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M/S Ultratech Cement Ltd. & Anr. v. State of Rajasthan & Ors.

Civil Appeal · 2020 INSC 456Decided 17 Jul 2020
Civil Appeal No. 2773 of 2020
Justice A.M. Khanwilkar · Justice Dinesh Maheshwari

Background

Ultratech Cement (formerly Grasim Industries) was granted a Capital Investment Subsidy of 75% of its sales tax/VAT liability for its Kotputli cement plant under Rajasthan's Investment Promotion Scheme, 2003, based on Entitlement Certificates issued by the State Level Screening Committee (SLSC) in 2011. Years later, in 2018, the State's Finance Department revised this down to 50%, holding the SLSC had erroneously granted the higher rate based on a misreading of an earlier government decision that had already been withdrawn, and ordered recovery of the excess with 18% annual interest.

Decision Breakdown

The Supreme Court upheld the State's power to revise the erroneous certificates, since the Scheme itself allowed revision within five years and the SLSC's grant of 75% subsidy was found to be an unauthorised, perverse reading of a decision that had been withdrawn before it could apply. However, the Court modified the interest rate: since the company itself had only ever given an undertaking to repay any excess subsidy at 12% per annum, and there was no finding that it had obtained the benefit through any fraud or misrepresentation, the higher 18% rate under the Scheme's default penalty clause could not be applied. The appeal was therefore partly allowed: the 50% subsidy cap was affirmed, but interest was reduced from 18% to 12% per annum.

Lesson Learnt

Government benefits availed under an officer's erroneous order can still be clawed back by the State within the time limits set by the scheme itself, even years later, but the rate of interest charged on recovery must match what the beneficiary actually agreed to, not automatically the harshest default penalty rate in the scheme.

Official source (sci.gov.in)View Judgment (PDF)

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