetary apportionment in the State and the Central budgets for reimbursing the tax paid to those units which enjoyed tax exemption up to a specified period.”
“It is further to be noted that the GST Council is a constitutional body. It has powers to make recommendations on wide-ranging issues concerning GST, including grant of exemptions from the GST. It also has power to make recommendations with regard to special provisions governing North Eastern and Himalayan States. Taking into consideration that the units like the appellants have been established in the Himalayan and North-Eastern States based on the said O.M. of 2003 and that lakhs of persons are employed in such industries, we are of the view that it will be appropriate that such States should also consider to correspondingly reimburse such units out of the share of revenue received by them through devolution from the Central Government. We further find that it will also be appropriate that the GST Council considers making appropriate recommendations to the States in that regard,” the Court said.
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