Jammu & Kashmir High Court
Shiva Industries Through Mr. Vinay … vs Union Of India Through Secretary on 4 April, 2025
Bench: Sanjeev Kumar, Puneet Gupta
HIGH COURT OF JAMMU & KASHMIR AND LADAKH
AT JAMMU
Reserved on: 17.03.2025
Pronounced on:04.04.2025
WP(C) No.2159/2022
Shiva Industries through Mr. Vinay Mahajan Age 54 years
Partner, 6 Industrial Extension Area Kathua, Jammu & Kashmir
...Petitioners(s)
Through:- Mr. Jatin Mahajan, Advocate
Versus
1. Union of India through Secretary, Ministry of Commerce
(Department of Industrial Policy and Promotion)
Udyog Bhawan, New Delhi 110011
2. Commissioner Central Taxes
Union Territory of Jammu and Kashmir
OB-32, Rail Head Complex, Jammu
3. Deputy Commissioner-Central Goods and Services
Taxes Division, Ward No.5, Mandi Kotli, Samba OB-32,
Jammu
4. Commissioner State Taxes, Excise and Taxation Complex,
Rail Head, Jammu.
5. State Taxes Officer,
Kathua.
...Respondent(s)
Through:- Mr. Jagpaul Singh, Advocate
Coram: HON'BLE MR. JUSTICE SANJEEV KUMAR, JUDGE
HON'BLE MR. JUSTICE PUNEET GUPTA, JUDGE
JUDGMENT
Sanjeev Kumar “J”
1. The petitioner is an industrial unit engaged in the production
and supply of cement to various manufacturers and customers across the
country. The petitioner is aggrieved of the refund orders dated 22nd
April, 2022 and 23rd June, 2022 passed by the Deputy Commissioner,
WP(C) No.2159/2022 2
CGST Division, Samba [„respondent No.3‟] in terms of notification
No.F.No.10(1)2017-DBA-II/NER dated 05.10.2017 and has challenged
the same primarily on the ground that the rejection of refund claims by
respondent No.3 in terms of the impugned order dated 20th June, 2022
is in violation of notification dated 05.10.2017 (supra) issued by the
Government of India, Ministry of Commerce & Industry, Department of
Industrial Policy & Promotion.
2. Prior to the rolling out of GST regime on 01 July, 2017, the
petitioner was entitled to refund of excise duty in terms of excise
Exemption Notification No.56/2002-C.E. dated 14.11.2002 and Excise
Notification No.1/2010-C.E. dated 06.02.2010. Both these excise
exemption notifications came to be rescinded vide notification
No.21/2017-C.E. dated 18.07.2017.
3. As a measure of goodwill and to provide financial support to the
industrial units, which were availing the benefit of excise
exemption/refund under the superseded excise Exemption Notifications,
the Government of India took a policy decision to provide budgetary
support to the existing eligible manufacturing units operating, inter alia,
in the then State of Jammu & Kashmir for residual period for which
each of the units was eligible. The new Scheme was offered as a
measure of goodwill only to the units which were eligible for drawing
benefits under the earlier excise duty exemption/refund schemes.
Pursuant to the aforesaid decision of the Government of India, Ministry
WP(C) No.2159/2022 3
of Commerce and Industry vide notification dated 05.10.2017
promulgated Scheme of budgetary support under CGST regime, inter
alia, to the units located in the then State of Jammu & Kashmir.
4. The petitioner was the eligible unit to take the benefit of
budgetary scheme, for it was availing the benefits under the rescinded
excise exemption notification No.1/2010 for the period immediately
preceding 01.07.2017, the petitioner filed refund application for the
period July, 2021 to September, 2021 and January, 2022 to March,
2022. The refund claims were filed by the petitioner as per the
procedure set out in the notification dated 05.10.2017 and the circular
issued on the subject providing for refund of 58% of CGST paid on the
inter-state supplies and 29% of IGST paid on intra-State supplies made
by the petitioner.
5. The respondent No.3 vide orders impugned allowed the refund of
Rs.6,86,078/- as against Rs.6,87,756/- for the period from July, 2021 to
September, 2021 and the refund claim for the period January, 2022 to
March, 2022 was accepted to the extent of Rs.3,82,290/- as against
Rs.3,89,460/- claimed in the application. The refund claims to the extent
of Rs.1678/- for the period of July, 2021 to September, 2021 and
Rs.7,170/- for the period of January, 2022 to March, 2022 were rejected
without indicating any reason.
