(MENAFN- KNN India)
Mumbai, Aug 17 (KNN)
In a landmark decision, the Bombay High Court has ruled that Medium Enterprises are eligible to claim benefits under the Vivad se Vishwas (VSV) Scheme, even after being reclassified as non-MSMEs.
This ruling sets a significant precedent for other businesses in similar situations. It effectively extends the safety net provided by the government during the pandemic to a broader range of enterprises, recognising the lingering economic impacts of COVID-19.
The court's decision hinged on the interpretation of recent amendments to the Micro, Small and Medium Enterprise Development Act, 2006.
A crucial factor in the decision was the October 18, 2022 amendment to Clause 8(5) of the MSME classification notification, which allows enterprises to continue availing non-tax benefits for three years after reclassification.
The court interpreted this clause to create a "legal fiction," allowing enterprises to be treated as their previous classification for non-tax benefits, despite upward changes in status.
The VSV Scheme, introduced by the Finance Ministry, aims to refund 95 per cent of liquidated damages deducted from contracts with Government/PSUs during the pandemic.
The court emphasised that the scheme is a non-tax benefit applicable even to Medium Enterprises that have been reclassified.
The case, Marine Electricals India vs. Union of India (W.P No.3080 of 2024), was heard by a Division Bench comprising Justice B. P. Colabawalla and Justice Firdosh P. Pooniwalla.
The petitioner, Marine Electricals India, a provider of electronic automation and technical solutions to government bodies, had been reclassified as "not an MSME" in May 2023.
When attempting to claim benefits under the VSV Scheme in February 2024, they were initially denied based on their new classification.
This ruling comes as a relief to many businesses affected by the COVID-19 pandemic and subsequent liquidated damages deductions.
The court's decision underscores the importance of interpreting regulations in the spirit of supporting businesses during unprecedented challenges.
It also highlights the need for clear communication and implementation of government schemes to ensure their intended benefits reach the targeted beneficiaries.
As the business landscape continues to evolve post-pandemic, this ruling may pave the way for more inclusive interpretations of relief measures, potentially benefiting a wider spectrum of enterprises in their recovery efforts of Form
(KNN Bureau)
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