J&K HC Declares TMT Scrap a ‘Specified Good,’ Eligible for GST Refunds under Support Scheme [Read Order]

In a recent ruling, the Jammu & Kashmir High Court has held that Thermo Mechanically Treated Bars (TMT) scrap generated during steel manufacturing qualifies as a “specified good” under the State’s BudgetarySupport Scheme and is therefore eligible for Goods and Services Tax (GST) reimbursement.

The case arose from the petitioner, Vijay Steel Industries, located in the SIDCO Industrial Complex at Bari Brahamana, Jammu, which established its unit in 2005 to manufacture TMT bars, angles, flats, and rounds. The company initially enjoyed excise duty exemptions under Notification No. 56/2002‑CE, later extended through Notification No. 01/2010‑CE for units undertaking substantial expansion.

The Centre and the State introduced a Budgetary Support Scheme, reimbursing part of the GST paid by eligible manufacturing units 58% by the Centre and 42% by the State. Vijay Steel registered under this scheme and sought reimbursement for taxes paid on both finished TMT bars and the scrap generated during production.

Appearing for the petitioner, Advocate Gautam Chugh argued that the scrap was not mere waste but a product arising directly from the same manufacturing process that produces TMT bars. He stated that the scrap consists of non‑standard lengths of TMT bars, which are cut and sold in the market as M.S. scrap. These pieces have undergone the full manufacturing process and are distinct from raw material.

He also stated that the Central Government had already reimbursed GST on scrap sales, and the State was bound to follow suit under its own notifications (SRO 519 and 521 of 2017). Chugh relied on the Supreme Court’s decision in Escorts Ltd. v. Commissioner of Central Excise (2015) to argue that by‑products emerging from manufacturing are also “manufactured goods.”

On the other hand, Senior Additional Advocate General Monika Kohli, representing the State Tax Department, maintained that the Budgetary Support Scheme applied only to “specified goods” approved by the Industries Department. Counsel argued that Vijay Steel was registered for manufacturing TMT/CTD bars, not scrap, and the petitioner’s claim for reimbursement on scrap sales was therefore inadmissible.

After considering both sides The bench examined Clauses 2.1 and 2.2 of SRO 519 (dated 21.12.2017), which define “eligible manufacturing unit” and “specified goods.” also noted that “Specified goods” are those manufactured by units approved by the Industries Department, except items listed in Annexure‑A (which excludes products like tobacco, plywood, soft drinks, etc.) and Scrap is not among the excluded categories.

The Court observed that the exclusion list is exhaustive, and since scrap is a by‑product of the approved manufacturing process, it cannot be denied the benefit of reimbursement.

Accordingly, the Court quashed it and directed the authorities to reconsider Vijay Steel’s claim afresh and issue a reasoned order within one month.

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