TaxTMI 
TaxTMI 
2014 (1) TMI 1022
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....f Rs. 1,92,000/- as VAT Remission in place of actual figure of Rs. 13,790.67. iii) Without prejudice to the above, the lower authority has erred in not treating the amount of Rs. 2,04,42,410/- towards CENVAT credit as Capital Subsidy. iv) Without prejudice to the above, the lower authority has erred in not treating the amount of Rs. 13,790.67 towards VAT remission as capital subsidy. v) The assessee craves its right to add, alter, withdraw, modify or delete any of the grounds of appeal. 3. The grounds raised in ITA No. 4013/Del/2011 (A.Y. 2007-08) in the Revenue's appeal read as under:- i) On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs. 91,94,880/- u/s. 80-IB on account of Self Cenvat Credit availment. ii) On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in holding that Excide Duty refund is a capital receipt in nature and not liable to tax. iii) The order of the ld. CIT(A) is erroneous and is not tenable on facts and in law. iv) The appellant craves leave to add, alter or amend any / all of the grounds of appeal before or during the course of t....
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....Availment. Furthermore, Ld. CIT(A) allowed the addition ground of the assessee that excise duty refund was a capital in nature and not taxable to tax. 7. Against the above order the Assessee in appeal for asstt. year 2006-07 and Revenue is in appeal for asstt. year 2007-08 & 2008-09 before us. 8. Since the issues are analogical, we are adjudicating the issue with reference to the facts and figures of the Asstt. 2007-08. 9. The assessee has received refund of excise duty paid by it, from the Excise authorities. The Government of India, Ministry of Commerce and Industry and Department of Industrial Policy and Promotion vide its Office Memo dated 14.6.2002 has formulated a special package of incentives for the development of industries in the State of J&K. Such office Memorandum states that the special package for the State of J&K is on the same lines which were earlier formulated by the Government of India for the North Eastern states notified vide OM NO. EA/1/2/96-IPD dated 24th December, 1997. With a view to accelerate industrial development in the State of J&K, the package of incentives was introduced and made applicable to the industrial undertakings specifying certain conditi....
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....awback cannot be credited against the cost of manufacture of goods debited in the profit and loss account and they do not fall within the expression "profits derived from industrial Undertaking " under section 80-IB." Before going into detailed analysis of the judgment of Hon'ble Supreme Court, it is important to go into certain observation of Hon'ble Supreme court to understand the whole concept of Duty drawback and DEPB as well as the contention of Hon'ble Supreme Court' in the said judgment (Liberty India). At Para 12, Page No. 231 of ITR - "12. In this batch of civil appeals we are concerned with admissibility of the amounts of duty drawback and DEPB for deduction under section 80-IB. 16. DEPB is an incentive. It is given under the Duty Exemption Remission Scheme. Essentially, it is an export incentive. No doubt, the object behind DEPB is to neutralize the incidence of customs duty payment on the import content of export product. Under DEPB, an exporter may apply for credit as a percentage of the FOB value of exports made in Feely convertible currency. Credit is available only against the export product and at rates specified by the DGFT for import of raw materials, componen....
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.... Kashmir. That Cenvat Credit / Duty Drawback is allowed to the manufacturer of goods. This manufacturing facility should be in the State of Jammu & Kashmir. The Cenvat Credit is allowed only to the manufacturer and not to traders or other activities of the assessee even the same are being conducted by the specified unit. It is only on a condition when excisable goods are manufactured by new industrial undertaking. In the case of Cenvat Credit, the manufacturing of goods by undertaking is a pre-condition. That it is also important to note that excise duty is available only on manufacture and is payable on removable of goods from the manufactory, Duty Drawback or DEPB is allowed only on export. It is allowable to any exporter, irrespective of facts whether he is manufacturing or not, meaning thereby that even if the exporter is not a manufacturer; the incentive in tile form of Duty drawback / DEPB will be allowed. Hence, it is a very pivotal difference between DEPB/ Duty Drawback and Cenvat Credit that in the case of Duty drawback / DEPB, it is not necessary that the exporter should be a manufacturer also but in the case of cenvat credit / refund; this is a pre-condition that the cla....
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....llant has also submitted a detailed chart comparing the notifications of both the States and placed at Page No. 83 of the Paper Book. It is the contention of the appellant that since both the notification are para materia, therefore, the case of appellant is squarely covered by the judgment of Hon'ble Delhi High Court in the case of Dharmpal Premchand. The main submission of the appellant on the applicability of Dharampal Premchand are reproduced here below : The Hon'ble Delhi High Court after considering notification as well as the tactual position had observed as under: "18 - As stated above, the notifications clearly mandate from excise duty is available only if the industrial activity carried out by the assessee either in a new industrial undertaking in which installed capacity is increased by at least by 25%. It is thus clear that in the first notification, i.e. 32/1999 the exemption is area specific, while in the second notification, i.e. 33/1999 the exemption is specific to goods as referred to in the schedule appended to the said notification. It is thus clear that the exemption is directly relatable to industrial undertaking manufacturing goods, which are otherwise exigib....
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....cise duty refund is therefore, a first degree source of receipt linked with the manufacturing activity of the undertaking. Hence it is derived from the business of the industrial undertaking and falls within the parameters laid clown in Section 80RIB of the IT Act. While on the issue I have gone through the findings of my predecessor in appellant's case for AY 2006-07 in Appeal No: 427/08-09 dated 07.09.10, wherein my learned predecessor has disallowed the appellant's claim for allowing 80-IB deduction on Excise Duty refund (self Cenvat Credit). On relying upon the observation of Honourable Supreme Court in case of Liberty India Ltd. (supra) viz. "for the purpose of AS-2, Cenvat Credits should not be included in the case of purchase of inventories" & that the said decision is applicable to the facts of appellant's case too. It is however noted from the Notification No, 56/2002 of Central Excise dated 14.11,02 that the exemption contained in the notification is subject to the condition that the manufacturer first utilizes whole of the Cenvat Credit (this arises out of purchase of raw material) available to him on the last day of the month meaning thereby that no excise duty refund ....
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....le. He further claimed that the decision of the Dharampal (Supra) came after the Liberty India pronouncement by the Apex Court. He further submitted that the issue has to be decided in favour of the assessee in as much as the impugned amount is capital receipt. 13. Ld. Departmental Representative on the other hand relied upon the order of the Assessing Officer and the Ld. CIT(A)'s order for the asstt. year 2006-07. However, she could not controvert the assessee's submissions that the issue is covered in favour of the assessee by the decision of the Hon'ble Jurisdictional High Court in the case of Dharampal Premchand (Supra). 14. We have carefully considered the submissions and perused the records. We find ourselves in agreement with the finding of the Ld. CIT(A) that the issue is covered in favour of the assessee by the decision of the Hon'ble Jurisdictional High Court in the case of Dharampal Premchand 221 CTR 133. In this case the Hon'ble Court has held that the refund of excise duty has a direct nexus with manufacturing activity and therefore such refund is an income derived from industrial undertaking eligible for relief under section 80-IB. We further agree with the contenti....