The change was not because of fraud or misrepresentation, but because there was a change in the capital investment limit for the eligibility for subsidy.
The apex court thus set aside the Allahabad High Court judgment, which had approved of the coercive proceedings taken by the Uttar Pradesh government against Sun Beverages Ltd, a soft drink bottling company set up in a remote place in the Agra district.
The company invested Rs 32 lakh in machinery for the production of soft drink bottles. At the time of the registration, such units were called medium-scale industries and were eligible for subsidy for starting operations in remote areas, where there were no industries.
The government recognised it as a medium-scale industry and sanctioned grants according to its industrial policy.
But later the central government changed the definition of small- and medium-scale industries. Industries with less than Rs 35 lakh investment in machinery directly involved in production were categorised the small-scale industry and those above that the medium-scale industry. Sun Beverages became a small-scale industry by the new definition.
The state government initiated action against the company for recovery of the subsidy already given, with interest.
This was done without any notice and any opportunity to the company to explain its stand. The company moved the Allahabad High Court, but it dismissed its petition.
According to the high court, there was breach of the terms of granting subsidy by the company. On appeal, the Supreme Court allowed the petition of the company.
The apex court said there had been absolutely no violation of any provision of the subsidy scheme by the company and the demand for the refund with interest was
