Facts of the Case

This case turns on the Central Excise area-based exemption regime and the post-GST Budgetary Support Scheme, not on GST liability itself. Zydus Wellness Products Limited and Alkem Laboratories Limited had acquired manufacturing units in Sikkim from Zydus Wellness-Sikkim (a partnership firm) and Cachet Pharmaceuticals Private Limited respectively — units that had originally been availing area-based exemption under Central Excise Notification No. 20/2007-CE. When GST replaced the excise regime in July 2017, all such area-based exemption notifications were rescinded, and the Government introduced a Budgetary Support Scheme (via a DIPP notification dated 05.10.2017) to compensate “eligible units” for the residual period of their original exemption. After acquiring the units, the petitioners got themselves freshly registered under the CGST Act (Zydus Nutritions Ltd on 26.03.2019, Alkem on 03.10.2019) and applied for budgetary support under the Scheme, but their claims were rejected on the ground that they were new legal persons, not the original “eligible units” that had invested in and operated in Sikkim before the exemption was withdrawn.

Issues Involved

  1. Whether the petitioners, having acquired the Sikkim units after the exemption was withdrawn and having taken fresh GST registration as new legal persons, qualified as “eligible units” under the Budgetary Support Scheme.
  2. Whether the definition of “person” under Section 2(84) of the CGST Act, 2017, and the registration requirement under Section 22, was relevant in determining eligibility.

Petitioner's Arguments

  • The petitioners had taken over the manufacturing units that were originally eligible under exemption Notification No. 20/2007-CE and continued the same commercial production.
  • They should be treated as successors entitled to the residual period of budgetary support originally available to the units.

Respondent's Arguments

  • Under Section 2(84) read with Section 22 of the CGST Act, 2017, the petitioners were required to obtain, and did obtain, fresh GST registration as distinct legal “persons” following the change in ownership.
  • As new and distinct persons from Zydus Wellness-Sikkim and Cachet Pharmaceuticals, the petitioners did not exist at the time the original exemption notification applied, and could not be treated as “eligible units” under paragraph 4.1 of the Budgetary Support Scheme.
  • The Scheme was meant to support only those units that had made the original investment and suffered hardship from the untimely withdrawal of the excise exemption — not later acquirers.

Court Order / Findings

  • Justice Bhaskar Raj Pradhan held that, reading Section 2(84) (definition of “person”) with Section 22 (registration) of the CGST Act, 2017, the petitioners were separate and distinct legal entities from the original eligible units.
  • Since Zydus Nutritions Limited and Alkem Laboratories Limited did not exist as registered persons at the time the exemption notification applied to the Sikkim units, they could not claim entitlement to the Budgetary Support Scheme meant for the original “eligible units.”
  • Both writ petitions were dismissed; the department was directed to dispose of Alkem's pending claim applications in terms of the judgment.

Important Clarification

Although the Court applied CGST Act provisions to determine who counts as a “person” requiring fresh registration, the substantive dispute is about eligibility for a Central Excise-linked Budgetary Support Scheme following a change in business ownership — it is not a ruling on GST rates, credits, or GST liability. Businesses acquiring units that previously enjoyed area-based excise exemptions should note that a change of legal ownership, triggering fresh GST registration, can break continuity of eligibility for legacy compensation schemes tied to the original unit's identity.

Sections Involved

  • Central Goods and Services Tax Act, 2017 — Section 2(84) (definition of “person”) and Section 22 (registration requirement), used to determine legal identity for Scheme eligibility.
  • Central Excise Act, 1944 — Notification No. 20/2007-CE (area-based exemption for Sikkim units).
  • Budgetary Support Scheme notified by the Department for Promotion of Industry and Internal Trade on 05.10.2017.

Decision – In Favour of

In favour of the Respondents (Union of India and tax authorities) — both writ petitions were dismissed on the ground that the petitioners, as new registered persons, were not the “eligible units” entitled to budgetary support under the Scheme; this is a Central Excise/Budgetary Support Scheme ruling, not a GST liability determination.

Case Details

Court: High Court of Sikkim at Gangtok
Case Nos.: W.P.(C) No. 20 of 2022 (Zydus Wellness Products Ltd.) and W.P.(C) No. 27 of 2022 (Alkem Laboratories Ltd.)
Neutral Citation: 2023:SHC:143
Coram: Justice Bhaskar Raj Pradhan
Date of Judgment: 12.09.2023

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