EMAMI LIMITED and ANR V. THE UNION OF INDIA and 5 ORS

WP(C)/4649/2013

AI Insights

The case involves Emami Limited and Sri Jaswant Sethia challenging the decisions of the State Level Committee (SLC) regarding the reduction of the central capital investment subsidy claimed by Emami Limited for its new manufacturing unit in Abhoypur, North Guwahati. The dispute centered on whether investments made in plant and machinery after the commencement of commercial production were eligible for subsidy under the North East Industrial and Investment Promotion Policy (NEIIPP, 2007) and the Central Capital Investment Subsidy Scheme, 2007 (CCISS, 2007). The court found that the SLC's resolutions excluding such investments were inconsistent with the policy's objectives and the scheme's provisions, leading to the remand for re-evaluation of the subsidy claim.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 722490 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 25-06-2019
• Assessment Year: misc
• Laws Referred To: Article 226 of the Constitution of India, Companies Act, 1956, North East Industrial and Investment Promotion Policy (NEIIPP, 2007), Central Capital Investment Subsidy Scheme, 2007 (CCISS, 2007)
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: A KALITA; M DUTTA
• Assessee Lawyers: M L GOPE; A SARAF; S P SARMA
• Keywords: Commercial production; Industrial Unit; Substantial Expansion; Capital investment subsidy; State Level Committee; Central Capital Investment Subsidy
• Section: 226

Judgement Text

"Page No.# 1/9 GAHC010131072013 THE GAUHATI HIGH COURT (HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH) Case No. : WP(C) 4649/2013 1:EMAMI LIMITED and ANR A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 HAVING ITS REGISTERED OFFICE SITUATED AT 687, ANANDPUR, E.M. BYPASS, KOLKATA- 700 107 AND HAVING ONE OF ITS INDIVIDUAL UNIT AT ABHOYPUR, PO. COLLEGE, NAGAR, NORTH GUWAHATI, GUWAHATI, ASSAM 2: SRI JASWANT SETHIA S/O SRI JAWAHARLAL SATHIA R/O NILGIRI APARTMENTS HOUSE NO. 104H ADHABARI TINIALI GUWAHATI KAMRUP ASSAM VERSUS 1:THE UNION OF INDIA and 5 ORS REP. BY THE SECRETARY TO THE GOVT.OF INDIA, MINISTRY OF INDUSTRIAL DEVELOPMENT, DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION, NEW DELHI. 2:STATE OF ASSAM REP.BY THE COMMISSIONER AND SECRETARY TO THE GOVT. OF ASSAM DEPARTMENT OF INDUSTRIES AND COMMERCE DISPUR GUWAHATI- 781006. 3:COMMISSIONER OF INDUSTRIES AND COMMERCE ASSAM UDYOG BHAWAN BAMUNIMAIDAM GUWAHATI-781021. 4:COMMISSIONER AND SECRETARY TO THE Page No.# 2/9 STATE OF ASSAM FINANCE DEPARTMENT ASSAM SECRETARIAT DISPUR GUWAHATI. 5:DIRECTOR OF INDUSTRIES AND COMMERCE CENTRE KAMRUP GUWAHATI. 6:NORTH EAST INDUSTRICAL DEVELOPMENT FINANCE CORPORATION DISPUR GUWAHATI- 781006 Advocate for the Petitioner : MR.M L GOPE Advocate for the Respondent : GA, ASSAM BEFORE HONOURABLE MR. JUSTICE UJJAL BHUYAN ORDER Date : 25-06-2019 Heard Dr A Saraf, learned Senior Counsel, assisted by Mr S P Sarma, learned counsel for the petitioners and Mr A Kalita, learned Standing Counsel, Industries and Commerce Department, Government of Assam. Also heard Mr M Dutta, learned counsel for the North East Industrial Development Finance Corporation (NEDFi) 2. The two petitioners are Emami Limited and Sri Jaswant Sethia. Petitioner No. 1, Emami Limited, is a public limited company incorporated under the Companies Act, 1956, having its registered office at Kolkata and one of its unit is at Abhoypur, North Guwahati, Guwahati in the State of Assam. Petitioner No. 2, Sri Jaswant Sethia, is the General Manager (Commercial) of petitioner No. 1. 3. By filing this petition under Article 226 of the Constitution of India, petitioners seek quashing of decision taken by the State Level Committee meeting dated 23.09.2011, 24.09.2011 and 19.12.2011 as well as consequential rejection letter dated 31.07.2012 issued by the Commissioner of Industries and Commerce, Government of Assam. Additionally, petitioners seek a direction to the respondents for Page No.# 3/9 payment of the subsidy amount on the complete capital investment made by petitioner No. 1. 4. Matter relates to payment of central capital investment subsidy to petitioner No. 1; rather reduction in the claim of central capital investment subsidy. 5. A brief narration of facts would be in order. 