Benefit of Budgetary Support Scheme under Post GST regime.

Godrej Consumer Products Ltd. v. Union of India

High Court of Jammu & Kashmir and Ladakh

OWP Nos. 638 & 639 of 2018 | Date of Judgment: 30.12.2022

Relevant Sections: Section 174(2)(c) of CGST Act, 2017

Category: GST Refund / Budgetary Support Scheme / Area-based Exemption

Facts of the Case [Paras 2–3]

1. The petitioner, a manufacturer with units in Kathua and Bari Brahmana (J&K), earlier availed excise exemption under Notification No. 56/2002-CE dated 14.11.2002 for 10 years, expiring on 09.02.2017 [Para 2.1].
2. Based on the 2010 Excise Exemption Notification (No. 1/2010-CE), the petitioner undertook substantial expansion before 01.07.2017, believing the benefit would carry into the GST regime [Para 2.2–2.3].
3. The petitioner commenced commercial production on 25.09.2017 and applied for budgetary support under Notification F.No.10(1)2017-DBA-II/NER dated 05.10.2017, which provides 58% CGST refund to eligible units [Para 2.4–2.5].
4. The Assistant Commissioner rejected their UID application stating the unit was not availing exemption “immediately before” 01.07.2017, a mandatory condition under Para 4.1 of the Notification [Para 10–10.1].

Questions in Consideration [Paras 1, 5.3–5.5]

1. Whether the petitioner’s unit qualified as an “Eligible Unit” under the Budgetary Support Notification dated 05.10.2017?
2. Whether the denial of benefit on the ground of non-availment of exemption immediately before 01.07.2017 violates Articles 14 and 19(1)(g) of the Constitution?
3. Whether the rescinding of previous notifications and introduction of the new scheme violates the doctrine of promissory estoppel and legitimate expectation?
4. Whether the proviso to Section 174(2)(c) of the CGST Act is unconstitutional as it permits post-appointed day notifications?

Observations of the Court [Paras 7–13]

1. The scheme dated 05.10.2017 clearly restricts benefits to those units availing the excise exemption immediately before 01.07.2017 [Para 7.6].
2. The petitioner ceased availing benefits under Notification No. 56/2002-CE on 09.02.2017 and only commenced fresh production on 25.09.2017, hence, failed to satisfy the condition [Para 10.1–10.2].
3. Exemption notifications must be construed strictly. Since the petitioner was not an “eligible unit,” the benefit cannot be extended by implication or liberal construction [Para 10.5].
4. The court reiterated that public interest permits modification or withdrawal of policy and exemption cannot be claimed as a right [Paras 12.3–12.5].
5. Doctrine of promissory estoppel does not apply where overriding public interest justifies withdrawal of benefit [Para 12.1–12.2].

Judgment of the Court [Para 13–14]

The High Court dismissed both writ petitions holding:

• The petitioner did not qualify under the eligibility criteria of the 2017 Notification.
• No violation of constitutional rights occurred.
• The doctrine of promissory estoppel and legitimate expectation was not applicable in this fiscal context.
• Interim directions were vacated.

Between Fine Lines

• Budgetary support under GST for erstwhile excise-exempt units is available only if benefits were being availed immediately prior to 01.07.2017.
• Investments or expansions made in expectation of continued exemptions do not automatically qualify.
• The court emphasized strict interpretation of exemption notifications.
• Changes in policy due to GST transition are considered valid if made in public interest.
• Promissory estoppel has limited scope in fiscal matters.

Summary of Referred Cases