The Hon’ble Supreme Court in UNION OF INDIA & ORS. Versus ZYDUS WELLNESS PRODUCTS LTD - 2025 (8) TMI 639 - SC Order held that while the Special Leave Petition (SLP) filed by the Union was maintainable despite prior compliance with the High Court’s order, no interference with the High Court’s judgment was warranted on merits.
Facts:
Zydus Wellness Products Ltd. ('the Petitioner') is a company engaged in the manufacture of cosmetics, food and beverages with manufacturing Units located in Sikkim.
The Union of India and the Department of Revenue ('the Respondent') issued Notification No. 20/2007-CE dated April 25, 2007 (as amended), granting excise duty exemptions to Units in specified states, including Sikkim, for 10 years. This was replaced post-GST with the Budgetary Support Scheme (BSS), notified on October 05, 2017.
The Petitioner sought budgetary support under the Budgetary Support Scheme (BSS). However, owing to procedural requirements relating to re-registration of Unique IDs and consequent delays arising from change in ownership and restructuring of the entity, the Respondent did not extend the benefit under the BSS.
The Petitioner contended that the benefit under the BSS was “Unit-specific” and not lost merely due to changes in ownership or name, as the Units remained the same geographically and functionally.
The Respondent contended that since the Petitioner's corporate identity and GSTIN changed, it was not entitled to budgetary support, asserting that benefits were “owner-specific.”
Aggrieved by the denial of UID allotment and budgetary support, the Petitioner approached the Hon’ble High Court of Sikkim through writ petitions seeking directions for UID issuance and claim processing under the BSS.
Issue:
Whether the Budgetary Support Scheme benefit is “owner-specific” or “Unit-specific” under the GST regime and whether a change in ownership disqualifies an otherwise eligible manufacturing Unit from claiming support under the BSS?
Held:
The Hon’ble Supreme Court in UNION OF INDIA & ORS. Versus ZYDUS WELLNESS PRODUCTS LTD - 2025 (8) TMI 639 - SC Orderheld as under:
- Observed that, a preliminary objection regarding maintainability was raised on the ground that the High Court’s order had already been complied with and no right to appeal was reserved.
- Noted that, the Petitioner failed to disclose that adjudication under the High Court's order was already completed before the SLP was filed by raising an issue of suppression.
- Further noted that, mere compliance with a court’s order does not bar a party from pursuing legal remedies, and suppression must be material to warrant rejection.
- Held no good ground existed to interfere with the well-reasoned order passed by the Division Bench of the High Court of Sikkim. The SLP was accordingly dismissed.
Our Comments:
The Supreme Court held that a combined reading of the term ‘person’ under Section 2(84) and the registration mandate under Section 22 of the CGST Act, 2017 made it evident that, following the change in ownership, Zydus Nutritions Limited (subsequently Zydus Wellness Products Limited) and Alkem Laboratories Limited were required to obtain fresh registration under Section 22 of the Act. In compliance, Zydus Nutritions Limited secured registration on March 26, 2019 under Rule 10(1), while Alkem Laboratories Limited did so on October 03, 2019. As a result, both entities, being legally distinct from their predecessors, i.e Zydus Wellness-Sikkim and Cachet Pharmaceuticals Private Limited, who were previously entitled to the benefit under Exemption Notification No. 20/2007-CE, were not eligible to apply for budgetary support under paragraph 7 of the Budgetary Support Scheme. The Supreme Court upheld the High Court’s findings that the benefit under the BSS is indeed “Unit-specific” rather than “owner-specific”.
This interpretation aligns with the object of both the original area-based exemption under Notification No. 20/2007-CE and the transitional BSS under GST, which aim to promote industrial growth in specified backward regions through location-based incentives. The High Court had emphasized that change in ownership or GST registration, without change in the Unit’s geographical location or manufacturing activity, should not nullify eligibility under the BSS.
This ruling is consistent with Circular No. 960/03/2012-CX dated February 17, 2012, which clarified that change in ownership alone does not affect the continuity of excise exemptions. The Hon’ble High Court of Sikkim had allowed a Writ in an identical issue in M/s Torrent Pharmaceuticals Ltd. (Unit-III), (Erstwhile Unichem Laboratories Ltd.), Versus Union of India, Commissioner of CGST, Siliguri, Under Secretary, Department for Promotion of Industry and Internal Trade New Delhi, Assistant Commissioner, CGST, Gangtok. - 2025 (4) TMI 553 - SIKKIM HIGH COURT. These decisions reinforce the position of the law with regard to similar issues.
Relevant Provisions:
Scheme of Budgetary Support under Goods and Service Tax Regime to the units located in States of Jammu & Kashmir, Uttarakhand, Himachal Pradesh and North East including Sikkim (F. No. 10(1)/2017‑DBA‑II/NER) datedOctober 5, 2017
“1.2 Units which were eligible under the erstwhile Schemes and were in operation through exemption notifications issued by the Department of Revenue in the Ministry of Finance, as listed under para 2 below would be considered eligible under this scheme. All such notifications have ceased to apply w.e.f. 01.07.2017 and stands rescinded on 18.07.2017 vide notification no. 21/2017 dated 18.07.2017. The scheme shall be limited to the tax which accrues to the Central Government under Central Goods and Service Act, 2017 and Integrated Goods and Services Act, 2017, after devolution of the Central tax or the Integrated tax to the States, in terms of Article 270 of the Constitution.
4. DEFINITIONS
4.1 “Eligible unit‟ means a unit which was eligible before 1st day of July, 2017 to avail the benefit of ab initio exemption or exemption by way of refund from payment of central excise duty under notifications, as the case may be, issued in this regard, listed in para 2 above and was availing the said exemption immediately before 1st day of July, 2017. The eligibility of the unit shall be on the basis of application filed for budgetary support under this scheme with reference to:
(a) Central Excise registration number, for the premises of the eligible manufacturing unit, as it existed prior to migration to GST; or
(b) GST registration for the premises as a place of business, where manufacturing activity under exemption notification no. 49/2003-CE dated 10.06.2003 and 50/2003-CE dated 10.06.2003 were being carried prior to 01.07.2017 and the unit was not registered under Central Excise.
4.2 “Specified goods‟ means the goods specified under exemption notifications, listed in paragraph 2, which were eligible for exemption under the said notifications, and which were being manufactured and cleared by the eligible unit by availing the benefit of excise duty exemption, from:
(a) The premises under Central Excise with a registration number, as it existed prior to migration to GST; or
(b) The manufacturing premises registered in GST as a place of business from where the said goods under exemption notification no. 49/2003-CE dated 10.06.2003 and 50/2003-CE dated 10.06.2003 were being cleared.
4.3 “Residual period‟ means the remaining period out of the total period not exceeding ten years, from the date of commencement of commercial production, as specified under the relevant notification listed in paragraph 2, during which the eligible unit would have been eligible to avail exemption for the specified goods. The documentary evidence regarding the date of commercial production shall be submitted in terms of para 5.7.”
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