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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI R.C. SHARMA, AM & SHRI RAM LAL NEGI, JM
सुनवाई की तायीख / : 24/06/2016 Date of Hearing घोषणा की तायीख / : 13/07/2016 Date of Pronouncement आदेश / O R D E R Per R.C. SHARMA, A. M.: These are Appeals filed by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)- 24, Mumbai („CIT(A)‟ for short) dated 01.08.2014 for the Assessment Year (A.Y.)2009-10 to 2011-2012, in the matter of order passed u/s 143(3) of the Income Tax Act.
Common grievance of assessee in all the year relate to treating the subsidy received by the assessee by way of refund/exemption of excise duty and 2 &6698/M/14 (A.Y. 2009-12) M/s. Man Industries India. Ltd. Vs. ACIT sales tax, as a revenue receipt in place of capital receipt. Precise grounds of appeal
raised in A.Y. 2009-10 reads as under: 1. “The learned Commissioner of Income Tax (Appeals)-LTU erred in confirming the addition of subsidy by way of refund/exemption of excise duty/VAT of Rs.26,33,63,463/- (VAT: Rs.15,84,40,288/- and Excise Duty : Rs.10,49,23,175/-) availed in the relevant year by treating it as a revenue receipt.
2. The Appellant prays that the order of the learned Commissioner of Income Tax (Appeals)-LTU on the grounds be set aside and that claim of the Appellant be allowed.”
3. Rival contentions have been heard and record perused. Facts in brief are that Assessee Company is engaged in the business of manufacturing saw pipes and spiral pipes. It set up and started industries in Anjar-Kutch (Gujarat) in 2005. Accordingly the assessee company became eligible for subsidy scheme provided by central and State Government for development of earthquake prone area – Anjar-Kutch (Gujarat). The assessee is regularly assessed to tax under the provisions of the Income Tax Act,1961. For the relevant year, i.e., A.Y. 2009-10, the assessee had filed the return of income on 29/09/2009 computing total income at Rs.37,21,96,759/-. In the course of the assessment proceedings, by a letter dated 11/01/2013, the assessee filed a revised computation of Income wherein the subsidy by way of VAT exemption of Rs.15,84,40,288/- and excise refund of Rs.10,49,23,175/- was reduced from the total income and the book profit u/s 115JB of the Act treating them as capital receipts. The learned Assessing Officer completed the assessment by passing an order u/s 143(3) of the Act dated 01/04/2013 rejecting the above claim of the assessee and 3 &6698/M/14 (A.Y. 2009-12) M/s. Man Industries India. Ltd. Vs. ACIT computing the total income at Rs.37,64,98,251/-. It was stated by the Assessing Officer that assessee had claimed exclusion of sales tax (ST) /Value added tax (VAT) of Rs.15,84,40,288/- and of excise duty incentives by way of excise duty refund(ed) in the computation of business/total income under the normal provisions of I.T. Act, 1961 and had also claimed exclusion for the same while computing the book profits a/s. 115JB of I.T. Act, 1961 by way of letter dated 11/1/2013 during the assessment proceedings that sales tax incentive by way of sales tax exemption at source and excise duty Incentives by way of excise duty refunds were capital receipts not chargeable to tax as Income and these two Incentives, that is, sales tax Incentives of Rs. 15,84,40,288/- and excise duty incentives of Rs. 10,49,23,175/- should be excluded from the business income and also while computing the book profits u/s. 115JB of LT. Act, 1961. Assessing Officer called for the details and documents relating to various schemes. In respect of sales tax/Value added tax and excise duty AO examined assessee‟s claim for treating sales tax/value added tax incentives of Rs.15,84,40,288/- and excise duty incentives of Rs.10,49,23,175/- as capital receipt. The Assessing Officer noticed that as per the provisions of various schemes and the provisions of law/rules and notifications, the benefits of sales tax/value added tax exemption availed by the assessee under the relevant provisions of ST/VAT Law of the Gujarat state are not in the nature of capital receipt, accordingly he reject assessee‟s claim for sales tax exemption and excise duty refunds as capital receipt.
