DCIT, CEN. CIR-2(2), KOLKATA, Kolkata V. M/s Nezone Alloys Ltd., Guwahati

ITSSA 127/KOL/2015

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2814 (ITAT-KOLKATA)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 07-12-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 14-12-2015
• Court: TRIBUNAL
• Department Lawyers: G MALLIKARJUNA
• Section: 143(3); 153A; 80IB; 37; 132

Judgement Text

1 IT(SS)A NOS.125 TO 128/K/15 M/S NEZONE ALLOYES LTD. IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C, KO LKATA [BEFORE HONBLE SHRI N.V.VASUDEVAN, JM AND DR.ARJ UN LAL SAINI, AM] IT(SS)A NOS.125 TO 128/KOL/2015 ASSESSMENT YEARS : 2009-10 TO 2012-13 D.C.I.T., CENTRAL CIRCLE-2(2), -VERSUS- M/S. NEZON E ALLOYS LTD. KOLKATA. KOLKATA (PAN:AABCN 5478 K) (APPELLANT ) (RESPONDENT) FOR THE APPELLANT : SHRI G.MALLIKARJUNA, CIT(DR) FOR THE RESPONDENT : NONE DATE OF HEARING : 01.12.2016. DATE OF PRONOUNCEMENT : 07.12.2016 ORDER PER DR. ARJUN LAL SAINI, JM THESE ARE APPEALS BY THE ASSESSEE AGAINST FOUR ORDERS ALL DATED 14.09.2015 OF CIT(A)-20, KOLKATA RELATING TO A.Y.2009-10 TO 20 12-13. 2. GROUNDS OF APPEAL RAISED BY THE REVENUE IN AL L THESE APPEALS ARE IDENTICAL. FOR THE SAKE OF READY REFERENCE WE GIVE THE GROUNDS OF APPE AL RAISED BY THE REVENUE IN A.Y.2009-10 IN IT(SS)A.125/KOL/2015 WHICH READ AS F OLLOWS :- (L) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAD ERRED IN DELETING THE DISALLOWANCES MADE U/S 80IC OF THE INC OME TAX ACT,1961. (2) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAD ERRED IN RELYING ON THE DECISION OF THE HON 'BLE ITAT GUWAHA TI BENCH WHICH IN TURN HAD RELIED ON THE DECISION OF CIT V/S MEGHALAYA STEELS LIMITED (GUWAHATI HIGH COURT) WHICH IS PENDING IN THE HON'BLE SUPREME COURT AND HAS THUS N OT YET REACHED FINALITY. (3) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, APPEAL IN THIS CASE OF M/S NEZONE INSUSTRIES LTD. ( A NEZONE GROUP COMPANY) ON SIMILAR ISSUES ARE ALREADY PENDING BEFORE HON'BLE HIGH COURT GUWAHATI. (4) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE DEPARTMENT CRAVES TO ADD OR ALTER ANY MORE GROUNDS AT THE TIME OF THE APPEAL . 3 . ALL THESE APPEALS ARISE UNDER THE FOLLOWING FAC TS AND CIRCUMSTANCES: - 2 IT(SS)A NOS.125 TO 128/K/15 M/S NEZONE ALLOYES LTD. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS O F MANUFACTURE OF MILD STEEL, BLACK AND GALVANIZED TUBES/PIPES ETC. THE AS SESSMENT IN THE CASE OF THE ASSESSEE FOR A.YRS.2009-10 TO 2012-13 WERE COMPLETED U/S 143 (3) OF THE INCOME TAX ACT, 1961 (ACT) IN THE FOLLOWING MANNER :- SL. NO .ASSESSMENT YEAR DATE TOTAL INCOME DETERMINED 1. 2009-10 29.08.2014 RS.1,10,15,740/- 2. 2010-11 29.08.2014 (-)RS.32,62,397/- 3. 2011-12 29.08.2014 RS.5,09,573/- 4. 