Jammu & Kashmir High Court
Reserved On: 26.02.2026 vs Ut Of Jammu & Kashmir Through on 8 April, 2026
Author: Rajnesh Oswal
Bench: Rajnesh Oswal
2026:JKLHC-JMU:981-DB
IN THE HIGH COURT OF JAMMU & KASHMIR AND LADAKH
AT JAMMU
Case No: WP(C) No. 956/2023
CM No.2266/2023
c/w
WP(C) No. 953/2023
CM No. 2261/2023
Reserved on: 26.02.2026
Pronounced on:08.04.2026
Uploaded on:08.04.2026
Whether the operative part or full
Judgment is pronounced : Full
M/s Vijay Steel Industries
SIDCO Industrial Complex,
Bari Brahamana, Jammu
Jammu & Kashmir.
...Petitioner(s)/Appellant(s)
Through: Mr. Gautam Chugh, Advocate.
v/s
UT of Jammu & Kashmir through
State Tax Officer, Circle-G,
Excise & Taxation Complex,
Jammu. .... Respondent(s)
Through: Ms. Monika Kohli. Sr.AAG with Ms. Sagira
Jaffer, Assisting counsel.
CORAM: HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE RAJNESH OSWAL, JUDGE.
JUDGMENT
PER OSWAL-J
1. The case set up in the present petition by the petitioner is that, in
terms of Notification No. 56/2002-CE dated 14.11.2002, the petitioner
WP(C) No. 956/2023 c/w WP(C) No.953/2023 Page 1 of 11
2026:JKLHC-JMU:981-DB
established a new unit for the manufacture of Tor Steel, M.S. Angle,
M.S. Flat, M.S. Round, M.S. Square, Ribbed Bars and TMT Bars and
commenced its commercial production with effect from 04.10.2005.
In terms of the said notification, the petitioner was entitled to
exemption from payment of excise duty, by way of refund, for a
period of ten years from the date of commencement of commercial
production.
2. In the interregnum, Notification No. 01/2010-CE dated 06.02.2010
came to be issued, whereby certain specified goods manufactured and
cleared from units located in the erstwhile State of Jammu & Kashmir
were exempted from excise duty. The said exemption was also
available to new industrial units or to the industrial units existing
before 06.02.2010 which had undertaken substantial expansion by
way of increase of not less than 25% in the value of fixed capital
investment in plant and machinery or had made new investments in
terms of the prescribed conditions.
3. The petitioner completed the substantial expansion of its unit and
commenced commercial production with effect from 26.05.2015 and,
on the recommendation made by the District Industries Centre, the
General Manager, DIC, Jammu acknowledged the said date of
production as 26.05.2015 in favour of the petitioner.
4. Thereafter, upon the roll out of the GST regime with effect from
01.07.2017, the Government of India rescinded Notification No.
56/2002 dated 14.11.2002 and Notification No. 01/2010-CE dated
06.02.2010 vide Notification No. 21/2017 dated 18.07.2017.
Subsequently, the Government of India issued Notification No.
WP(C) No. 956/2023 c/w WP(C) No.953/2023 Page 2 of 11
2026:JKLHC-JMU:981-DB
10(1)/2017-DBA-II/NER dated 05.10.2017 (SBS) as well as CBEC
Circular No. 1060/9/2017-CX dated 27.11.2017 providing for
budgetary support, whereby an amount equivalent to 58% of the
Central Goods and Services Tax (CGST) and 29% of the Integrated
Goods and Services Tax (IGST) paid by the petitioner, after
utilization of the input tax credit, was to be granted.
5. The State Government adopted the scheme introduced by the
Government of India and issued similar notifications allowing
reimbursement of State taxes as well as a portion of the Central taxes
vide Notification Nos. 519 and 521, both dated 21.12.2017. For
availing the benefit of budgetary support under the impugned Central
Notification as well as the aforesaid State Notifications, the unit
concerned was required to qualify as an “eligible unit.” The term
“eligible unit” for the purpose of availing budgetary support has been
defined in Para 4.1 of the Central notification, whereas the definition
of “eligible manufacturing unit” has been provided in the State
Budgetary Support Notification Nos. 519 and 521 dated 21.12.2017.