4 &6698/M/14 (A.Y. 2009-12) M/s. Man Industries India. Ltd. Vs. ACIT 4. Assessee submitted before the AO that The Central Government had issued Incentive scheme to develop the earthquake prone area Anjar Kutch (Guj.) vide Notice 39 of 2001 CE dated 31st July, 2001. In the said notification manufacturing unit will get Excise incentive upto 5years from the date of production equivalent to cash payment of Excise Duty to the Govt. account. Further the Gujarat Government had also Issued an Incentive package as “Kutch Package Scheme 2001" for setting up' a new Industry. In the scheme new Industries will get tax exemption equivalent to the investment made within a period of 10 years from the date of first sale. In the scheme Industrial unit will charge VAT and retain the same as an Incentive. 4.1 Following judgments of various High Courts saying that Incentives declared by the Government for development are of capital nature were referred before the AO : - .
Shree Balajl Alloys Vs. CIT 333 ITR 335 - High Court of Jammu Kashmir held that Refund of Excise under subsidy scheme Is a capital nature and not taxable, 2. Vinod Kumar Jain vs. ITO, Jammu, ITAT, Amritsar Bench (Special Bench) (IT Appeal Nos. 65& 68 (Asr.) of 2010) 140 ITD 1, held that excise duty refund is to be treated as capital receipt.
CIT vs. Rasoli ltd. [2011J 245 CTR. 667 (Cal High Court) - Sales Tax subsidy received is capital receipt.
CIT vs. Reliance Industries lid. [2011] 339 ITR 632 (Bom. High Court) Sales Tax Incentive was a capital receipt.”
5 &6698/M/14 (A.Y. 2009-12) M/s. Man Industries India. Ltd. Vs. ACIT 5. However, the AO did not convince with the assessee‟s reply and held as under:
1. 1. All the Incentives are production Incentives in the sense that the company will be entitled to these incentives only after it goes into production.
2. The scheme was not to make any payment directly or indirectly for setting up of the industries. It is only after the industries had been set up and production had been commenced that the incentives were to be given for the limited period of 5/7 years.
3. No restriction is put in the scheme for utilization of incentives.
6. The AO also dealt with judicial pronouncements cited by ld. AR and held that these were distinguishable on facts. The AO held that facts of the case of assessee are similar to the facts of Shaney Steels and Press Works Ltd. 228 ITR 253 wherein Hon‟ble Supreme Court has held as follows: “In the instant case, subsidies had not been granted for production of or bringing into existence any new asset. The subsidies were granted year after year only after setting up of the new industry and commencement of production. Such as subsidy could only be treated as assistance given for the purpose of carrying on the business of the assessee and, therefore, these were of revenue character and would have to be taxed accordingly.”
7. By the impugned order CIT(A) confirmed the action of AO after observing inter alia that assessee availed of benefit of exemption of sales tax/vat under the notifications issued under the respective sales tax/value added tax schemes, which were formulated under the broad outlines of the development of Kutch district in light of devastating earthquake in the sate on 26/1/2001. Perusal of the 6 &6698/M/14 (A.Y. 2009-12) M/s. Man Industries India. Ltd. Vs. ACIT notification dated 9/11/2001 of the Gujarat Government shows that even though the broad parameters of this notification was creation of, new investment and new employment opportunities and attracting new industries and improving ,the overall economic environment in 'the district of Kutch in the state of Gujarat" at Macro Level, the, basic and ultimate purpose of giving incentives in the form of sales tax/Value added tax from, purchases and sales was to aim for commercial production which will ultimately result in employment of local persons and production , and sale of finished manufactured goods. However, the benefit of the ST/VAT exemption was to start only after the date of commercial production which was defined in clause 3.3/4.2 of the notification dated 09/-11/2001 to start from the date of the-first sale bill only and assessee was entitled to purchase the raw materials, packing materials and all the processing materials utilized for the purpose of manufacturing goods without payment of sales tax/VAT. Similarly, assessee was also entitled to exemption from the payment of sales tax In respect of sale of finished goods intermediaries, by products, waste and scrap produced by the eligible unit and assessee was required to furnish details of purchases of raw materials and sales to meet with the input/output norms prescribed under the exim policy of the Central Government and the same had to be , certified