6. Government of India vide Office Memorandum dated 01.04.2007 had announced a package of fiscal incentives and other concessions for the North-Eastern Region called- North East Industrial and Investment Promotion Policy (for short, ‘NEIIPP, 2007’). As per NEIIPP, 2007, all new units as well as existing units as on the date of introduction of the policy going for substantial expansion, commencing commercial production within 10 years from the date of notification of the policy would be eligible for incentives and exemptions for a period of 10 years from the date of commencement of commercial production. Thus, industrial units found eligible would be entitled to various exemptions as well as incentives. Amongst others, NEIIPP, 2007 provided the benefit of capital investment subsidy for setting up a new industrial unit or for substantial expansion of an existing unit. 7. Pursuant to NEIIPP, 2007, Government of India issued notification dated 31.07.2007 introducing a scheme called Central Capital Investment Subsidy Scheme, 2007 (‘CCISS, 2007’, for short). This scheme came into effect from 01.04.2007. As per CCISS, 2007, all eligible units located in the North Eastern Region would be provided capital investment subsidy @ 30% of investment in plant and machinery or additional investment in plant and machinery. The above scheme was subsequently amended vide notifications dated 12.09.2007 and 21.09.2007, where certain definitions were amended and addenda were made. 8. Details of NEIIPP, 2007 and CCISS, 2007 would be adverted to at a subsequent stage of the judgment. 9. Suffice it to say, petitioner No. 1 responded to NEIIPP, 2007 and decided to set up a new manufacturing unit at Abhoypur, North Guwahati in the State of Assam. Petitioner applied for registration with the Directorate of Industries and Commerce and submitted project report indicating capital investment. Total capital investment claimed by the petitioners was ₹ 15.25 crore. However, Industries and Commerce Department, Government of Assam approved ₹ 14.19 crore as the capital investment. Be that as it may, petitioner No. 1 commenced commercial production at its new industrial unit at Abhoypur, North Guwahati, w.e.f. 31.07.2008. 10. A Sub-Committee was constituted by the respondents which carried out spot inspection of the Page No.# 4/9 industrial unit and recommended that an amount of ₹ 4,24,74,316.00 be paid as 30% central capital investment subsidy. 11. State Level Committee in its 14th meeting held on 23.09.2011 and 24.09.2011 adopted a resolution to the effect that plant and machineries purchased and installed after date of commercial production should not be considered as admissible capital investment. Investments made after the date of commercial production should be claimed separately as expansion/modernization/diversification etc. as per the provisions contained in the NEIIPP, 2007. 12. Petitioner No. 1 has contended that on the date of commencement of commercial production, some of the plants and machineries were not installed though for those plants and machineries, orders were placed before the date of commencement of commercial production, i.e., prior to 31.07.2008. It is another matter that such plant and machineries were installed subsequently after the date of commencement of commercial production. 13. State Level Committee in its 15th meeting held on 19.12.2011, following the resolution adopted in its 14th meeting, reduced the recommended amount on which capital investment subsidy was claimed on the ground that investments made for commercial production could not be claimed as subsidy under the said scheme, but could be claimed separately as expansion of the industrial unit. Eligible investment in plant and machinery was assessed at ₹ 3,38,91,754.00 out of which ₹ 1,01,67,526.00 was approved as the 30% central capital investment subsidy. 14. Letter written by petitioners were not considered, rather rejected on the ground that machinery purchased after commencement of commercial production and expenditure incurred on that count were not eligible for subsidy in respect of a new unit. This has reference to letter dated 18.07.2012 of the Commissionerate of Industries and Commerce to the Government. 15. Contending that central capital investment subsidy claimed by the petitioners cannot be termed as a subsidy claim for expansion/modernization/diversification, rather is a composite claim for capital investment, present writ petition has been filed seeking the reliefs as indicated above. 16. Notice in this case was issued on 20.08.2013. 