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Judgment & Order (Oral)
The instant petition under Article 226 of the Constitution of India, has been filed, being aggrieved by the rejection and denial of a claim for reimbursement of 30% subsidy under the Central Capital Investment Subsidy Scheme, 2007. The primary ground of challenge is that such denial has been made by the State Level Committee on irrelevant and extraneous considerations whereas, the petitioner claims to have met the eligibility criteria.
As per the facts projected, a scheme in the name of Central Capital Investment Subsidy Scheme 2007 was framed in terms of the North East Industrial and Investment Promotion Policy 2007 which, amongst others, provided for reimbursement of 30% of the total amount of investments in plants and machineries to eligible new industrial units as well as additional investment to the eligible existing units undergoing substantial expansion. The petitioner claims to be entitled for such reimbursement and had filed its claim for the third expansion. However, the State th Level Committee meeting in its 48 sitting held on 09.05.2018 had rejected such claim on the ground that though the investment was more than 25% in plant and machinery, there was no corroboration and support in the increase of production, power, VAT and CST return.The petitioners had represented against such rejection and the matter was taken up by the State Level Committee meeting held on 07.01.2019 in th its 54 sitting. However, on similar grounds, the claim has been rejected.
I have heard Dr. A. Todi, learned Counsel for the petitioner. I have also heard Shri S.R. Boruah, leaned State Counsel, Assam.
Dr. Todi, the learned Counsel has submitted that the entire objective of the Scheme,as explained by a number of judicial pronouncements, is to have industrial development in the area and accordingly such claims are to be construed in sync with the objective.He has submitted that the petitioner has fulfilled the eligibility criteria by undertaking substantial expansion of 25% which is as per the Scheme and therefore, was entitled for the benefits which, however, has been rejected. He has submitted that no criteria has been laid down that there has to be commensurate increase in the production. He has submitted that, as prescribed, such expansion has been done in a transparent and open manner which is under the continuous monitoring of the State Department.
By drawing the attention of this Court to the NEIIP-2007 dated 01.04.2007, the learned Counsel for the petitioner has referred to the aspect of substantial expansion as laid down in Sl. No. (vi) which reads as follows:
“Incentives on substantial expansion will 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', as against an increase by 33½% which was prescribed in NEIP, 1997.”
He has also submitted that Capital Investment Subsidy has been defined which reads as follows:
“(vii) Capital Investment Subsidy:
Capital Investment Subsidy will be enhanced from 15% of the investment in plant and machinery to 30% and the limit for automatic approval of subsidy at this rate will be Rs.1.5 crores per unit, as against Rs.30 lakhs as was available under NEIP, 1997. Such subsidy will be applicable to units in the private sector, joint sector, cooperative sector as well as the units set up by the State Governments of the North Eastern Region. For grant of Capital Investment Subsidy higher than Rs.1.5 crore but uptoa maximum of Rs.30 crores, there will be an Empowered Committee Chaired by Secretary, Department of Industrial Policy & Promotion with Secretaries of Department of Development of North Eastern Region (DONER), Expenditure, Representative of Planning Commission and Secretary of the concerned Ministries of the Government of India dealing with the subject matter of that industry as its members as also the concerned Chief Secretary/Secretary (Industry) of the North Eastern State where the claiming unit is to be located.
Proposals which are eligible for a subsidy higher than Rs.30 crores, will be placed by Department of Industrial Policy and Promotion before the Union Cabinet for its consideration and approval.”
The learned Counsel has also referred to the notification dated 27.07.2007 by which, the Scheme was notified under the policy. Paragraph 3 of the notification is on the applicability and he submits that there is no dispute regarding the application of the saidScheme to the unit of the petitioner. He has referred to the definition of “substantial expansion”as given in paragraph 4(d) which reads as follows:
“4. Definitions:
(d)‘Substantial expansion’ means 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.”
