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2026 Supreme(Online)(J&K) 506
Rajnesh Oswal, J
Vijay Steel Industries – Appellant
Versus
State Tax Officer – Respondent
WP(C) No. 956/2023|WP(C) No. 953/2023
For the Appellants/Petitioners: Gautam Chugh
For the Respondents: Monika Kohli, Sagira Jaffer
Industrial units are entitled to receive budgetary support and tax reimbursements on byproduct scrap generated during the manufacturing process of permitted 'specified goods' under the state scheme, provided such scrap is not included in the negative exclusionary list.
Headnote:(A) Budgetary Support Scheme - SRO 519 and 521 dated 21.12.2017 - Reimbursement of Taxes - Industrial Unit - Specified Goods - Exclusion list (Annexure-A) - Residual goods/scrap produced during the manufacturing process - Whether eligible for reimbursement - Held, when such scrap is a necessary residue of the manufacturing process of the permitted industrial unit and the item is not in the excluded list, denial of reimbursement is unjustified - (Paras 11, 19, 21 and 22).
Facts of the case:
The petitioner, an industrial unit engaged in the manufacture of TMT/CTD bars, claimed budgetary support and reimbursement of taxes under the State government scheme pursuant to the GST regime rollout. The tax authorities rejected the claim for reimbursement on the sale of M.S. Scrap, contending that such scrap was not a "specified good" for which the unit was registered. The petitioner argued that the scrap is an inherent byproduct of the manufacturing process for its main products and should be eligible.
Findings of Court:
The Court observed that the scheme defines "specified goods" as those allowed by the concerned industrial department, excluding those in Annexure-A. Since the scrap is an inherent residue of the permitted manufacturing process of TMT/CTD bars and is not mentioned in the exclusionary list, the rejection of the reimbursement claim was unwarranted. The order of rejection passed by the tax authorities is quashed, and the respondents are directed to reconsider the claim.
Issues: Whether the byproduct (M.S. Scrap) arising during the manufacturing of registered goods qualifies as "specified goods" for reimbursement under the budgetary support schemes (SRO 519/521).
Ratio Decidendi: An industrial unit is entitled to reimbursement on byproduct residues that inherently emerge from the manufacture of permitted goods, provided such items are not specifically listed in the exclusionary annexed list of the scheme.
Result: Petitions allowed.
| Table of Content |
|---|
| 1. background and entitlement to industrial tax reimbursement schemes. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10) |
| 2. arguments regarding eligibility of manufacturing byproducts (scrap) for tax support. (Para 11 , 12 , 13 , 14 , 15) |
| 3. interpretation of exclusion lists and definition of specified goods. (Para 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23) |
| 4. court order directing fresh consideration based on manufacturing eligibility. (Para 24 , 25 , 26 , 27) |
JUDGMENT
PER OSWAL-J
1. The case set up in the present petition by the petitioner is that, in terms of Notification No. 56/2002-CE dated 14.11.2002, the petitioner established a new unit for the manufacture of Tor Steel, M.S. Angle, M.S. Flat, M.S. Round, M.S. Square, Ribbed Bars and TMT Bars and commenced its commercial production with effect from 04.10.2005. In terms of the said notification, the petitioner was entitled to exemption from payment of excise duty, by way of refund, for a period of ten years from the date of commencement of commercial production.
2. In the interregnum, Notification No. 01/2010-CE dated 06.02.2010 came to be issued, whereby certain specified goods manufactured and cleared from units located in the erstwhile State of Jammu & Kashmir were exempted from excise duty. The said exemption was also available to new industrial units or to the industrial units existing before 06.02.2010 which had undertaken substantial expansion by way of increase of not less than 25% in the value of fixed capital investment in plant and machinery or had made new investments in terms of the prescribed conditions.
3. The petitioner completed the substantial expansion of its unit and commenced commercial production with effect from 26.05.2015 and, on the recommendation made by the District Industries Centre, the General Manager, DIC, Jammu acknowledged the said date of production as 26.05.2015 in favour of the petitioner.
4. Thereafter, upon the roll out of the GST regime with effect from 01.07.2017, the Government of India rescinded Notification No. 56/2002 dated 14.11.2002 and Notification No. 01/2010-CE dated 06.02.2010 vide Notification No. 21/2017 dated 18.07.2017. Subsequently, the Government of India issued Notification No. 10(1)/2017-DBA-II/NER dated 05.10.2017 (SBS) as well as CBEC Circular No. 1060/9/2017-CX dated 27.11.2017 providing for budgetary support, whereby an amount equivalent to 58% of the Central Goods and Services Tax (CGST) and 29% of the Integrated Goods and Services Tax (IGST) paid by the petitioner, after utilization of the input tax credit, was to be granted.
5. The State Government adopted the scheme introduced by the Government of India and issued similar notifications allowing reimbursement of State taxes as well as a portion of the Central taxes vide Notification Nos. 519 and 521, both dated 21.12.2017. For availing the benefit of budgetary support under the impugned Central Notification as well as the aforesaid State Notifications, the unit concerned was required to qualify as an “eligible unit.” The term “eligible unit” for the purpose of availing budgetary support has been defined in Para 4.1 of the Central notification, whereas the definition of “eligible manufacturing unit” has been provided in the State Budgetary Support Notification Nos. 519 and 521 dated 21.12.2017.
6. It is stated that the definition of “eligible unit” as provided in the State Notifications clearly demonstrates that the eligibility for State budgetary support is dependent upon the eligibility under the Central Budgetary Support Notification dated 05.10.2017. Accordingly, the satisfaction of the eligibility conditions under the said Central Notification by a manufacturing unit has a direct bearing upon its entitlement to the benefits under the State Budgetary Support Notifications.
7. The said scheme provides budgetary support to the manufacturing units to the extent of 58% of the Central Tax paid in the cash ledger account, whereas the remaining 42% of the Ce
