Benefits To Registered Retail Traders Under MSMED Act Limited To Priority Sector Lending, Not Eligible For QCO Exemption: Kerala High Court

Justice Ziyad Rahman A.A. stated that “the entire category of wholesale and retail trades were excluded completely from the purview of MSMED Act and later, they were re-included within the purview of the Act. Such re-inclusion was for a limited purpose of availing priority sector lending. Therefore, since such inclusion was for a limited purpose, which is confined to the priority lending only, nothing beyond such benefits can be claimed by the Micro Enterprises, coming within the category of wholesale and retail trade.”

The assessee/petitioner is a trader of plywood and is also an importer. The assessee has secured registration with the Ministry of Micro, Small and Medium Enterprises, Government of India as a Micro Enterprise, as defined under the Micro, Small and Medium Enterprises Development Act, 2006.

The Ministry of Commerce and Industry, (Department for Promotion of Industry and Internal Trade), had issued Plywood and Wooden flush door shutters (Quality Control) Order, 2024 (Ext.P2).

As per the said Quality Control Order (“QCO”) certain standards were prescribed for the products of Plywood and Wooden flush doors shutters. As per Order 1 (2) of the QCO, 2024, the same shall come into force with effect from 28.02.2025.

According to the department, since the status of the assessee as a micro enterprise, being a retail trader, is limited to the benefit of availing the priority sector lending alone, the exemption as contemplated under the second proviso to Order 1(2) of Ext.P2 cannot be granted to the assessee.

The specific contention raised by the assessee is by placing reliance upon the extended period, as per the proviso to Order 1(2) of Ext.P2 QCO. It was pointed out that, as per the said proviso, the Micro Enterprises are excluded from the application of the quality measures contemplated under Ext.P2, till 20.08.2025. Therefore, the assessee, being a Micro Enterprise is entitled to the aforesaid benefits.

The bench stated that the contentions raised by the assessee, claiming benefits of exemption, as far as Micro enterprises are concerned, cannot be extended to them. This is more particularly because, it is evident from the Order 1 (2) of Ext.P2 that, the same came into force of 28.02.2025 and specific exclusion was granted to Small Enterprises and Micro Enterprises as per the provisos to the said provision.

“Since the aforesaid provisos are meant for exemptions, the same have to be strictly construed and the status of the assessee as a micro enterprise, even though it is having a registration, it is only for the purpose of availing priority sector lending alone and nothing beyond that. Therefore, the extension of time as contemplated under the proviso referred to above cannot be availed by the assessee being non-eligible”, added the bench.

In view of the above, the bench dismissed the petition.

Case Title: M/s Luxe Panel Distributors v. The Additional Commissioner of Customs

Case Number: WP(C) NO. 18501 OF 2025

Citation: 2025 LiveLaw (Ker) 396

Counsel for Petitioner/ Assessee: M. Balagopal

Counsel for Respondent/ Department: Vivek A.V.

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