Likewise, the definitions of plant and machinery and the procedure for disbursement of capital investment subsidy as laid down in the saidScheme have also been pressed into service. For ready reference, the above are extracted hereinbelow:
“Plant and Machinery (for manufacturing sector)
(i)In calculating the value of plant and machinery, the cost of industrial plant and machinery as erected at site will be taken into account which will include the cost of productive equipments, such as tools jigs, dies & moulds, insurance premium etc.
(ii)The amount invested in goods carriers to the extent they are actually utilized for transport of raw materials and marketing of the finished products, will be taken into account.
(iii)Working capital including raw materials and other consumables stores, will be excluded for computing the value of plant and machinery.
6(a). Definition of ‘Plant and Machinery' and ‘components' which should be taken in to account for the purpose of this Scheme in respect of Service Sector, Bio-technology industry & Power Generating industries referred to in para 3 (I), (I) & (III) above would be notified separately.
9. Procedure for disbursement of capital investment subsidy
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 Financial Institution concerned (if the industrial unit is to be assisted by a financial institution), to go into details of each case to decide whether the unit qualifies for the grant of subsidy and also about the quantum of subsidy.”
The learned Counsel for the petitioner has reiterated that nowhere in the policy or the Scheme there is any scope to look into the aspect of increase in production or power, production, power or for examination of the VAT and CST returns. He has submitted that peripheral matters cannot be the sole ingredients to come to a conclusion for rejecting the claim of the petitioner when the petitioner has, otherwise fulfilled the requirements of the Scheme. In support of his submission, the learned counsel for the petitioner has relied upon the following case laws:
Under Secretary, Ministry of Industries & Ors. Vs. Marchon Textile Inds. (P) Ltd. & Anr., (2005) 10 SCC 554;
Bhabani Print and Publication & Anr. Vs. Union of India & Ors., (2018) 5 GLR 89;
Emami Ltd. & Anr. Vs. Union of India & Ors., (2020) 1 GLR 119.
The case of Marchon Textile (supra) has been cited to bring home the contention that the Scheme of grant of subsidy is to be construed in a practical and pragmatic approach so that the purpose is not frustrated. For ready reference, the relevant observations are extracted hereinbelow:
“8.The schemes floated by the State releasing grant of subsidy for industrial units to be set up in certain selected backward districts/areas have a benevolent and public purpose to achieve, and that is, to promote the growth of industries in such districts/areas which but for the State encouragement would continue to remain backward and the industrial investment will not be attracted to such areas. Such schemes have to be construed with practical and pragmatic approach so as to achieve and not frustrate the purpose sought to be achieved. The benefit of the scheme ought to be allowed, if it can be done. The applications should not be dealt with a hypertechnical approach or in a pedantic manner. If the application filed before the cut-off date is substantially in order and satisfies the formalities expected of the scheme, then an opportunity should be allowed to the applicant to cure the defects which are not of substantial nature or are capable of being cured so that the deserving units are not left out of the scheme.”
In the case of Bhabani Print and Publication (supra), the NEIIP, 2007 has been discussed. The primary objective being to support entrepreneurs to make investment towards setting up of industrial units or undertake substantial expansion of existing units in the NE region.
In the case Emami Ltd. (supra), this Court has led emphasis on the aspect of substantial compliance of the ingredients and not to reject on mere technicalities. The relevant observations are extracted hereinbelow:
“33.Viewed in the above context, resolution of State Level Committee dated 23.9.2011 and 24.9.2011 that plant and machinery purchased and installed after the date of commercial production 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.”
Towards the end of his submissions, the learned counsel for the petitioner, by drawing the attention of this Court to the affidavit-in-opposition filed by the respondent no.3 on 28.07.2026, has submitted that in paragraph 7 of the said affidavit where the justification has been sought to be made for such rejection, there is a reference to a communication dated 20.04.2017 which was never served upon the petitioner nor the same is in the public domain. He accordingly submits that the reasons for rejection appear to be opaque and there is no transparency in the matter which would require judicial interference.
