Capital investment subsidy cannot be denied for absent production increases once 25% plant-and-machinery expansion is established.

The petitioner, an industrial unit at Tezpur, Assam, claimed reimbursement of 30% of its investment in plant and machinery under the Central Capital Investment Subsidy Scheme, 2007, framed pursuant to the North East Industrial and Investment Promotion Policy, 2007 (NEIIP-2007).

The claim related to the petitioner’s third expansion, for which it asserted that the value of its fixed capital investment in plant and machinery had increased by more than the prescribed 25%.

The State Level Committee, in its 48th sitting on 09.05.2018, rejected the claim on the ground that the increase in plant and machinery was not corroborated by a commensurate increase in production, power consumption, or VAT and CST returns.

The petitioner’s representation was rejected on substantially similar grounds by the Committee in its 54th sitting on 07.01.2019.

The petitioner challenged the latter decision under Article 226 of the Constitution, contending that these additional requirements were not contained in the Policy or Scheme.

Whether the State Level Committee could deny capital investment subsidy under the 2007 Scheme on the ground that substantial expansion in plant and machinery was not accompanied by a commensurate increase in production, power consumption, or VAT/CST returns.

Whether the State Level Committee’s decision dated 07.01.2019 was legally sustainable when the petitioner’s compliance with the 25% substantial-expansion requirement was not disputed.

Whether the petitioner was entitled to payment of interest on the subsidy amount.

The Court applied the NEIIP-2007 and the Central Capital Investment Subsidy Scheme, 2007, under which “substantial expansion” means an increase of not less than 25% in the value of fixed capital investment in plant and machinery for expansion of capacity, modernisation, or diversification.

The Scheme provides for a 30% capital investment subsidy and requires the State Level Committee to determine whether the unit qualifies and the quantum of subsidy in accordance with the Scheme.

The Court relied on Under Secretary, Ministry of Industries v. Marchon Textile Industries (P) Ltd., (2005) 10 SCC 554, for the principle that subsidy schemes intended to promote industrial development must be construed practically and pragmatically rather than hyper-technically.

It also relied on Bhabani Print and Publication v. Union of India, (2018) 5 GLR 89, and Emami Ltd. v. Union of India, (2020) 1 GLR 119, for the principles that subsidy claims must be assessed consistently with the notified Policy and Scheme and that the State Level Committee cannot introduce additional eligibility conditions not prescribed therein.

The Court further applied the principle in Nazir Ahmed v. King Emperor, AIR 1936 PC 253, that where a power is required to be exercised in a prescribed manner, it must be exercised in that manner or not at all.

The Court found that the Policy and Scheme expressly prescribed a 25% increase in the value of fixed capital investment in plant and machinery as the criterion for substantial expansion, but contained no requirement of a corresponding increase in production, power consumption, or VAT/CST returns.

Since the State Level Committee did not dispute that the petitioner had achieved the requisite substantial expansion, its reliance on those additional factors as determinative conditions amounted to importing requirements beyond the Scheme.

Although such factors might be relevant for administrative assessment, they could not constitute the sole basis for denying the subsidy, particularly where the notified eligibility condition had been satisfied and variations in production could arise for several reasons.

The Committee was therefore required to assess the claim strictly in accordance with the Policy and Scheme and could not formulate or apply an extraneous eligibility standard.

The State Level Committee’s decision dated 07.01.2019 was accordingly set aside.

The respondents were directed to reconsider the petitioner’s claim afresh, strictly in accordance with the Policy and Scheme, preferably within three months from receipt of a certified copy of the judgment.

The Court declined to award interest because the Scheme contained no provision for payment of interest.

The writ petition was disposed of accordingly.