17. Despite notice being issued, no affidavit was filed by the State respondents, though NEDFi filed affidavit. On 19.04.2017, this Court directed the State respondents to positively file counter affidavit. However, no counter affidavit was filed despite the fact that several dates and opportunities were granted to the State respondents to file counter affidavit. Finally, on 25.01.2019, considering the long Page No.# 5/9 pendency of the case, Court observed that an endeavour would be made to dispose of the writ petition. 18. Thereafter, the matter was heard. 19. Respondent No. 6, i.e., NEDFi in its affidavit filed on 14.11.2013, has stated that NEDFi is the designated nodal agency appointed by the Government of India for the purpose of disbursement of central capital investment subsidy in the North-Eastern States under NEIIPP, 2007. Role of NEDfi is limited to the extent of guidelines issued by the Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry, Government of India. Responsibility of admitting claims from concerned units, processing of the claim papers, computation of the eligible subsidy amount payable to the unit and final recommendation for disbursement of such subsidy rests with the State Government. Claims of units for central capital investment subsidy are approved by the District Level Committee or the State Level Committee, as the case may be. Only after the claims are approved, Department of Industrial Policy and Promotion releases fund to NEDFi along with a list of the units and the corresponding amount to be disbursed to such units. Therefore, NEDFi can disburse the subsidy amount to the individual units only as per approval. 20. As noticed above, other respondents, i.e., the State respondents have not filed affidavit. To that extent, averments made in the writ petition have remained uncontroverted. 21. Submissions made by learned counsel for the parties have been considered. 22. At the outset, it would be apposite to refer to the relevant provisions of NEIIPP, 2007 and CCISS, 2007; further referred to hereinafter as the policy and the scheme. The policy covered all the states of North-Eastern India and all new units as well as existing units going in for substantial expansion and which commenced commercial production within 10 years period from the date of notification of the policy would be eligible for incentives for a period of 10 years from the date of commencement of commercial production. It may be mentioned that the policy became effective from 01.04.2007. 23. Under the heading –“Substantial Expansion”, it was provided that incentives on substantial expansion would be given to units effecting “an increase by not less than 25% in the value of fixed capital investment in plant and machinery for the purpose of expansion of capacity/modernization and diversification”. It provided that there would be 100 % Excise Duty exemption as well as 100 % Income Tax exemption under the policy. Besides, there would be capital investment subsidy to the extent of 30% and interest subsidy @ 3% on working capital loan. In addition, there would be 100% reimbursement of insurance premium Page No.# 6/9 24. As per Clause-XV, NEDFi would be the nodal agency for disbursal of subsidies under the policy. 25. Government of India in the Ministry of Commerce and Industry issued notification dated 27.07.2007, introducing the scheme CCISS, 2007 (already referred to as “the Scheme”) with a view to accelerate industrial development for the North-Eastern region. It was mentioned that it would come into effect from 01.04.2007 and remain in force upto and inclusive of 31.03.2017. Clause-4 of the notification deals with definitions. ‘Industrial unit’ has been defined under Clause-4 (a) to mean any industrial undertaking, suitable servicing unit other than that run departmentally by the Government. As per Clause-4 (b), ‘new industrial unit’ means an industrial unit for the setting up of which effective steps were not taken prior to 01.04.2007; under Clause-4 (c), ‘existing industrial unit’ means an industrial unit for the setting up of which effective steps were taken prior to 01.04.2007. ‘Substantial expansion’ has been defined under Clause-4 (d) to mean increase in the value of fixed capital investment in plant and machinery of an industrial unit by not less than 25% for the purpose of expansion of capacity/modernization and diversification. ‘Effective steps’ has been defined under Clause-4 (e) to mean any one or more of the following steps:- i) 10% or more of the capital issued for the industrial unit has been paid up, ii) any part of the factory building has been constructed, and, iii) a firm order has been placed for any plant and machinery required for the industrial unit. Under Clause- 4 (f), ‘Fixed capital investment’ has been defined to mean investment in plant and machinery for the purpose of the scheme. 