Union of India & Ors. Vs Zydus Wellness Products Ltd (Supreme Court of India)
The Supreme Court of India dismissed a special leave petition filed by the Union of India against Zydus Wellness Products Ltd., upholding a High Court’s ruling that the Budgetary Support Scheme (BSS) is “unit-specific.” The case centered on whether a manufacturing unit’s eligibility for budgetary support is lost if its ownership or corporate identity changes. The BSS was introduced post-GST to provide continued financial support to units in certain states, including Sikkim, that had previously enjoyed excise duty exemptions. These exemptions were initially granted to promote industrial development in backward regions by providing location-based incentives. Zydus Wellness, after a change in ownership and corporate identity, was denied BSS benefits by the Department of Revenue, which argued that the scheme was “owner-specific” and that the new corporate entity was not eligible.
However, the Supreme Court, after reviewing the BSS and its predecessor exemption schemes, determined that their primary objective was to support industrial growth in specific geographical locations. This focus on the physical manufacturing unit and its location, rather than the legal entity owning it, was consistent with the initial intent of the incentive schemes. The Court referenced a previous circular that clarified that a change in ownership alone doesn’t affect the continuity of such exemptions. Therefore, the High Court’s finding that the benefit under the BSS is tied to the physical unit, as long as its geographical location and manufacturing activity remain unchanged, was affirmed. This decision reinforces the legal position that ownership changes do not nullify eligibility for location-based industrial incentives, aligning the BSS with the government’s policy of promoting regional development.