6. It is stated that the definition of “eligible unit” as provided in the State
Notifications clearly demonstrates that the eligibility for State
budgetary support is dependent upon the eligibility under the Central
Budgetary Support Notification dated 05.10.2017. Accordingly, the
satisfaction of the eligibility conditions under the said Central
Notification by a manufacturing unit has a direct bearing upon its
entitlement to the benefits under the State Budgetary Support
Notifications.
WP(C) No. 956/2023 c/w WP(C) No.953/2023 Page 3 of 11
2026:JKLHC-JMU:981-DB
7. The said scheme provides budgetary support to the manufacturing
units to the extent of 58% of the Central Tax paid in the cash ledger
account, whereas the remaining 42% of the Central Tax paid in the
cash ledger account is reimbursed by the State Government in terms
of Notification No. 521 dated 21.12.2017. The petitioner contends that
it was earlier availing the area-based exemption under Notification
No. 01/2010-CE dated 06.02.2010.
8. Pursuant to the application submitted by the petitioner, registration
vide Unique ID No. 57/JAMMU-1AAFFV2839PIZU was granted to
the petitioner vide communication dated 01.01.2018. The petitioner
also applied for registration under the Scheme of Budgetary Support
under Goods and Services Tax in terms of Notification SRO 519 and
SRO 521 dated 21.12.2017 issued by the erstwhile State Government.
9. The petitioner further applied for budgetary support for the residual
period under the Central Notification dated 05.10.2017. In pursuance
thereof, an inspection team constituted by the Department of
Industrial Policy and Promotion (DIPP) inspected the unit of the
petitioner in terms of Clause 6 of the said Notification dated
05.10.2017 and returned findings in favour of the petitioner-unit,
holding the petitioner to be eligible for entitlement to the budgetary
support benefits under the said notification.
10.It is further stated that the petitioner, through various
communications, applied for reimbursement of budgetary support for
the periods corresponding to 09.04.2018, 11.04.2018, 14.07.2018,
15.10.2018, 15.01.2019, 15.04.2019, 12.07.2019, 15.10.2019,
WP(C) No. 956/2023 c/w WP(C) No.953/2023 Page 4 of 11
2026:JKLHC-JMU:981-DB
21.01.2021 and 15.04.2021 before the concerned State Tax
Authorities.
11.The respondent rejected the claim of the petitioner for reimbursement
under the Budgetary Support Scheme on the ground that the item M.S.
Scrap does not fall within the category of “specified goods” as defined
under the exemption Notification No. 519 dated 21.12.2017. The said
rejection, according to the petitioner, has been made in utter disregard
of the substantive fact that the M.S. scrap sold by the petitioner had
emerged during the manufacturing process and constituted
manufactured goods. It is stated that such goods were also cleared
during the pre-GST regime on payment of appropriate Central Excise
Duty while availing the exemption under Notification No. 01/2010-
CE dated 06.02.2010, and therefore duly qualify as “specified goods”
for the purpose of budgetary support under the Central Budgetary
Support Notification dated 05.10.2017 as well as the State Budgetary
Support Notifications Nos. 519 and 521 dated 21.12.2017.
12.The sole contention of the petitioner is that the principal goods
manufactured by it are TMT/CTD Bars, M.S. Flats, etc. During the
course of the manufacturing process, certain odd sizes of TMT/CTD
Bars also emerge, which are thereafter cut into uniform standard sizes,
and the edge cuttings of such bars are sold in the market as M.S.
Scrap. According to the petitioner, these edge cuttings are not mere
waste but are manufactured products which have undergone the entire
manufacturing process, whereby the raw material is converted into
finished TMT/CTD Bars, which are distinct from the original raw
material subjected to the manufacturing process.
WP(C) No. 956/2023 c/w WP(C) No.953/2023 Page 5 of 11
2026:JKLHC-JMU:981-DB
13.The respondent has filed objections stating therein that a conjoint
reading of Clauses 2.1 and 2.2 of SRO 519 dated 21.12.2017 clearly
indicates that the benefit of the aforesaid scheme is available only in
respect of goods manufactured by the industrial unit. It is contended
that the petitioner is an industrial unit registered for the manufacture
of TMT/CTD Bars and not for the manufacture of Scrap. According to
the respondents, Scrap is merely a residue generated during the
manufacture of TMT/CTD Bars and, therefore, the sale thereof does
not qualify for reimbursement of State taxes, as M.S. Scrap is not a
specified good for which the petitioner industrial unit has been
registered. It is further stated that, as against the total
reimbursement/refund of Rs. 3,19,05,528/- claimed by the petitioner
for the accounting year 2017-18, reimbursement to the tune of Rs.
