TMT/CTD Scrap Treated as ‘Specified Goods’: J&K HC directs Budgetary Support Reimbursement [Read Order]

The High Court of Jammu & Kashmir and Ladakh held that scrap generated during the manufacturing of TMT/CTD bars qualified as “specified goods” and directed reconsideration of reimbursement under the Budgetary Support Scheme.

As per the facts, the petitioner, M/S Vijay Steel Industries, was engaged in manufacturing TMT/CTD bars and had been availing area-based excise exemptions prior to the introduction of the Goods and Services Tax (GST). After GST, it applied for benefits under the Budgetary Support Scheme, which allows partial reimbursement of taxes paid.

The dispute arose when the State tax authorities rejected reimbursement claims related to M.S. Scrap. The respondent rejected the claim of the petitioner for reimbursement under the Budgetary Support Scheme on the ground that the item M.S. Scrap does not fall within the category of “specified goods” as defined under the exemption Notification No. 519 dated 21.12.2017.

The petitioner contended that the scrap was not waste but a result of the same manufacturing process as TMT bars. These were non-standard pieces that had undergone full manufacturing and were commercially sold. It also highlighted that Central authorities had already granted reimbursement for such scrap.

When the matter reached the High Court, the bench of Chief Justice Justice Arun Palli and Justice Rajnesh Oswal examined the definition of “specified goods” under the scheme. It noted that Annexure-A of Notification SRO 519 (dated 21.12.2017) is an exclusionary list; it disentitles only those industrial units manufacturing the goods specifically enumerated therein.

It was further viewed that, as the petitioner is registered for the manufacture of TMT/CTD Bars, and the respondent concedes that the scrap in question is a necessary residue of that manufacturing process, the exclusion does not apply. It was found that the department itself admitted that the scrap arose from the same manufacturing process as the final product.

The Court observed that merely because the unit was registered for TMT/CTD bars does not mean that products emerging from the same manufacturing process lose their character as manufactured goods. Since the scrap retained the essential character of the final product and was marketable, it could not be treated as mere waste.

Rejecting the department’s narrow interpretation, the Court held that denial of reimbursement solely on the ground that scrap is not separately specified was unjustified. Relying on this, the High Court quashed the rejection order dated 01.07.2022. It directed the authorities to reconsider the petitioner’s claim afresh within one month, keeping in view the observations made in the judgment.

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