by the Chartered Accountant, Even though the quantum of incentives by way of sales tax/value added tax exemption was linked to and restricted by the eligible fixed capital investment, the benefits/incentives were to be available for a period of 5/7/10 years, depending upon the quantum investment and the benefit of sales 7 &6698/M/14 (A.Y. 2009-12) M/s. Man Industries India. Ltd. Vs. ACIT tax exemption was available only from “the date of commencement of commercial production" and which was defined as "date of first sale bill" under clause 3.3 of the notification. Conditions in clause 5, 7 and 8 of the notification dated 09/11/2001 clearly show that the commercial production was to be the bed rock for availing the sales tax remission benefits and the "industrial unit shall have to continue production upto the period of eligibility of 5/7/10 years as per clause 4.6 of notification dated 09/11/2001 and if assessee was not in a position to remain in continuous production on account of the reasons beyond control of the management, the assessee was required to obtain permission of the Gujarat Government before discontinuance of production. Thus, it becomes clear from the policy guidelines issued by the Govt. of Gujarat for attracting new industries and investments in Kutch district of Gujarat that the criteria of "eligible fixed capital investment” was only for the determination of the quantum and upper limit of sales tax incentives by way of sales tax/vat exemptions under the ST/VAT provisions of the Gujarat state. However, the basis of availability, eligibility for exemption quantification of ST/VAT incentives, commencement of date of ST/VAT etc., commercial production was to be reckoned with date of first sale bill and this date of sale/commercial production was with reference to the purchase of raw materials/packing material, and production of goods and sale of finished goods, and exemption of sales tax/value added tax was directly linked to purchase of raw materials, production of goods and sale of finished goods only. However, without payment of sales tax/value added tax under the eligibility 8 &6698/M/14 (A.Y. 2009-12) M/s. Man Industries India. Ltd. Vs. ACIT period of incentives and upper limit for the grant of quantum of sales tax incentives were linked to and were to be made with reference to the eligible fixed capital investment in land, buildings and plant/machinery as per the norms prescribed in the sales tax and value added tax notifications/rules/laws and nothing else. 7.1 The CIT(A) further observed that as per the notification total stress is laid on the business activity consisting of purchase, manufacture and sale only and the assessee became entitled to the benefits of sales tax incentives by way of remissions of purchase tax/sales tax only after the start of commercial production which was defined to begin with the first sale bill only. Thus, the entire provisions relating to the grant of remission of purchase tax/sales tax overwhelmingly speak about the eligibility and availability of benefits of sales tax exemptions only If manufacture/production is done and' goods are purchased and sold. Similarly, provisions of section 18A, 18B and 18C of Gujarat Value Added Tax Act 2003 which came into effect from 1/4/20,06, also unequivocally speak about and link the grant of value added tax incentives by way of exemption' of VAT to become available, only if, the goods are purchased and sales are effected by the, eligible unit located. In Bhuj district of Gujarat state after certain date only. Thus, even under the Gujarat Value Added Tax 2003, provisions for availing VAT remission benefits by way of exemption from payment of VAT at source are more or less similar to the sales tax provisions.
9 &6698/M/14 (A.Y. 2009-12) M/s. Man Industries India. Ltd. Vs. ACIT 8. The CIT(A) further observed that there was no physical receipt of benefits by way of sales tax Incentives in the form of exemption of sales tax, purchase tax/value, added tax since assessee was exempted from payment of purchase/sales/value added tax at the point and sale itself from the first day of sale itself. Thus, there was neither a constructive receipt nor a constructive payment by the assessee and when that is the fact of the case, the question of ST/VAT exemptions being capital receipts do not arise.
After having above discussion CIT(A) confirmed the action of AO declining assesseee‟s claim for treating subsidy as capital receipt basically on the plea that incentive has to be given after commencing of production and depending upon the quantum of investment and that benefit of sales tax exemption was available only from the date of commercial production. Against the order of CIT(A) assessee is in further appeal before us.
