Ownership Changes Render Manufacturing Units in Sikkim Ineligible for Budgetary Support Scheme - Sikkim High Court"

In a significant judgment, the Sikkim High Court, presided over by The Hon’ble Mr. Justice Bhaskar Raj Pradhan, has ruled that changes in ownership and constitution disqualify manufacturing units in Sikkim from availing the Budgetary Support Scheme introduced for eligible units in the state.

The two writ petitions under consideration involved the eligibility of Zydus Wellness Products Limited and Alkem Laboratories Limited for budgetary support under the Budgetary Support Scheme, a part of various Industrial Promotion Schemes aimed at bolstering manufacturing units in Sikkim. The core issue before the court was whether alterations in ownership and constitution could prevent these units from benefiting from the scheme.

The petitioners argued that the transformation from a partnership concern to a company should not strip them of the right to access the Budgetary Support Scheme. They contended that despite the legal entity change, the business, assets, and liabilities remained consistent.

However, the respondents held a different view. They posited that changes in ownership and constitution effectively categorized the petitioners as new legal entities, thereby making them ineligible for the Budgetary Support Scheme. The Ministry of Finance and Ministry of Commerce both supported this viewpoint.

In its detailed examination of the Budgetary Support Scheme, the Court emphasized that the scheme aimed to provide support exclusively to existing eligible manufacturing units that had been operating in Sikkim. It was apparent that the scheme was designed for units that had met the criteria under previous excise duty exemption/refund schemes but had not fully benefited from those schemes due to untimely withdrawal. Importantly, the scheme did not extend to units that had not made the requisite investments to avail the benefits of previous exemptions.

The Court, therefore, held that both petitioners, Zydus Wellness Products Limited and Alkem Laboratories Limited, did not qualify as eligible units under the scheme's definition, as they did not exist during the period when the exemption notification was applicable. Furthermore, the change in ownership and constitution of these entities further disqualified them from the scheme.

This judgment serves as a significant precedent in clarifying the eligibility criteria for manufacturing units seeking support under the Budgetary Support Scheme in Sikkim. It underscores the importance of understanding the nuances of such schemes and the impact of changes in ownership and constitution on eligibility.

Date of Decision: 12 September, 2023

Zydus Wellness Products Limited  vs Union of India, Through the Secretary