The Hon’ble HC, Delhi in the matter of M/s Hero Motocorp Ltd. v. Union of India & Ors. [W.P.(C) 505/2020 & CM APPL. 1328/2020 dated March 2, 2020] dismissed the writ petition seeking complete exemption by way of reimbursement of the amount of Central Goods and Service Tax (CGST) and/or Integrated Goods and Service Tax (IGST), for the residual period of 10 years of area-based exemption Notification No. 50/2003- C.E. dated June 10, 2003 (Exemption Notification).
M/s Hero Motocorp Ltd. (“the Petitioner”) is engaged in the business of manufacturing of two wheelers in the State of Uttarakhand.
In the year 2002, special packages of incentives were announced to promote industrial development in the State of Uttarakhand. In pursuance thereto, Office Memorandum Order dated January 7, 2003, was issued, detailing the package of incentives. The fiscal incentive provided under the memorandum included 100% ab inito Central Excise Duty Exemption to new industrial units for a period of 10 years from the date of commencement of commercial production.
Thereafter, Exemption Notification was issued providing exemption to industrial units for a period not exceeding 10 years from the date of publication of notification in the Official Gazette or from the date of commencement of commercial production, whichever is later.
Since the Petitioner’s unit qualified for exemption under the Exemption Notification, it established a new industrial unit for manufacture of motor vehicles at Haridwar, Uttarakhand and commenced commercial production in its industrial unit from April 7, 2008 and continued to avail the benefits of the exemption notification till July 1, 2017.
With the implementation of GST, vide Notification No. 21/2017-C.E. (NT) dated June 30, 2017 various area-based exemption notifications, including the Exemption Notification were rescind w.e.f. July 1, 2017. Due to the rescission of the Exemption Notification, the beneficial incentives granted to the Petitioner, ceased to continue w.e.f. July 1, 2017.
Since the withdrawal of the Exemption Notifications caused financial hardships, the GST Council decided that it would provide budgetary support to the eligible units for the residual exemption period by way of part reimbursement of GST, paid by the unit, limited to the Central Government’s share of CGST and/or IGST retained after devolution of a part of these taxes to the States. Accordingly, the Central Government notified the Budgetary Support Scheme providing reimbursements of Central Government’s share of the cash component of CGST and IGST i.e. 58% of CGST and 29% of IGST, in lieu of exemption provided under the Exemption Notification.
The Petitioner filed writ petition to seek a direction to Union of India (“Respondent”) to grant “complete exemption by way of reimbursement of the amount of CGST and IGST for the residual period of Exemption Notification”.
The Hon’ble HC, Delhi in W.P.(C) 505/2020 & CM APPL. 1328/2020 dated March 2, 2020 held as under:
Section 174 (2) (c) of the CGST Act
“Repeal and saving.
174. (2) The repeal of the said Acts and the amendment of the Finance Act, 1994 (32 of 1994.) (hereafter referred to as “such amendment” or “amended Act”, as the case may be) to the extent mentioned in the sub-section (1) or section 173 shall not-
(c) affect any right, privilege, obligation, or liability acquired, accrued or incurred under the amended Act or repealed Acts or orders under such repealed or amended Acts:
Provided that any tax exemption granted as an incentive against investment through a notification shall not continue as privilege if the said notification is rescinded on or after the appointed day; or”
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