It was argued by ld. Sr. AR that incentive scheme by way of providing subsidy to the unit to be established in Bhuj District of Gujarat was provided by Central & State Government. He further invited our attention to the Central Excise Duty refund and State VAT Exempt Scheme launched for new industrial unit to be set up in Kutch District between 2001-2005. Pursuant to the Government Scheme the assessee has set up and started its industrial unit in Anjar-Kutch (Gujarat) and satisfied all the eligibility condition of the said subsidy from Central and State Government. He invited our attention to the Chapter-IVA of Gujarat Value Added Tax Rules 2006, according to which such industrial unit 10 &6698/M/14 (A.Y. 2009-12) M/s. Man Industries India. Ltd. Vs. ACIT shall be entitled to tax incentives in the form of exemption and deferment of the tax so collected. Our attention was also invited to the relevant provisions which make eligible unit entitlement for estimation of Central Sales Tax payable under the provisions of Central Sales Tax Act, 1956 on the sales effected by them in the course of Inter-State Trade and Commerce. Ld. AR further stressed that all these incentives were given to cover the disaster happened at Kutch District by motivating establishment of new unit in the Kutch for its revival. As per ld. AR it is clear from the scheme that subsidy was given only for the new unit to be set up in these area and, therefore, in the nature of capital receipt. He further relied on the decision of Hon‟be Supreme Court in the case of Ponni Sugar and Chemicals Ltd.(supra), Shaney Steels Press Works Ltd. (supra) and P.J.Chemicals Ltd.(supra). Reliance was also placed on the decision of Hon‟ble jurisdictional High Court in the case of Reliance Industries Ltd. (supra) and decision of Hon‟ble Gujarat High Court in the case of Baroda Inox Leisure Ltd.
On the other hand, ld. DR relied on the order of lower authorities and contended that incentives so received by the assessee in the form of refund of excise duty and sales tax was in the nature of income insofar as same was received only after commencement of the production. He further contended that incentive was not paid as percentage of investment so as to call the same as capital receipt but was payable to assessee only after commencement of the commercial production. Reliance was placed on the decision of Hon‟ble Supreme Court in the case of Shaney Steels Press Works Ltd. (supra).
11 &6698/M/14 (A.Y. 2009-12) M/s. Man Industries India. Ltd. Vs. ACIT 12. We have considered rival contentions and carefully gone through orders of authorities below. We have also deliberated on the judicial pronouncements referred by lower authorities in their respective orders as well as cited by ld. AR and ld. DR during the course of hearing before us in the context of factual matrix of the case. 12.1 From the record we found that to avail the benefits of Incentive scheme Issued by Central and State Government, the assessee has set up and started Industries at Anjar - Kutch (Guj.) in the year 2005. The assessee got the benefits year to year on Investment made under the Incentive scheme and credited to profit and loss account. The said receipt are capital receipt in nature therefore not liable to tax while computing the income tax on such income as the various high courts has given their decision that the Excise duty and Sales tax incentives received for setting up new Industries for development of specific area as notified by Govt are not in the nature of capital receipt. Both the subsidy schemes i.e. Central-excise duty refund and State-VAT exemption, were applicable only to new Industrial units set up in the Kutch district between 2001 and 2005. The assessee company was set up and started industrial units in Anjar-Kutch (Guj) in the year 2005 and satisfied the conditions of eligibility for the said subsidy from the Central Government and the State Government. As a result, the assessee company became eligible for the said incentive under the said subsidy scheme immediately on setting up of the new industrial unit in Kutch though the subsidy was receivable only after production by way of refund of excise duty and VAT 12 &6698/M/14 (A.Y. 2009-12) M/s. Man Industries India. Ltd. Vs. ACIT exemption. In the case of the assessee the incentive so received was for setting up new industry in the earthquake prone Anjar-Kutch area of Gujarat and not a production incentive as in the case of Sahney Steel and Press Works Ltd. Vs. CIT, 228 ITR 253(SC) relied on by the learned Assessing Officer. However, the AO has declined assessee‟s claim of subsidy as a capital receipt on the plea that subsidy so received was production incentive and not a incentive for setting up new industrial unit in the notified areas. The subsidy received by the assessee is capital in nature and not income. The distinction between Production subsidy and the subsidy for setting up new Industry has been considered by Courts in many judgments and in particular by the Hon'ble Supreme Court in different judgments including in the case of Sahney steel and Press Works Ltd. Vs. CIT; 228ITR 253 (SC). In all the cases it has been held that the incentive/subsidy for setting up new Industry is a capital receipt and not Income. In CIT Vs. P. J. Chemicals Ltd.; 210 ITR. 830 (SC) It has been accepted by the Department that the subsidy for setting up of new Industry is a capital receipt and not Income. Thus the learned Assessing Officer was wrong in rejecting the claim of the assessee that the subsidy is a capital receipt and not Income. In CIT Vs. Ponni Sugar and Chemicals Ltd.; 306 ITR 392 (SC), the Hon'ble Supreme Court has followed the norms/laid down in Sahney Steel and Press Works Ltd. Vs. CIT; 248 ITR 253 (SC) and has observed at page 400 as under: “.. The Importance of the judgment of this Court in Sahney steel case lies in the fact that it has discussed and analyzed the entire case law and it has laid down the basic test to be applied in judging 13 &6698/M/14 (A.Y. 2009-12) M/s. Man Industries India. Ltd. Vs. ACIT the character of a subsidy. That test is that the character of the receipt in the hands of the assessee has to be determined with respect to· the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial. The main eligibility condition in the scheme with which we are concerned in this case is that the incentive must be utilized for repayment of loans taken by the assessee to set up new units or for substantial expansion of existing units. On this aspect there is no dispute. If the object of the subsidy scheme is to enable the assessee to run the business more profitably then the receipt is on revenue account. On the other hand, if the object of the assistance under the subsidy scheme is to enable the assessee to set up a new unit or to expand an existing unit then the receipt of the subsidy would be on capital account. Therefore, it is the object for which the subsidy/ assistance is given which determines the nature of the incentive subsidy the form or the mechanism through which the subsidy is given are irrelevant.”