2,83,68,956/- was sanctioned in favour of the petitioner. Similarly, the
reimbursement claims submitted by the petitioner for the subsequent
periods, namely 2018-19, 2019-20 and 2020-21, also included tax
paid on the sale of scrap. However, upon due scrutiny of the
reimbursement claims, only the amount admissible under the scheme
was allowed and the eligible refund amount was accordingly released
in favour of the petitioner
14.Learned counsel for the petitioner, Mr. Chug, submitted that the
manufacturing process for TMT bars inherently produces non-
standard sized pieces alongside standard products. These pieces are
subsequently sold as M.S. Scrap. He further contends that the
respondent is not justified in refusing reimbursement, as the scrap in
question arises from the same manufacturing process as the standard
WP(C) No. 956/2023 c/w WP(C) No.953/2023 Page 6 of 11
2026:JKLHC-JMU:981-DB
products and remains materially and functionally similar,
notwithstanding its non-standard size. Learned counsel further
submitted that the Central authorities have been allowing
reimbursement to the petitioner even on the sale of scrap; however,
the respondent, without any justification, has declined to grant
reimbursement on the ground that the petitioner is registered only for
manufacturing specified products. He has drawn the attention of this
Court to Clause 3.2 of SRO 521 as well as SRO 519 dated
21.12.2017, which provides that reimbursement under the State
scheme is to be made only after verification and clearance of the claim
of 58% to the industrial unit under the Central Scheme. It is thus
argued that once the claim has been cleared under the Central Scheme,
the respondent cannot withhold reimbursement on the ground that the
petitioner’s unit is registered for manufacturing specified goods and
not scrap. In support of his submissions, learned counsel has placed
reliance upon the judgment of the Hon’ble Supreme Court in Escorts
Ltd. v. Commissioner of Central Excise, Faridabad, reported in 2015
(319) E.L.T. 406 (S.C.).
15.Per contra, Ms. Monika Kohli, learned Senior AAG, vehemently
argued that under Clauses 2.1 and 2.2 of Notification SRO 519 dated
21.12.2017, budgetary support is restricted to goods manufactured and
duly permitted by the concerned department, excluding those listed in
Annexure-A. It is contended that as the scheme limits support to the
specified goods only, the petitioner is ineligible for reimbursement on
M.S. Scrap, which does not fall within specified goods under the said
Notification.
WP(C) No. 956/2023 c/w WP(C) No.953/2023 Page 7 of 11
16.Heard learned counsel appearing for the parties and perused 2026:JKLHC-JMU:981-DB
the
record.
17.In order to determine the controversy involved in the present petition,
it is deemed appropriate to reproduce Clauses 2.1 and 2.2 of SRO 519
dated 21.12.2017, which read as under:-
2.1 Eligible Manufacturing Unit means a unit which avails
the benefit under Central Scheme namely Budgetary Support
under Goods and Services Tax regime to the Industrial Units
located in States of Jammu & Kashmir, Uttarakhand, Himachal
Pradesh and North East including Sikkim dated the 5th October,
2017.
2.2. ‘Specified goods’ means the goods manufactured by the
Industrial Units as have been allowed by the department of
Industries/Handloom/Handicrafts/Jammu and Kashmir Khadi
and Village Industries Board/Small Scale Industries
Development Corporation Limited (SICOP/J&K industrial
Development Corporation (SIDCO) except those mentioned in
Annexure-A to this Notification.
