Supreme court quashes judgments by high courts on area-based exemption

Rules refunds should be limited to actual manufacturing or value addition

In a ruling aimed at preventing the misuse of tax exemptions, the Supreme Court on Friday overturned the relief given by the high courts of Gujarat, Guwahati and Sikkim and held that area-based exemptions in the form of tax or duty refunds should be limited to actual manufacturing or value addition. 

The judgment favours the Union government’s stance of limiting refund of erstwhile central excise given to units in industrially backward areas such as Kutch (Gujarat) and the north-eastern regions in tax incentive schemes dating back to 2001 and 2007, respectively.

The apex court pointed out that tax paid needs