From the record we found that the subsidy was given to assessee for setting up unit in the Kutch district. The Hon‟ble Supreme Court in the case of Ponni Sugar & Chemicals (supra) and in the case of Shree Balaji Alloys, affirming the view of Hon‟ble Jammu and Kashmir High Court, held that such subsidy was of capital nature and not income. This judgment of the Hon‟ble Supreme Court has been applied by various High Courts and Tribunals in subsequent judgements for deciding the nature of the subsidy receipts. 13.1 Facts in the instant case before us are identical to the facts of the case decided by Jurisdictional High Court in the case of Reliance Industries Ltd. 339 ITR 632 (Bom) wherein Court observed that in 1979, the Government of Maharashtra had framed a subsidy scheme by way of sales tax incentive for setting up new industries in notified backward areas in Maharashtra for 14 &6698/M/14 (A.Y. 2009-12) M/s. Man Industries India. Ltd. Vs. ACIT development of the area and generation of employment. The scheme was formulated by a resolution dated 05/01/1980. The sales tax incentive received by the assessee in this case in the A. Ys. 1984-85 to 1986-87 was held by the Bombay High Court to be capital receipt and not income. 13.2 The issue was also considered by the ITAT Special Bench in Dy. CIT vs. Reliance Industries Ltd. 273 ITR (AT) 16 (Mum) (SB) wherein similar sales tax incentive was held in favour of the assessee, being capital receipt. This view was upheld by the Hon‟ble Bombay High Court in the above case. While deciding so the Hon‟ble Bombay High Court followed the judgment of the Hon‟ble Supreme Court in CIT vs. Ponni Sugar and Chemicals Ltd.; 306 ITR 392 (SC).
We found that the facts in the instant case before us are identical to the above cases decided by Supreme Court in case of Shree Balaji Alloys (supra), Ponni Sugar & Chemicals Ltd(supra) and by Bombay High Court in the case of Reliance Industries (supra), Chaphalkar Brothers 351 ITR 309, Kirloskar Oil Engines Ltd., 364 ITR 88, by Gujarat High Court in the case of Inox Leisure ltd. 351 ITR 314. However, the learned Assessing Officer has wrongly held that the facts are different and has erroneously refused to follow these judgements. Following the principle laid down by the Hon‟ble Supreme Court in CIT vs. Ponni Sugar and Chemicals Ltd.306 ITR 392 (SC), the Hon‟ble Jammu and Kashmir High Court in the case of Shree Balaji Alloys, held that the subsidy by way of excise duty refund and interest subsidy given by the Central Government for setting up new industries in notified backward areas in Jammu and Kashmir was 15 &6698/M/14 (A.Y. 2009-12) M/s. Man Industries India. Ltd. Vs. ACIT a receipt on capital account and not income. The decision of Hon‟ble Jammu & Kashmir High Court has been recently affirmed by Hon‟ble Supreme Court.The facts in all these cases are identical to the case of the assessee with respect to subsidy received by way of refund/exemption of excise duty/VAT/Sales Tax. However, the Assessing Officer has wrongly held that the facts are different and has refused to follow this judgement. One of the reasons given by the Assessing Office not to follow the judgement of Hon‟ble Bombay High Court was that the SLP against this judgment is pending before the Hon‟ble Supreme Court.