18.As is evident, “specified goods”, as defined in the aforesaid SRO 519
dated 21.12.2017, means the goods manufactured by the industrial
unit which have been allowed by the Department of
Industries/Handloom/Handicrafts/Jammu & Kashmir Khadi and
Village Industries Board/Small Scale Industries Development
Corporation Limited (SICOP)/J&K Industrial Development
Corporation (SIDCO), except those goods which are mentioned in
Annexure-A to the said Notification. Annexure-A of the Notification
WP(C) No. 956/2023 c/w WP(C) No.953/2023 Page 8 of 11
2026:JKLHC-JMU:981-DB
specifies eighteen (18) categories of goods that are expressly excluded
from the purview of the scheme. They are as under:-
1. Repacked goods.
2. Wooden shook’s
3. Bricks and Tiles
4. Copper utensils manufactured by mechanized units.
5. Soft drinks.
6. Edible Oil and Vanaspati ghee
7. Screen printing of glazed tiles.
8. Cutting and stitching of doormat out of coir, jute and décor
(wall to wall)
9. Cutting of marble/granite
10. Repair and servicing of Automobiles.
11.Sweetmeats (excluding toffees candy etc.)
12.Cycles/Tricycles.
13.Cured skins
14.Roasted peanuts and Dry Fruits
15.Televisions, Air Conditioners, Refrigerators and Washing
Machines, when assembles and manufactured by the
industrial units located in the State and sold under the brand
name of other products.
16.Tobacco and its products
17.Stone crushing
18.Manufacturing of Ply Wood.
19.The respondent maintains that the petitioner is registered solely for the
manufacture of TMT/CTD Bars, and not for the production of scrap.
However, respondent simultaneously admits that this scrap is an
inherent residue generated during the manufacturing process. The
respondent contends that because scrap is not among the specified
goods for which the petitioner is registered, it remains ineligible for
reimbursement under the scheme.
20.Admittedly, the petitioner is engaged in manufacturing TMT/CTD
Bars. According to the petitioner, the scrap in question consists of
non-standardized lengths of TMT bars which, despite their
dimensions, remain marketable and are sold as M.S. Scrap. It is
undisputed by the respondent that these non-standard products retain
WP(C) No. 956/2023 c/w WP(C) No.953/2023 Page 9 of 11
2026:JKLHC-JMU:981-DB
the essential character of TMT bars, having undergone the identical
manufacturing process as the standard-sized finished products.
21.Notably, Annexure-A of Notification SRO 519 (dated 21.12.2017) is
an exclusionary list; it disentitles only those industrial units
manufacturing the goods specifically enumerated therein. As the
petitioner is registered for the manufacture of TMT/CTD Bars, and
the respondent concedes that the scrap in question is a necessary
residue of that manufacturing process, the exclusion does not apply.
Furthermore, the respondent acknowledges that this scrap undergoes
the identical manufacturing process as the primary TMT/CTD Bars.
22.We have examined the order dated 01.07.2022 passed by the
respondent whereby reimbursement in respect of the sale of M.S.
Scrap has been declined on the ground that the same does not fall
within the category of “specified goods.” Upon consideration of the
matter, we are of the view that the respondent was not justified in
refusing reimbursement on the ground that M.S. Scrap is not a
specified good under the scheme.
23.The petitioner contends that the Central Tax Authorities have granted
the benefit of reimbursement to the petitioner for the sale of M S
Scrap.
24.In view of the aforesaid discussion, we are of the considered opinion
that the order dated 01.07.2022 is not sustainable in the eyes of law
and the same is accordingly quashed. The respondent is directed to
consider the petitioner’s claim afresh, keeping in view the
observations made hereinabove, and pass a reasoned order in
WP(C) No. 956/2023 c/w WP(C) No.953/2023 Page 10 of 11
2026:JKLHC-JMU:981-DB
accordance with the applicable SROs within a period of one month
from the date of receipt of the order.
25.Disposed of as above along with connected CM(s), if any.
WP(C) No. 953/2023
26.Learned counsel for the respective parties submitted that the
controversy involved in the present petition is identical to that in the
connected matter, namely, WP(C) No. 956/2023. Consequently, the
impugned order, in the present petition shall also stand quashed in the
same terms. Accordingly, this petition is also disposed of along with
connected CM(s), if any, in terms of the judgment passed in WP(C)
No. 956/2023.
27.The Registry shall place a copy of this judgment on the record of the
connected petition(s).
(Rajnesh Oswal) (Arun Palli)
Judge Chief Justice
Jammu
08.04.2026
Madan Verma-Secy
Whether order is speaking? Yes.
Whether order is reportable? Yes.
WP(C) No. 956/2023 c/w WP(C) No.953/2023 Page 11 of 11
