Budgetary support under GST cannot exclude otherwise eligible units solely for lack of Central Excise registration.

The budgetary support scheme under the GST regime was meant to continue the residual excise-based incentive for existing eligible industrial units under the North East industrial policy. Excluding units that were otherwise eligible but had not registered under Central Excise because their turnover was below the threshold or because they manufactured exempt goods was held to create an irrational class within a class, with no rational nexus to the scheme's object. The clarificatory circular limiting support to units that had been registered and had actually paid excise duty was held to travel beyond the scheme and to be inconsistent with Article 14. The exclusion was therefore unlawful, the circular was set aside to that extent, and the authorities were directed to consider extension of benefits on individual examination.

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Issues: Whether the denial of budgetary support under the GST-era scheme to industrial units that were eligible under the North East industrial policy but were not registered under the Central Excise law because their turnover was below the threshold limit or because they manufactured excisable goods exempt from duty was lawful, and whether the clarificatory circular excluding such units was valid.

Analysis: The budgetary support scheme was framed to extend financial support for the residual period to existing eligible manufacturing units that had been entitled to area-based excise exemptions under the earlier industrial policy framework. The scheme required reference to Central Excise registration in some cases, but its object was to continue the promised benefit to eligible units after GST subsumed central excise. The exclusion of units that were otherwise eligible under the industrial policy, but which had not paid excise duty only because they fell below the registration threshold or manufactured exempt goods, created a class within a class. The Court held that this classification had no rational nexus with the object of the scheme, especially because all such units were now liable to GST and the scheme itself did not provide any mechanism to isolate a central excise component within GST. The clarificatory circular restricting the scheme to units that had been registered under central excise and had actually paid excise duty was held to travel beyond the scheme and to be inconsistent with Article 14.

Conclusion: The exclusion of the petitioners from budgetary support was held unlawful, the clarificatory circular was set aside to that extent, and the respondents were directed to consider and extend the scheme benefits to eligible petitioners on individual examination.

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