In the case of Rasoi Ltd. 335 ITR 438 (Cal), Hon‟ble Calcutta High Court following the principle laid down by the Hon‟ble Supreme Court in CIT vs. Ponni Sugar and Chemicals Ltd.; 306 ITR 392 (SC), held that the subsidy by way of sales tax incentive for expansion of capacity, modernization and improving marketing capacity is receipt on capital account and not income. 15.1 ITAT Special Bench in the case of Vinod Kumar Jain vs. ITO 140 ITD 1 “Following the above judgment of the Hon’ble Jammu and Kashmir High Court, the Amritsar Special Bench of the Hon’ble Tribunal held that the subsidy by way of excise duty refund is a capital receipt and not income.”
15.2 In the case of CIT vs. Chaphalkar Bros.351 ITR 309 (Bom): “Following the principle laid down by the Hon’ble Supreme Court in CIT vs. Ponni Sugar and Chemicals Ltd.; 306 ITR 392 (SC), the Hon’ble Bombay High Court held that the subsidy by ay of grant of concession in entertainment duty to promote construction of multiplex theatre complexes was a receipt on capital account and not income.”
16 &6698/M/14 (A.Y. 2009-12) M/s. Man Industries India. Ltd. Vs. ACIT 16. Furthermore following the principle laid down by the Hon‟ble Supreme Court in CIT vs. Ponni Sugar and Chemicals Ltd.; 306 ITR 392 (SC) and the judgemnet of the Hon‟ble Bombay High Court in CIT vs. Chaphalkar Bros.; 351 ITR 309 (Bom), the Hon‟ble Gujarat High Court in the case of Baroda Inox Leisure Ltd.(supra) held that the subsidy by way of exemption from payment of entertainment tax to boost tourism sector was a capital receipt and not income.
In the case of CIT vs. Kirloskar Oil Engines Ltd.;364 ITR 88 Hon‟ble Bombay High Court following the above principle laid down by the Hon‟ble Supreme Court in CIT vs. Ponni Sugar and Chemicals Ltd.;306 ITR 392(SC), held that the subsidy for setting up of new unit is capital receipt and not income. The Hon‟ble High Court held as under: “i) The character of a receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. The purpose test has to be applied. The point of time at which the subsidy is given is not relevant. The source is immaterial. The form of subsidy is immaterial. The main condition and with which the court should be concerned is that the incentive must be utilized by the assessee to set up a new unit or for substantial expansion of the existing unit. ii) If the object of the subsidy scheme is to enable the assessee to run the business more profitably the receipt is on revenue account. On the other hand, if the object of the assistance under the subsidy scheme is to enable the assessee to set up a new unit the receipt of subsidy would be on the capital account. iii) Once the undisputed facts pointed towards the object and that being to enable the assessee to set up a new unit then the receipt was a capital receipt.”
We had carefully gone through Gujarat Industrial Policy 2003 and Incentive Scheme 2001 for Economic Development of Kachchh District. As per Gujarat 17 &6698/M/14 (A.Y. 2009-12) M/s. Man Industries India. Ltd. Vs. ACIT Industrial Policy for setting up industrial park state government was encouraging participation of private sector for setting up small estates and specialized industrial parks. As per the scheme eligible unit will be provided subsidy in the form of sales tax exemption in respect of units having investment upto Rs.10 crore, equal to 100% Fixed eligible investment. In case investment is more than 10 crore and upto 50crores the exemption will be for 7 seven years period equal to 100% on fixed eligible investment. The incentive scheme 2001 for economic development of Kachchh District came into force from 31 July,2001 wherein the following units were eligible under the scheme:- i. New SSI units & new medium & large scale units are eligible. ii. Expansion and diversification or modernization projects of the existing units will not be eligible under this scheme. iii. New unit means a separate license or registration shall have to be obtained or necessary amendments should have been carried out in the existing license or registration. iv. Separate identifiable investment shall have to be made. v. Separate building and books of accounts should have been maintained. vi. Unit has to commence commercial production before 31.12.2005 viii. Those units who have not commenced commercial production before 31.12.05 but had taken effective steps before 31.12.05 are also eligible as pipeline case. Pipeline units have to commence commercial production before 31.12.2007.