26. As per Clause-5, all eligible industrial units located anywhere in the North Eastern region shall be given capital investment subsidy @ 30% of their investment in plant and machinery or additional investment in plant and machinery. 27. Plant and machinery and calculation of the value of plant and machinery are dealt with under Clause-6. Clause-9 lays down the procedure for disbursement of capital investment subsidy, which says that each State Government concerned will set up a State Level Committee (SLC) consisting of a representative of each of the State Finance Department, State Industries Department, State Directorate of Industries, NEDFi and the concerned Financial Institution. The State Level Committee (SLC) shall go into details of each case to decide whether the unit qualifies for the grant of subsidy and also about the quantum of subsidy. 28. Having noticed the above, facts of the present case may now be adverted to. 29. State Level Committee (SLC) in so far State of Assam is concerned, held its 14th meeting for 30% central capital investment subsidy under the policy on 23.09.2011 and 24.09.2011. As per Page No.# 7/9 Resolution No. 3, State Level Committee (SLC) decided that plant and machineries purchased and installed after the date of commercial production should not be taken as admissible investment. Investment made after date of commercial production should be claimed separately as expansion/ modernization/diversification etc. as per the provisions of the policy. Member Secretary was asked to re-examine all investment claims and to deduct all investments made after date of commercial production from the 30% central capital investment subsidy. Aforesaid resolution is extracted hereunder:- “The Committee resolved that the Plant and Machineries purchased and installed after date of commercial production should not be considered as admissible investment. Investment made after date of commercial production should be claimed separately as expansion/modernization/diversification etc. as per provision in the NEIIPP’07 guideline. Member Secretary has been advised to re-examine and deduct all investments made after date of commercial production from the 30% CCIS claims placed in the meeting. The committee further advise to modify the eligibility and non-eligibility list [ as annexure-II and III] and incorporate ‘date of completion of installation of plant and machineries’ instead of ‘installation of plant and machineries’.” 30. Following the above, State Level Committee (SLC) in its 15th meeting held on 19.12.2011, considered the claim of petitioner No. 1 along with others. State Level Committee (SLC) considered ₹ 3,38,91,754.00 as the eligible investment in plant and machinery, out of which 30% was approved as central capital investment subsidy, amounting to ₹ 1,01,67,526.00. When petitioner No. 1 sought for re- consideration of the subsidy amount, Commissionerate of Industries and Commerce, Assam informed the Government vide letter dated 18.07.2012 that 30% of central capital investment subsidy claim of petitioner No. 1 was processed initially as per earlier decision of State Level Committee (SLC), wherein, it was decided to include plant and machinery purchased within one year of the date of commercial production. In the case of petitioner No. 1, date of commercial production is 31.07.2008. It was stated that within the period of one year from the date of commercial production, petitioner No. 1 had installed other lines of productions and accordingly claim was processed. It was pointed out that the Sub-Committee carried out spot inspection and recommended ₹ 4,24,74,316.00 as 30% central capital investment subsidy. The claim was placed before the State Level Committee (SLC). In its meeting held on 23.09.2011, State Level Committee (SLC) decided not to consider the investment made after the date of commercial production. Accordingly, the claim was re-processed, whereafter, it Page No.# 8/9 was placed before the State Level Committee (SLC) on 19.12.2011 and an amount of ₹ 1,01,67,526.00 was approved as 30% central capital investment subsidy. 31. Short point for consideration is whether State Level Committee (SLC) was justified in not considering the investments made in plant and machinery which were installed after the date of commercial production. 