SUN PHARMA LABORATORIES LIMITED Vs. UNION OF INDIA
LAWS(SIK)-2021-2-2
HIGH COURT OF SIKKIM
Decided on February 05,2021

Sun Pharma Laboratories Limited Appellant
VERSUS
UNION OF INDIA Respondents

JUDGEMENT

MEENAKSHI MADAN RAI,J. - (1.) The Petitioner herein assails the restrictions imposed by the Scheme of Budgetary Support, issued under the Goods and Services Tax regime vide Notification F.No.10(1)/2017-DBAII/ NER, dated 05.10.2017, by the Respondent No.1, reducing the quantum of benefits earlier availed by the Petitioner, thereby reneging on the promises made under the erstwhile Tax regime and adversely affecting the Petitioner. 1.(a) The Petitioner is a Private Limited Company engaged inter alia in the manufacture of P&P Medicaments and Consumer Health Products for which purpose Unit I was set up on 2005 and Unit II later in time, both situated at Ranipool, East Sikkim. 1.(b) The Petitioner's case is that vide a Memorandum, dated 17.02.2003, the Respondent No.1 notified the 'New Industrial Policy and other concessions for the State of Sikkim " ('Industrial Policy, 2003') which inter alia granted 100 per cent exemption from Excise duty for a period of ten years from the date of commencement of commercial production. Pursuant thereto, various exemption Notifications were issued under the respective Fiscal Statutes, including Central Excise original Notification No.56/2003-C.E., dated 25.06.2003. By this Notification, 100 per cent duty exemption was granted to the goods specified in the Schedule thereto, manufactured and cleared from a Unit located in Sikkim from so much of the duty of Excise leviable under the Central Excise Act, 1944 and other allied Acts as is equivalent to the amount of duty paid by the manufacturer of the goods other than the amount of duty paid by utilization of CENVAT Credit under the CENVAT Credit Rules, 2002 for a period of ten years from the date of commencement of commercial production. 1.(c) On 01.04.2007, the Respondent No.1 notified the North East Industrial and Investment Promotion Policy, 2007 ('Industrial Policy, 2007') thereby discontinuing the Industrial Policy of 2003. The Industrial Policy of 2007 also covered the State of Sikkim and inter alia provided that the new Units and existing Units which go in for substantial expansion and commence commercial production within ten years of the date of Notification of the said Policy, would be eligible for incentives for a period of ten years from the date of commencement of commercial production. It further provided that 100 per cent Excise duty exemption would be continued on finished products made in the North Eastern Region as available under NEIP, 1997. However, in cases where the CENVAT paid on the raw materials and intermediate products going into the production of finished products (other than the products which are otherwise exempt or subject to nil rate of duty) is higher than the Excise Duties payable on the finished products, ways and means to refund such overflow of CENVAT Credit will be separately notified by the Ministry of Finance. 1.(d) Based on the representations of the Respondent No.1, the Petitioner, by making substantial investments, set up the first Unit in 2005 and commenced commercial production on 20.04.2009. The second Unit set up later, commenced commercial production on 14.04.2014. Thus both Units started its commercial production within ten years from the date of issuance of Industrial Policy, 2007 and were enjoying the full refund of the Central Excise Duties paid by them by way of the mechanism provided in the exemption Notification. 1.(e) It is alleged that the Respondent No.1 issued Notifications No.21/2008-C.E. and 20/2008-C.E., both dated 27.03.2008, amending Notifications No.56/2003-C.E., dated 25.06.2003 and 20/2007-C.E., dated 25.04.2007, to curtail 100 per cent Excise duty exemption provided thereof. The benefit of exemption was sought to be reduced to the prescribed percentage of value addition amount i.e. 56 per cent applicable to pharmaceutical products mentioned in the respective Notifications and applicable Chapter. These amendments were challenged before this Court by the Petitioner in W.P.(C) No.41/2015, W.P.(C) No.08/2017, W.P.(C) No.27/2017 and W.P.(C) No.40/2017 and this Court quashed the impugned Notifications No.20/2008-C.E., dated 27.03.2008 and 38/2008-C.E., dated 10.06.2008, vide Judgment dated 21.11.2017. 1.