As per the above scheme the eligible units will be entitled for sales tax exemption. Similarly excise duty exemption was also provided under Kachchh Package. “Government of India, in the Ministry of Finance, vide Notification No.39/2001-Central excise dated 31st July 2001 has announced a 18 &6698/M/14 (A.Y. 2009-12) M/s. Man Industries India. Ltd. Vs. ACIT five year excise holiday to the new industrial units set up in the district of Kachchh.”
We had carefully gone through the relevant terms of excise duty exemption - Kachchh Package, wherein we found that new units established after the issue of the notification dated 31.7.2001 are eligible to get exemption from Central excise. Initially, the unit has to pay the excise duty and, thereafter, submit a statement of the duty paid less the credit availed under CENVAT Credit Rules 2001 to the concerned jurisdictional excise authority to claim the refund. After due verification of the claim, the amount will be refunded. In case of units having value of investment in plant and machinery less than Rs.20crore, the quantum of exemptions available up to a maximum of twice the value of such investment, of excisable goods every year. In all other cases, no such monetary ceiling is applicable. The facility of exemption is extended for a period of five years from the date of commencement of commercial production. 20.1 Scheme further provides that new industrial unit means a unit established in the district of Kutch by any industrial undertaking during the operative period of this scheme. This unit shall have to fulfill the following conditions for being qualified as a new industrial project. (a) For new project, a separate license or registration shall have to be obtained or necessary amendments should have carried out in the existing license or registration.
19 &6698/M/14 (A.Y. 2009-12) M/s. Man Industries India. Ltd. Vs. ACIT (b) For the new project, separate identifiable investment shall have to be made and it should not be a part of existing project or expansion thereof. For new scheme, it is necessary to have a separate building and the accounts should also be maintained separately. However, the new project using the utilities such as water, power, steam and pollution control facilities form the existing units shall not loose the eligibility to receive the incentives under the scheme. 20.2 As per clause Eligible units will be able to avail of the benefits of sales tax exemption or sales tax department on their eligible fixed capital investment. Under the sales tax incentive, the -tax to-be recovered against the sales proceeds under the Gujarat Sales Tax Act or Central Sale Tax Act shall be considered. The units shall have to opt for one of the following incentives. (a) Sales Tax Exemption (b) Sales Tax Deferment (c) Composite scheme for units having capital investment exceeding Rs.1 00 crore. 20.3 Under the sales tax exemption the eligible unit will be entitled to purchase the raw materials, packing materials and all the processing materials utilized for the purpose of manufacturing goods, without the payment of sales tax. In addition it will be exempt from the payment of sales tax in respect of sale of finished goods, intermediates, by- products, waste and crap produced by it. The industries opting for the scheme of sales tax exemption will be eligible to receive benefits as per the input/output norms prescribed under the Exim Policy of Central Government for sales tax exemption at various stages of the purchase of 20 &6698/M/14 (A.Y. 2009-12) M/s. Man Industries India. Ltd. Vs. ACIT material. For the purpose, the unit shall have to submit a certificate from Chartered Accountant. Such certificate shall include the details of the sale of finished goods based on the purchase and utilization of input material. One copy of this certificate will have to be submitted to Sales Tax Commissioner. The norms for the items which are not covered under the Exim Policy shall be prescribed by the Industries Commissioner and the same will be informed to the Sales Tax Commissioner.
From the record we found that after the assessee found to be eligible for grant of excise duty exemption, the competent authority i.e. Office of the Chief Commissioner of Central Excise Ahmedabad vide letter dated 24.11.2005 issue certificate to the assessee which reads as under: OFFICE OF THE CHIEF COMMISSIONER OF CENTRAL EXCISE l 7th FLOOR, CENTRAL EXCISE BHAVAN, AMBAWADI AHMEDABAD-380 015 By Speed Post F. No. V/30-02/CCO/Kutch/03-04 Date: 24-11-2005 To, M/s. Man Industries (India) Ltd., Survey No. 485/2, Anjar-Mundra Highway, Village - Khedoi, Taluka - Anjar, District - Kutch, Gujarat. Sir, Sub: Issuance of certificate to M/s. Man Industries (India) Ltd., Survey No. 485/2, Anjar-Mundra Highway, Village - Khedoi, Taluka - Anjar, District - Kutch, Gujarat. Enclosed please find herewith two certificates duly signed by the committee, one in respect of setting up of the above said unit in Kutch district of Gujarat and another in respect of original value of Rs.88,70,70,832/- (Rupees Eighty Eight Crore Seventy Lakh Seventy
Sd/- Deputy Commissioner (CCO) Encl. As above. Copy to: The Commissioner, Central Excise, Rajkot along with above mentioned two original certificates.
