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2023 Supreme(Sikk) 9
HIGH COURT OF SIKKIM
Bhaskar Raj Pradhan, J.
Zydus Wellness Products Limited - Appellant
Versus
Union of India & Ors. - Respondents
W.P.(C) No. 20 of 2022 and W.P.(C) No. 27 of 2022
Decided On : 12-09-2023
Dr. Ashok Saraf, Senior Advocate with Mr. Pritam Baruah, Advocate, Mr. Mayank Jain, Advocate ,Ms Akshita Shetty, Advocate and Mr. Hissey Gyaltsen, Advocate, for the Appellant; Ms Sangita Pradhan, Deputy Solicitor General of India assisted by Ms Natasha Pradhan, Advocate, for the Respondent.
Ownership changes disqualify entities from budgetary support under the Budgetary Support Scheme as it applies strictly to existing eligible units, not their new owners.
Headnote:(A) Companies Act, 2013 - Section 7(2) - Transfer of Property Act, 1882 - Section 54 - Goods and Services Tax Act, 2017 - Budgetary Support Scheme - Petitioners sought budgetary support after a change in ownership; the Court found that ownership change rendered the entities ineligible for budgetary support, adhering to CBIC guidelines. (Paras 5, 6, 32, 39)
(B) Interpretation of Exemption Notifications - The Court ruled that the Budgetary Support Scheme applies strictly to eligible units, defined as those existing before a specific date and not merely to owners. The intention of the Scheme is to provide relief to existing entities, not new ones formed post-ownership change. (Paras 11, 35, 39)
Facts of the case:
Zydus Wellness Products Limited and Alkem Laboratories Limited sought budgetary support under a scheme after changes in their ownership structures. The respondents argued that the ownership changes disqualified the petitioners from receiving support.
Findings of Court:
The petitioners were found to not be eligible units under the Budgetary Support Scheme due to the change in ownership and registration, leading to the dismissal of the petitions.
Issues: The key issues included whether change of ownership impacts eligibility for budgetary support and the interpretation of eligibility criteria.
Ratio Decidendi: The court concluded that budgetary support is unit-based and that entities formed after ownership changes are distinct from their predecessors, thus ineligible for the benefits.
Result: Both writ petitions dismissed.
| Table of Content |
|---|
| 1. zydus and alkem's petitions concerning budgetary support eligibility. (Para 1 , 2 , 3 , 4) |
| 2. arguments for and against budgetary support claims. (Para 5 , 6 , 7 , 8 , 9 , 10) |
| 3. court's examination of the budgetary support scheme and its definitions. (Para 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38) |
| 4. conclusion: both petitions dismissed. (Para 39) |
JUDGMENT
Bhaskar Raj Pradhan, J. - The two writ petitions are taken up for consideration. W.P. (C) No. 20 of 2022 has been preferred by Zydus Wellness Products Limited while W.P. (C) No. 27 of 2022 has been preferred by Alkem Laboratories Limited.
2. In the case of Zydus Wellness Products Limited, on 28th February 2019, Zydus Wellness-Sikkim - a Partnership Firm, was converted into Zydus Nutritions Limited, pursuant to sub-section (2) of section 7 of the COMPANIES ACT , 2013 and Rule 18 of the Companies (Incorporation) Rules, 2014. Thereafter, on 4th June, 2019, Zydus Nutritions Limited changed its name to Zydus Wellness Products Limited pursuant to Rule 29 of the Companies (Incorporation) Rules, 2014. Zydus Wellness Products Limited seeks budgetary support under the Scheme of Budgetary Support dated 05.10.2017' (the Budgetary Support Scheme), for the 'residual period' for which Zydus Wellness Sikkim was entitled to exemption under Notification No. 20/2007-C dated 25.4.2007.
3. In the case of Alkem Laboratories Limited, in October 2019, Unit-V was transferred by way of slump sale from Cachet Pharmaceuticals Private Limited - the transferee company, to Alkem Laboratories Limited on a running and going concern basis under section 54 of the Transfer of Property Act, 1882. The petitioner seeks direction to allocate fresh Unique Identity (UID) for Unit-V of the petitioner and to process the verification and claim applications under the Budgetary Support Scheme for the residual period' for which Cachet Pharmaceuticals Private Limited was entitled to exemption under Notification No. 20/2007-C dated 25.4.2007.
4. The changes in case of Zydus Wellness Products Limited as well as Alkem Laboratories Limited entailed grant of fresh UID and change in the registration number. This is an admitted fact.
5. The short question which arises for consideration in both the writ petitions is - Are the petitioners entitled to the budgetary support under the Budgetary Support Scheme?
6. The petitioners contend that the change of ownership and therefore, the grant of fresh UID and registration number do not disentitle the units from availing the budgetary support as the Budgetary Support Scheme seeks to provide budgetary support to eligible units' and not to the owners thereof. The respondents are, however, insistent that because of the change in ownership the petitioners are not entitled anymore as ownership has changed and the petitioners are completely new legal entities.
7. Dr. Ashok Saraf, learned Senior Advocate for Zydus Wellness Products Limited submitted that the only criteria to be satisfied for the benefit of the Budgetary Support Scheme was that the unit must be an eligible unit' at the time of transition to GST on 1.7.2017 and the benefit would be for the residual period'. He further submitted that the change in constitution from a partnership concern to a company cannot disentitle it from the benefit of the Budgetary Support Scheme which is clear from the fact that they were earlier given the benefit. Even with the change in the constitution, the business, assets and liabilities vested on Zydus Wellness Products Limited and therefore, only the name of the Company changed on 4.6.2019. It is further submitted that when an assesse is held to be eligible for obtaining the benefit, the amended notification being an exempted notification should receive beneficial construction. Dr. Saraf further submitted that although exemption provisions are to be construed strictly as regards the applicability thereo
