IMPORTANT POINT
An enterprise retains its previous classification for three years post re-classification for non-tax benefits under the MSME Act.

JUDGMENT :

(Firdosh P. Pooniwalla, J.) :

1. Rule. Rule made returnable forthwith and heard finally by consent of the parties.

2. The issue in the present Writ Petition is whether the Petitioner can take advantage of the “Vivad Se Vishwas I-Relief for MSMEs Scheme” [for short the “VSV Scheme”] floated by the Finance Ministry of the Government (Union of India) by an Office Memorandum dated 11th April 2023. Under this Scheme, the Government proposed to refund 95% of the liquidated damages deducted under contracts entered into with the Government/PSUs on the fulfillment of the eligibility conditions, more particularly set out in the said Office Memorandum. It is in this context that the Petitioner, although seeking various reliefs in the above Petition, has restricted itself to prayer clauses (iii-a) and (iii-b) which read thus:-

“(iii-a) A writ of Certiorari and/or a Writ in the nature of Certiorari and/or any other appropriate Writ, Order and/or direction under Article 226, calling for the records leading to the issuance of the decisions communicated vide emails dated 12th March 2024 (at Exhibit "S") and 13th March 2024 (at Exhibit "T") and after examining the legality and propriety thereof, be pleased to quash and set aside the same.

(iii-b) A Writ of Mandamus and/or a Writ in the nature of Mandamus and/or any other appropriate Writ, Order and/or direction under Article 226 directing the Respondent to accept the Petitioner's application for relief under the Vivad Se Vishwas I Scheme as per Office Memorandum dated 10.04.2023 and subsequent Office Memorandums and to process the same in accordance with law.”

3. The Petitioner is a Company engaged in rendering services of electronic automation, information, communication, and technical solutions, and manufacturing of Meteorological Instruments, Radar Equipment, GPS Devices, Search Devices, Navigators etc., to various Government bodies and PSU undertakings carrying out shipbuilding.

4. In exercise of powers conferred by sub-section (1), read with sub-section (9), of Section 7 and sub-section (2), read with sub- section (3), of Section 8 of the Micro, Small and Medium Enterprise Development Act, 2006 (“the MSME Act”), the Ministry of Micro, Small and Medium Enterprise, on 26th June 2020, issued Notification No.S.O.2119(E). Under this notification, the Government framed criteria, inter alia, for classifying an Enterprise as a Micro, Small and a Medium Enterprise under the MSME Act and also the form and procedure for filing the Memorandum known as ‘Udyam Registration’, which was to take effect from 1st July 2020. Clause 8 of the said Notification provided for updation of information and the transition period in classification. Clause 8(5), and which is relevant for our purpose, stated that in case of an upward change in terms of investment in plant and machinery or equipment, or turnover, or both, and consequent re-classification, an Enterprise would maintain its prevailing status till the expiry of one year from the close of the year of registration. Thereafter, by another Notification dated 18th October 2022, Clause 8(5) [of the Notification dated 26th June 2020] was substituted. The substituted Clause 8(5) provided that in case of an upward change in terms of investment in plant and machinery or equipment, or turnover, or both, and consequent re-classification, an Enterprise shall continue to avail of all non-tax benefits of the category (Micro or Small or Medium) it was in before the re-classification, for a period of three years from the date of such upward change.

5. On 10th May 2021, the Petitioner was registered as a “Medium” Enterprise under the MSME Act and obtained an Udyam Registration Certificate.

6. Between 19th February 2020 and 31st March 2022, the Petitioner was unable to deliver/complete various projects contracted with the Government/Public Sector Undertakings due to constraints arising from the COVID-19 Lockdown. Due to these defaults, the contracting Government undertaking/