OFFICE OF THE CHIEF COMMISSIONER OF CENTRAL EXCISE l 7th FLOOR, CENTRAL EXCISE AHMEDABAD ZONE AHMEDABAD 7th Floor, Central Excise Bhavan, B/h. Polytechnic Bus-stand, Nr. Panjrapole, Ahmedabad-380 015 F. NO. V /3 0-2/CCO/Kutch/03-04 Date: CERTIFICATE This is to certify that the original value of investment in plant and machinery in the factory of MIs. Man Industries (India) Ltd., Survey No. 485/2, Anjar-Mundra Highway, Village - Khedoi, Taluka : Anjar, Dist.- Kutch, Gujarat having Central Excise Registration No. AAACM2675GXM003 in terms of Notification. No. 39/2001-CE dated 31.07.2001 is Rs. 88,70,70,832/- ( Eighty Eight Crores Seventy Lakhs Seventy Thousand Eight Hundred Thirty Two Only). This certificate is issued on the basis of a Certificate dated 28.03.2005 issued by Pradeep H. Agarwal & Associates, Chartered Accountants, Mumbai. This Certificate is issued in terms of para 3(iv) of Notfn. No. 39/2001- CE dated 31.07.2001 for the purpose of availing the exemption under the said Notification. Sd/- Sd/- (D. RAJGOPALANI) (S.C. MATHUR) PRINCIPAL SECRETARY CHIEF COMMISSIONER INDUSTRIES & MINES DEPARTMENT CENTRAL EXCISE & CUSTOMS GOVERNMENT OF GUJARAT AHMEDABAD ZONE 22 &6698/M/14 (A.Y. 2009-12) M/s. Man Industries India. Ltd. Vs. ACIT To, Date of Issue: 24/11/2005 M/s. Man Industries (India) Ltd., Survey No. 485/2, Anjar-Mundra Highway, Village - Khedoi, Taluka - Anjar, District - Kutch, Gujarat. Copy to: The Commissioner of Central Excise & Customs, Rajkot
Similarly Final Eligibility Certificate has been issued by the Sales Tax authority which reads as under: Final Eligibility Certificate No: N a k/V - 25/ rectified certificate/Ru le-5( 2 )/08-07 /G.8 703/05 Office of the Dy. Commercial Tax Commissioner, Ward-25, Gandhidham. (Kutch) Date: 28/09/2008. To, M/s.Man Industries (I) Ltd., Khedoi, Taluka Anjar. Sub: Increase in amount of Tax Exemption/Tax Remission under Gujarat Value Added Tax Act 2003, Rule 5 (2) Reference: (1) Certificate No.K-5(2)/Remission/42/06-07 dated:30/08/2006 issued from our office. (2) Final Eligibility Certificate No. IC/INC/ST/kutch/T-5/1741 Dated 10/06/2006 issued by Commissioner of Industries, Bhuj/Gandhinagar. (3) Your application dated 16/06/2008 for correction. Dear Sir, As mentioned in certificate in reference to 1 above, amounting to RS,26,59,47,000/- as Tax Exemption/Tax Remission was sanctioned for the period 28/03/2005 to 28/03/2015. Hence, according to application mentioned in reference 3 and certificate mentioned in reference 2 for amount of Rs.26,59,47,000/- Tax Exemption/Tax Remission certificate 49(2) for period 29/03/2005 to 31/03/2006 and 01/04/2006 to 28/03/2015 is sanctioned under Gujarat Value Added Tax 2003, Rule 5(2).
23 &6698/M/14 (A.Y. 2009-12) M/s. Man Industries India. Ltd. Vs. ACIT As per above details, certificate mentioned in reference 2 Tax Exemption/Tax Remission of amount Rs.148,13,04,000/- (Rs. One Hundred forty Eight Crores Thirteen Lakhs four Thousand only) is sanctioned.