(f) From 01.07.2017, the entire indirect Tax regime in the country underwent a major reform with the introduction of the Goods and Services Tax ('GST') which thereby introduced the Central Goods and Services Tax Act, 2017 (for short 'CGST Act'), the Integrated Goods and Services Tax Act, 2017 (for short 'IGST Act') and the Sikkim Goods and Service Tax Act, 2017. Section 174 of the CGST Act repealed the Central Excise Act, 1944 with certain exceptions and vide Notification No.21/2017-C.E., dated 18.07.2017, the Respondent No.1 rescinded Notifications No.20/2007-C.E., dated 25.04.2007 and 56/2003-C.E., dated 25.06.2003. 1.(g) In continuation of the earlier Industrial Policies as well as Excise Notifications to exempt the levy of Central Excise duty on the Goods manufactured and sold from the Units in the State of Sikkim, the Central Government provided for Budgetary Support Schemes for such Units under the GST regime. The Budgetary Support Scheme is applicable to the Units which were eligible for drawing benefits under the earlier Excise Duty Exemption/Refund Schemes and was applicable for the remaining period out of the total period not exceeding ten years, from the date of commencement of commercial production as specified under the erstwhile Notification. The amount of Budgetary Support under the Scheme for specified goods manufactured by the eligible Unit is specified as the sum total of 58 per cent of the Central Tax paid through debit in cash ledger account maintained by the Unit after full utilization of the input Tax Credit of the Central Tax and Integrated Tax and 29 per cent of the Integrated Tax paid through debit in cash ledger account maintained by the Unit after full utilization of the input Tax Credit of the Central Tax and Integrated Tax. The Excise Duty Exemptions availed by the Petitioner by way of refund in the pre GST regime, for both the Units were curtailed by the Respondent No.1 through the Budgetary Support Policy thereby reducing the benefit granted to the Petitioner. Therefore, the reduction in benefits on the supply of goods by the Petitioner is contrary to Article 14 of the Constitution of India (for short 'Constitution') and the Petitioner's right to avail the benefit of exemption cannot be taken away by the limited benefit provided under the Budgetary Support Scheme. That, the Respondent No.1 is estopped from imposition of CGST which was represented by them to be 100 per cent exempt for the specified period. Hence, the prayers in the Writ Petition.
(2.) Denying and disputing the allegations of the Petitioner, the Respondents No.1 and 2 in their Counter-Affidavit, reagitated that Notification No.20/2007-C.E., dated 25.04.2007, which was subsequently amended by Notification No.20/2008-C.E., dated 27.03.2008, was issued well before the Petitioner started its commercial production, which started after the amendment of exemption Notification restricting the refund. That, the confinement of 58 per cent of the Central Goods and Services Tax (for short 'CGST') and 29 per cent of the Integrated Goods and Services Tax (for short 'IGST'), has been fixed taking into consideration that at present the Central Government devolves 42 per cent of the Taxes on Goods and Services to the States, as per the recommendation of the 14th Finance Commission. Moreover, the power of exemption is variously described as conditional legislation and also a piece of delegated legislation. This power of the Central Government has to be exercised in public interest and there is no warrant for reading any limitation into this power. That, the new Budgetary Support Scheme is launched as a measure of goodwill only to the Units which were eligible for drawing benefits under the earlier Excise Duty Exemption/Refund Schemes but otherwise has no relation to the erstwhile Schemes and it is impossible to compare the benefits under the old Scheme and the new Scheme, neither is it feasible or desirable. This has been considered by the Central Government to be expedient in public interest and for revenue. That, in fact, the Petitioner has availed benefits extended by the Government under the Budgetary Support Scheme for various periods from July, 2017 through December, 2017 and after availing the benefits, they have filed the instant Writ Petition which is arbitrary and bad in law, on which ground alone the Petition deserves a dismissal. Moreover, the full benefit in respect of the share of the Central Revenue is being granted to the Petitioner and they have been availing of the said benefit from the Department. Hence, for the aforestated reasons, the Writ Petition is liable to be rejected.
(3.) The Respondent No.3 chose not to file any Counter- Affidavit.;


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