Subsidy entitlement under an industrial scheme is not defeated by nil VAT liability where the scheme allows alternative disbursement.

The West Bengal State Support for Industries Scheme, 2008 separated eligibility from the mode of subsidy disbursement: Clause 6 governed entitlement, while Clause 16 dealt only with payment mechanics. Clause 16.10 allowed subsidy to be adjusted against VAT paid, but also provided for payment of any balance by account payee cheque where full adjustment was not possible. On that basis, actual VAT liability or payment was not a condition precedent to entitlement, and the sanctioned subsidy could not be refused merely because the petitioners were not liable to pay VAT.

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Issues: Whether the petitioners were entitled to subsidy under the West Bengal State Support for Industries Scheme, 2008 despite not being liable to pay VAT, and whether Clause 16 of the Scheme made actual VAT payment an eligibility condition.

Analysis: The Scheme's eligibility conditions are set out in Clause 6, while Clause 16 only regulates the mode of payment. Clause 16.10 expressly provides for adjustment of subsidy against VAT paid, but also contemplates payment of the balance by account payee cheque at the end of the tenth year where full adjustment is not possible. The sanction letter did not require proof that VAT was in fact payable or paid as a condition precedent to entitlement. The communications from the tax authorities showed that the petitioners' net VAT liability had been reduced to nil, and the authorities themselves treated the petitioners as a case where the sanctioned subsidy could not be fully adjusted against VAT. In that situation, there was no basis to deny disbursement of the sanctioned subsidy.

Conclusion: The petitioners were entitled to the subsidy, and the respondents could not refuse disbursement on the ground that the petitioners were not liable to pay VAT.

Final Conclusion: The writ petition succeeded, and the respondents were directed to release the entire sanctioned subsidy within the stipulated time, with interest if payment was delayed.

Ratio Decidendi: Where a scheme separates eligibility from the mode of disbursement, absence of VAT liability does not defeat entitlement to subsidy if the scheme itself provides an alternative mechanism for payment when VAT-based adjustment is not possible.

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