Supreme Court Upholds RIPS-2003 Revision Power and Caps Cement Subsidy at 50% With Recovery of Excess at 12% Interest

Case Name: M/s Ultratech Cement Ltd. & Anr. v. State of Rajasthan & Ors.
Citation: 2020 INSC 456
Date of Judgment/Order: 17th July, 2020
Bench: Hon’ble Mr. Justice A.M. Khanwilkar and Hon’ble Mr. Justice Dinesh Maheshwari

Held: The Supreme Court held that the Kotputli unit was not entitled to capital investment subsidy at 75% under RIPS-2003 and that the State’s revision under Clause 13 could be sustained to confine the benefit to the scheme-permissible limit of 50%, requiring refund of the excess 25% subsidy, while modifying the interest component by holding that interest at 18% under Clause 10 was not attracted in the absence of misrepresentation or breach, but the appellant was bound by its undertaking to refund excess with interest at 12% per annum.

Summary: The dispute arose after the State Level Screening Committee issued entitlement certificates allowing the cement unit to avail subsidy at 75% of tax payable/deposited, but the Additional Chief Secretary (Finance) invoked Clause 13 (revision) of RIPS-2003 and treated the entitlement as erroneous and prejudicial to State revenue, directing re-issuance of entitlement at 50% and recovery of excess with 18% interest; the Rajasthan High Court upheld this action, and in appeal the Supreme Court examined the scheme’s amendment history—particularly the insertion and deletion of sub-clauses (vi) and (vii) to Clause 7 relating to higher cement incentives, subsequent clarifications and provisos, and the contractual/administrative documents relied upon by the company—and concluded that the higher 75% benefit could not be sustained under the operative scheme framework, though the interest demand had to be moderated because the case was not based on fraud/misrepresentation and the company’s liability to pay interest flowed instead from its own undertaking to refund any excess subsidy with interest at 12%.

Decision: The appeal was partly allowed: the Supreme Court affirmed the High Court’s upholding of the State’s revision order limiting subsidy entitlement to 50% and permitting recovery of the excess 25% subsidy, but modified the impugned orders to the extent of interest by restricting the recoverable interest to 12% per annum (instead of 18%) from the date of availing the excess subsidy until payment/recovery, with parties left to bear their own costs.