6. The petitioner is, thus, aggrieved and has called in question the
impugned orders to the extent of rejection of part of refund claim on the
WP(C) No.2159/2022 4
grounds, which we have taken note of herein above. During the course
of arguments, it was contended by the learned counsel for the petitioner
that the petitioner-Unit had submitted refund claims for the indicated
period strictly as per the budgetary support scheme promulgated by the
Government of India, Ministry of Commerce and Industry in its
notification dated 05.10.2017. It is submitted that the eligibility of the
petitioner to the benefit of budgetary support by way of refund of
CGST/IGST paid on its supplies is not disputed by respondent No.3.
The respondent No.3 has rejected a part of the claim by adopting certain
calculations, which have not been made known to the petitioner.
7. Per contra, the stand of the official respondents, as divulged in
the objections filed by respondent Nos. 1 and 2, is that the amount of
budgetary support envisaged under the Scheme for specified goods
manufactured by eligible units is to the extent of 58% of the CGST and
29% of IGST paid through debit in the cash ledger account maintained
by the Unit in terms of Subsection (1) of Section 49 of the CGST Act,
2017 and Section 20(i) of IGST Act, 2017, after utilization of the input
tax credit of the central tax and integrated tax. It is not disputed that the
petitioner-Unit had applied for refund for the above indicated period on
account of budgetary support scheme promulgated in terms of
notification dated 05.10.2017. The amount, which was found due to the
petitioner was sanctioned by the respondents and the claim of excess
amount was rejected on the ground that it was not supported by the
budgetary support scheme. The manner in which the calculations were
WP(C) No.2159/2022 5
made to work out the refund due to the petitioner is, however, not
indicated in the objections.
8. Having heard learned counsel for the parties and perused the
material on record, we are of the considered opinion that the rejection of
part of refund claim of the petitioner by respondent No.3 flies in the
face of clear and unambiguous language of Notification dated
05.10.2017.
9. The claim of the petitioner that it is an eligible unit and is
engaged in the manufacturing and supplying of specified goods is not
disputed by the respondents. As a matter of fact, on the basis of
aforesaid status of the petitioner, major part of refund claim of the
petitioner has been accepted and sanctioned to be released in its favour
by respondent No.3. The only dispute, which is raised before us is with
regard to the mode and manner of determination of the amount of
budgetary support.
10. Para 5 of the Budgetary Support Scheme, which deals with the
determination of the amount of budgetary support, reads as under:-
“5. DETERMINATION OF THE AMOUNT OF BUDGETARY
SUPPORT 5.1 The amount of budgetary support under the scheme for
specified goods manufactured by the eligible unit shall be sum total of –
(i) 58% of the Central tax paid through debit in the cash ledger account
maintained by the unit in terms of sub-section(1) of section 49 the Central
Goods and Services Act, 2017 after utilization of the Input tax credit of the
Central Tax and Integrated Tax.
WP(C) No.2159/2022 6
(ii) 29% of the integrated tax paid through debit in the cash ledger account
maintained by the unit in terms of section 20 of the Integrated Goods and
Services Act, 2017 after utilization of the Input tax credit Tax of the Central
Tax and Integrated Tax. Provided where inputs are procured from a registered
person operating under the Composition Scheme under Section 10 of the
Central Goods and Services Act, 2017 the amount i.e. sum total of (i) & (ii)
above shall be reduced by the same percentage as is the percentage value of
inputs procured under Composition scheme out of total value of inputs
procured.
Explanation:-
Explanation-I
a Sum total worked out under clause (i) & (ii) Rs.200
b Percentage value of inputs procured under 20%
Composition Scheme out of total value of inputs
procuredC Admissible amount out of (a) above Rs(200-20% of
200) = Rs.160
Explanation- II
(a) Calculation of (ii) shall be followed by calculation of (i)
(b) To avail benefit of this scheme, eligible unit shall first utilize input tax
credit of Central tax and Integrated tax and balance of liability, if any, shall be
paid in cash and where this condition is not fulfilled, the reimbursement
sanctioning officer shall reduce the amount of budgetary support payable to the
extent credit of Central tax and integrated tax, is not utilized for payment of
tax.
5.2 The above 58% has been fixed taking into consideration that at present
Central Government devolves 42% of the taxes on goods and services to the
States as per the recommendation of the 14th Finance Commission.