31.1. To appreciate the above, it would be apposite to advert to the policy and the scheme once again. 32. As per the policy, all new units as well as those going for substantial expansion commencing commercial production within 10 years from the date of notification of the policy would be eligible for the notified incentives and exemptions. The scheme framed to give effect to the policy defines ‘substantial expansion’ to mean increase in the value of fixed capital investment in plant and machinery by not less than 25%. ‘New industrial unit’ has been defined to mean an industrial unit for the setting up of which effective steps were not taken prior to 01.04.2007. What are effective steps have been explained under Clause-4 (e). In so far extent of admissible subsidy is concerned, all eligible industrial units are entitled to central capital investment subsidy @ 30% of investment in plant and machinery or additional investment in plant and machinery. Therefore, to properly appreciate the objective of the policy and the scheme, what is essential to note is that investment in plant and machinery must be relatable to the new industrial unit in a case dealing with new industrial unit or must be relatable to an existing industrial unit in a case relatable to substantial expansion. In so far case of petitioner No. 1 is concerned, it is the admitted position that it is a new industrial unit and the date of commercial production is 31.07.2008. Any investment made for plant and machinery between 01.04.2007 and 31.07.2008, be it on the basis of actual payment or deferred payment, would be eligible for central capital investment subsidy. In a given case, it could very well be that such investments were made prior to the date of commercial production, but installation of certain plants and machineries which could be ancillary or otherwise, is after the date of commercial production That cannot be a ground to deny central capital investment subsidy on such investments made in plant and machinery. Larger objective of the policy and the scheme is to accelerate industrial development in the North Eastern region. Therefore, date of installation of plant and machinery would not have much relevance. What would be relevant is relatability of the investments to such plant and machinery vis-à-vis commercial production of the industrial unit. 33. Viewed in the above context, resolution of State Level Committee dated 23.09.2011 and 24.09.2011 that plant and machinery purchased and installed after the date of commercial production Page No.# 9/9 should not be considered as admissible investment is a deviation from the policy and the scheme. Mandate of State Level Committee (SLC) is to go into details of each case to decide whether the industrial unit qualifies for grant of subsidy and also about quantum of subsidy. What State Level Committee (SLC) has done in this case is that it had laid down some kind of a policy as per which purchase and installation of plant and machinery after the date of commercial production would be considered as inadmissible investment. It is not only beyond the policy and the scheme, but also runs counter to the policy and the scheme as discussed above. As discussed, it is not the purchase and installation of plant and machinery post date of commercial production which is relevant but what is relevant is the relatability of the investment in plant and machinery to commercial production of the industrial unit. If indents were placed after 01.04.2007 but before 31.07.2008, the fact that certain plants and machineries were installed post date of commercial production would be of no consequence. 34. Therefore, on a thorough consideration of the matter and in the light of the discussions made above, resolution taken by the State Level Committee (SLC) on 23.09.2011 and 24.09.2011 vis-à-vis claim of petitioner No. 1 is beyond the policy and the scheme. Accordingly, the same is interfered with. Matter is remanded back to the State Level Committee (SLC) to re-determine the quantum of central capital investment subsidy to which petitioner No. 1 is entitled in terms of the policy and the scheme dehors the resolution dated 23.09.2011 and 24.09.2011. Such consideration would be made within a period of 3 (three) months from the date of receipt of a certified copy of this order. 35. Writ petition is accordingly allowed to the extent indicated above, but there shall be no order as to cost(s). JUDGE Comparing Assistant "