Inherent manufacturing residues qualify as specified goods for tax reimbursement under budgetary support schemes.

The petitioner, an industrial unit manufacturing Tor Steel and TMT Bars, commenced commercial production in 2005 and undertook substantial expansion in 2015

Following the rollout of GST in 2017, the Government introduced a Budgetary Support Scheme via Central Notification dated 05.10.2017 and State Notifications SRO 519 and SRO 521 dated 21.12.2017

These schemes provided for the reimbursement of a portion of CGST and SGST paid in cash to "eligible units" manufacturing "specified goods"

The petitioner applied for reimbursement, which the respondent rejected regarding the sale of "M.S. Scrap"

The respondent contended that M.S. Scrap did not fall under "specified goods" as the petitioner was registered only for manufacturing TMT/CTD bars, and scrap was merely a residue

The petitioner challenged this rejection, asserting that the scrap resulted from the same manufacturing process as the primary goods

Whether M.S. Scrap, generated as an inherent residue during the manufacturing process of TMT/CTD Bars, qualifies as "specified goods" for reimbursement under SRO 519 and SRO 521

The court interpreted Clauses 2.1 and 2.2 of SRO 519 (dated 21.12.2017), which define an "Eligible Manufacturing Unit" as one availing benefits under the Central Budgetary Support Scheme and define "Specified Goods" as goods manufactured by industrial units allowed by designated departments, excluding those listed in Annexure-A

Annexure-A contains an exclusionary list of eighteen categories (e.g., tobacco, stone crushing, repacked goods) that are ineligible for the scheme

The court further referenced the principle from Escorts Ltd. v. Commissioner of Central Excise, Faridabad (2015) regarding manufactured products and residues

noted Clause 3.2 of SRO 521, which links State reimbursement to the clearance of claims under the Central Scheme

The Court observed that "specified goods" under SRO 519 include all manufactured goods allowed by the relevant department unless expressly excluded by Annexure-A

It was undisputed that the petitioner is a registered manufacturer of TMT/CTD Bars and that the M.S. Scrap in question consists of non-standardized lengths generated during the identical manufacturing process as the primary products

The Court found that the respondent's admission—that the scrap is an "inherent residue" of the manufacturing process—was critical

Since the primary manufacturing activity (TMT bars) is not listed in the exclusionary Annexure-A, and the residue retains the material character of the manufactured goods having undergone the same process, the exclusion cannot be applied to the resulting scrap

the Court noted that the Central Tax Authorities had already granted reimbursement for the scrap, and under SRO 521, State reimbursement is typically cleared following such Central verification

the respondent's narrow interpretation that the unit was not "registered for scrap" was legally flawed

The Court quashed the impugned rejection order dated 01.07.2022

It directed the respondent to consider the petitioner’s claim afresh in light of the Court's observations and to pass a reasoned order within one month

Both writ petitions were disposed of on identical terms