5.3 Notwithstanding, the rescinding of the exemption notifications listed under
para 2 above, the limitations, conditions and prohibitions under the respective
notifications issued by Department of Revenue as they existed immediately
before 01.07.2017 would continue to be applicable under this scheme.
However, the provisions relating to facility of determination of special rate
WP(C) No.2159/2022 7
under the respective exemption notifications would not apply under this
scheme.
5.4 Budgetary support under this scheme shall be worked out on quarterly
basis for which claims shall be filed on a quarterly basis namely for January to
March, April to June, July to September & October to December.
5.5 Any unit which is found on investigation to over-state its production or
make any mis-declaration to claim budgetary support would be made in-
eligible for the residual period and be liable to recovery of excess budgetary
support paid. Activity relating to concealment of input tax credit, purchase of
inputs from unregistered suppliers (unless specifically exempt from GST
registration) or routing of third party production or other activities aimed at
enhancing the amount of budgetary support by mis-declaration would be
treated as fraudulent activity and, without prejudice to any other action under
law may invite denial of benefit under the scheme ab-initio. The units will
have to declare total procurement of inputs from unregistered suppliers and
from suppliers working under Composition Scheme under CGST Act, 2017.
5.6 The grant of budgetary support under the scheme shall be subject to
compliance of provisions relating to any other law in force.
5.7 The manufacturer applying for benefit under this scheme for the first time
shall also file the following documents:
(a) the copy of the option filed by the manufacturer with the jurisdictional
Deputy Commissioner/ Assistant Commissioner of Central Excise officer at
the relevant point of time, for availing the exemption notification issued by the
Department of Revenue;
(b) document issued by the concerned Director of Industries evidencing the
commencement of commercial production
(c) the copy of last monthly/quarterly return for production and removal of
goods under exemption notification of the Department of Revenue.
(d) An Affidavit-cum-indemnity bond, as per Annexure A, to be submitted on
one time basis, binding itself to pay the amount repayable under para 9 below.
Any other document evidencing the details required in clause (a) to (c) may be
accepted with the approval of the Commissioner.
WP(C) No.2159/2022 8
5.8 For the purpose of this Scheme, “manufacture” means any change(s) in the
physical object resulting in transformation of the object into a distinct article
with a different name or bringing a new object into existence with a different
chemical composition or integral structure. Where the Central Tax or
Integrated Tax paid on value addition is higher than the Central Tax or
Integrated Tax worked out on the value addition shown in column (4) of the
table below, the unit may be taken up for verification of the value addition:
Serial Chapter Description of goods Rate Description of
No. (%) inputs for
manufacture of
goods in column
(3)(1) (2) (3) (4) (5)
1. 17 or Modified Starch or 75 Maize, maize
35 glucose starch or tapioca
starch
2. 18 Cocoa butter or 75 Cocoa beans
powder
3. 25 Cement 75 Lime stone and
gypsum
4. 25 Cement clinker 75 Lime stone
5. 29 All goods 29 Any goods
6. 29 or Fatty acids or 75 Crude palm kernel,
38 glycerin coconut, mustard
or repeseed oil
7. 30 All goods 56 Any goods
8. 33 All goods 56 Any goods
9. 34 All goods 38 Any goods
10. 38 All goods 34 Any goods
11. 39 All goods 26 Any goods
12. 40 Tyres, tubes and 41 Any goods
flaps
13. 72 Ferro alloys, namely, 75 Chrone ore or
ferro chrome, ferro manganese ore
manganese or silico
manganese
14. 72 or All goods 39 Any goods, other
73 than iron ore
WP(C) No.2159/2022 9
15. 72 or Iron and steel 75 Iron ore
73 products
16. 74 All goods 15 Any goods
17. 76 All goods 36 Any goods
18. 85 Electric motors and 31 Any goods
generators, electric
generating sets and
parts thereof19 Any Goods other than 36 Any goods
chapter those mentioned
above in S. No.1 to
18Explanation: For calculation of the value addition the procedure
specified in notification no.01/2010-CE dated 06.02.2010 of the
Department of Revenue as amended from time to time shall apply
mutatis-mutandis.”
11. From a careful reading of paragraph No.5 reproduced herein
above, it becomes abundantly clear that an eligible unit manufacturing
specified goods is entitled to budgetary support to be calculated at the
rate of 58% of the central tax paid through debit in the cash ledger
maintained under Section 49(1) of CGST Act, 2017 and 29% of IGST
paid, after utilization of the input tax credit of the central tax and
integrated tax. This is so provided in Clauses 5.1(i) and 5.1(ii).