Per contra, Shri S. Boruah, learned State Counsel has, however defended the action. He has submitted that though the petitioner has applied for subsidy under the th Scheme, the same was rejected by the 48 State Level Committee meeting which was not challenged in any forum. The petitioner had, rather applied for further consideration which was accordingly done by the State Level Committee meeting in its th 54 sitting held on 07.01.2019 and again the same has been rejected. He has submitted that when the original decision has not been put to challenge, the petitioner would be precluded from challenging a subsequent decision.On the merits, the learned State Counsel has submitted that the factors which have been taken into consideration by the State Level Committee meeting are germane and relevant as increase in production, power, VAT and CST returns are intrinsically connected with substantial expansion in plant and machinery.He has submitted that the decision has been taken bona fide which would not require any interference.
As regards the communication dated 20.04.2017 is concerned, as mentioned in paragraph 7 of the affidavit dated 28.07.2026, the learned State Counsel has submitted that the communication was issued by the Central Government to the respective State Governments on the applicability of the subsidy scheme which, amongst others had the aspect of production in terms of quantity and value, excise duty, employment generation etc. He has submitted that the action of the State Level Committee meeting cannot be faulted with as they had acted bona fide and in accordance with law.
The rival submissions have been duly considered and the materials placed before this Court have been carefully examined.
The Scheme is as per the NEIIP, 2007 which was announced on 01.04.2007.Both the policy and the Scheme by which this policy has been made applicable contain the definitions of substantial expansion,Capital Investment Subsidy, plant and machinery and also the procedures for claiming Capital Investment Subsidy and disbursement thereof. On a careful perusal thereof, the only requirement is that for claiming such a subsidy, there has to be 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. It is the specific case of the petitioner that such expansion has to be made after duly notifying the authorities and such expansion was also monitored. th th
What is also relevant to mention is that in both the 48 and 54 meeting of the State Level Committee, there is no denial that the petitioner unit has no Substantial Expansion of 25% and the refusal of subsidy is only on the ground that there is no corroboration and support by commensurate increase of production, power, VAT, CST return. While an application for subsidy is to be considered, such consideration has to be strictly in terms of this policy and the Scheme notified. As noted above, nowhere in the Policy or the Scheme,there is any requirement or need to examine as to whether there has been any commensurate increase in the production, power, etc.
This Court finds supports in the submission advanced by the learned counsel for the petitioner that though the aforesaid factors may be relevant, those cannot be the determining factors for denial of the benefits as there may be various reasons for not having an increase in the production. What is important is with regard to the fact of making a substantial expansion of more than 25% which is not disputed in the present case. The judicial pronouncements as explained above has clearly laid down that the Scheme is to be liberally construed if a unit otherwise meets the eligibility criteria.
In the instant case, there being no dispute that the unit in question has met the criteria of having substantial expansion of more than 25% in plant and machinery, the refusal of the subsidy on the grounds cited is held to be untenable in law and accordingly set aside. This court is also fortified in taking the decision by the principles laid down by the Hon'ble Privy Council in the case of Nazir Ahmed Vs. King Emperor, reported in AIR 1936 253 PC (II) wherein the following observations have been made:
“The rule which applies is a different and not less well recognized rule—namely, that where a power is given to do a certain thing in a certainway the thing must be done in that way or not at all. Other methods of performance are necessarily forbidden.”
In view of the aforesaid discussion, this Court is of the opinion that the impugned decision of the State Level Committee taken on 07.01.2019 is unsustainable in law and is accordingly set aside.
The case of the petitioner is to be considered afresh strictly in accordance with the policy of the Scheme and in the manner indicated above. Such consideration is to be made expeditiously and preferably within a period of 3 months from the date of receipt of a certified copy of this order.
At this stage, Shri Todi, learned counsel for the petitioner has submitted that there is also a prayer for payment of interest. This Court is, however of the opinion that when the Scheme in question does not speak of any such provision, this Court will refrain from making any such direction.
The writ petition accordingly stands disposed of in the manner indicated above.