12. Clause 5.8 reproduced herein above, prescribes in the form of
table, the value addition for the purpose of payment of central tax or
integrated tax. It is not disputed before us that so far as the petitioner is
concerned, the value addition shall be calculated as per the notification
No.01/2010-Central Excise dated 06.02.2010 issued by the revenue as
amended from time to time. Clause 5.3 clearly lays down that
notwithstanding the rescinding of exemption notifications viz.
notification No.56/2002-CE dated 14.11.2002 and 01/2010-CE dated
WP(C) No.2159/2022 10
06.02.2010, the limitation condition and prohibition under the
respective notifications issued by the revenue department as they
existed immediately before 01.07.2017 would continue to be applicable
to the budgetary support scheme issued vide notification dated
05.10.2017. From a reading of notification dated 05.10.2017, in
particular paragraph No.5 in its entirety, it clearly comes out that the
amount of budgetary support to be released in favour of an eligible unit
is required to be determined in the following manner:-
i) 58% of CGST paid through debit in the cash ledger account
provided such tax through debit in cash ledger is paid after
utilization of the input tax credit of the central tax and integrated
tax.
ii) 29% of IGST paid through debit in cash ledger account provided
such amount in cash is paid after utilization of the input tax credit
of central tax and integrated tax.
iii) The CGST/IGST to be taken into account should be as paid on
value addition prescribed in the rescinded exemption
notifications.
iv) That the refund claims on account of budgetary support under the
notification dated 05.10.2017 shall not exceed the GST paid on
value addition.
WP(C) No.2159/2022 11
13. If we examine the refund claim submitted by the petitioner,
which is partly rejected by respondent No.3, in light of our
understanding of the notification dated 05.10.2017, we find that for the
quarter from July, 2021 to September, 2021 the amount of total CGST
paid by the petitioner was Rs.15,95,921/-. After utilizing the input
credit, the petitioner paid an amount of Rs.11,06,574/- by debit to the
cash ledger. Similarly, on account of IGST, the petitioner paid
Rs.1,58,424/- by debit to the cash ledger.
14. As per the budgetary support scheme, the amount which would
be payable to the petitioner on account of budgetary support would be
58% of the amount of CGST paid in cash, which would come to
Rs.6,41,913/-. Similarly, the petitioner would be entitled to refund of
Rs.45,943/- i.e. 29% of total IGST paid (Rs.1,58,424/-).
15. In the instant case, the CGST on value addition would be 75%
(Chapter 25 of Table of Excise Notification No.1/2020-CE dated
06.02.2010) of the total amount of CGSC paid for the quarter July, 2021
to September, 2021, which, in any case, would be exceeding the refund
claimed. In view of the aforesaid, we see no error or mistake
committed by the petitioner claiming a refund of Rs.6,87,756/-.We also
find no good reason emerging from the impugned order passed by
respondent No.3 to justify the rejection of claim of the petitioner for an
amount of Rs.1678/-, which the respondent No.3 has held to be an
amount inadmissible on account of budgetary support. We could have
WP(C) No.2159/2022 12
better analyzed the problem posed before us had the respondents
explained the manner in which the amount of budgetary support payable
to the petitioner was calculated.
16. In view of the aforesaid, we are left with no option but to hold
that the petitioner-Unit was entitled to refund of an amount of
Rs.6,87,756/- on account of reimbursement of budgetary support for the
CGST/IGST paid for the quarter July, 2021 to September, 2021 was
permissible.
17. As a result, the rejection of claim of Rs.1678/- in respect of
quarter July, 2021 to September, 2021 and Rs.7170/- for quarter
January, 2022 to March, 2022 by respondent No.3 is held bad and
contrary to the notification dated 05.10.2017. Respondent No.3 shall
take steps for release of the amount held inadmissible by it in the
sanction/rejection orders impugned in this petition passed in respect of
CGST/IGST paid by the petitioner for quarters July, 2021 to September,
2021 and January, 2022 to March, 2022 respectively.
18. The writ petition shall stand disposed of in the above terms.
(Puneet Gupta) (Sanjeev Kumar)
Judge Judge
JAMMU
04.04.2025
Vinod,PS
Whether the order is speaking : Yes/No
Whether the order is reportable: Yes/No
Vinod Kumar
2025.04.07 13.50
I attest to the accuracy and
integrity of this document
Jammu
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