2012-13 29.08.2014 RS.15,86,331/- 4.WHILE COMPLETING THE AFORESAID ASSESSMENT THE AO CONSIDERED THE TRANSPORT SUBSIDY, CENTRAL WORKING CAPITAL INTEREST SUBSIDY, STATE POWER SUBSIDY, SALES TAX REMISSION AS INCOME NOT ARISING FROM THE ACTIVITY, THE PROFITS AND GAINS OF WHICH WERE ELIGIBLE FOR DEDUCTION U/S 80-IC OF THE ACT. ACCORD ING TO THE AO THE AFORESAID SUBSIDIES CANNOT BE SAID TO BE ARISING OUT OF MANUF ACTURING BUSINESS, THE PROFITS OF WHICH ALONE WERE ELIGIBLE FOR DEDUCTION U/S 80-IC O F THE ACT. SINCE THERE WAS NO NEXUS WITH THE BUSINESS OF THE MANUFACTURING ACTIVI TY, THE AO DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80-IC OF THE ACT ON THE AFORESAID RECEIPTS. 5.ON APPEAL BY THE ASSESSEE THE CIT(A) DISMISSED TH E ASSESSEES APPEAL IN SO FAR AS IT RELATES TO TRANSPORT, POWER AND INTEREST SUBSIDY AN D ALLOWED THE CLAIM OF THE ASSESSEE IN RESPECT OF TREATING THE SALES TAX REMISSION AS D ERIVED FROM ASSESSEES ELIGIBLE BUSINESS. ON FURTHER APPEAL BY THE ASSESSEE THE HON BLE ITAT, GAUHATI BENCH FOLLOWING THE DECISION OF THE HONBLE GAUHATI HIGH COURT IN THE CASE OF CIT VS MEGHALAYA STEELS LTD. (2013) 34 TAXMAN.COM 34 (GAU) WHEREIN IT WAS HELD THAT THE AFORESAID SUBSIDIES HAVE TO BE INCLUDED AS PART OF THE PROFITS OF THE ELIGIBLE BUSINESS ON WHICH DEDUCTION U/S 80-IC OF THE ACT IS TO BE ALLOW ED, ALLOWED THE CLAIM OF THE ASSESSEE. SINCE THE REVENUE HAD FILED APPEAL AGAINS T THE DECISION OF THE HONBLE GAUHATI HIGH COURT IN THE CASE OF MEGHALAYA STEELS LTD. (SUPRA) THE REVENUE HAD ALSO 3 IT(SS)A NOS.125 TO 128/K/15 M/S NEZONE ALLOYES LTD. FILED AN APPEAL BEFORE THE HONBLE HIGH COURT OF GU WAHATI AGAINST THE DECISION OF THE TRIBUNAL IN ASSESSEES CASE. 6.WHILE THE MATTER STOOD THUS THERE WAS A SEARCH AN D SEIZURE OPERATION U/S 132 OF THE ACT IN THE CASE OF THE ASSESSEE ON 01.08.2012. CONS EQUENT TO THE SEARCH NOTICE U/S 153A OF THE ACT WAS ISSUED FOR A.YRS.2007-08 TO 201 3-14. AS FAR AS A.Y.2009-10 TO 2012-13 ARE CONCERNED, THE ASSESSEE FILED RETURN OF INCOME IN ACCORDANCE WITH THE RELIEF ALLOWED BY ITAT AGAINST THE ORDERS PASSED IN THE ASSESSMENTS COMPLETED U/S 143(3) OF THE ACT. SINCE THE REVENUE HAVE FILED THE APPEALS BEFORE THE HONBLE GAUHATI HIGH COURT AGAINST THE ORDERS OF THE TRIBUNAL ARISI NG OUT OF ASSESSMENTS U/S 143(3) OF THE ACT, THE AO WAS OF THE VIEW THAT INCOME THAT WA S DETERMINED AFTER GIVING THE APPEAL EFFECT (CIT(A) APPELLATE ORDER) THAT SHOULD BE CONSIDERED AS ASSESSED INCOME WHILE COMPLETING THE ASSESSMENTS U/S 153A R.W.S.143 (3) OF THE ACT. ACCORDINGLY THE AO DID NOT CONSIDER THE FOLLOWING SUBSIDY IN THE FO LLOWING ASSESSMENT YEARS AS ELIGIBLE FOR DEDUCTION U/S 80I-C OF THE ACT : SL.NO. A.Y. NATURE OF THE SUBSIDY AMOUNT 1.2009-10 TRANSPORT SUBSIDY RS. 7,58,308/- CENTRAL EXCISE DUTY RS. 74,43,482/- CST REMISSION RS. 19,50,537/- POWER SUBSIDY RS. 7,00,000/- CENTRAL INTEREST SUBSIDY RS. 91,055/- INSURANCE SUBSIDY RS. 72,354/- 2.2010-11 CENTRAL EXCISE DUTY REFUND RS. 27,0 3,860/- SALES TAX REMISSION RS. 8,74,427/- INTEREST SUBSIDY RS. 98,585/- INSURANCE SUBSIDY RS. 36,177/- 7. AS FAR AS A.Y.2011-12 AND 2012-13 ARE CONCE RNED THERE WAS NO EARLIER ASSESSMENTS COMPLETED U/S 143(3) OF THE ACT. THE AS SESSMENTS MADE FOR THESE ASSESSMENT YEARS WERE U/S 153A R.W.S. 143(3) OF THE ACT. AS FAR AS THESE THREE ASSESSMENT YEARS ARE CONCERNED THE AO CONSIDERED CE RTAIN SUBSIDIES RECEIVED BY THE 4 IT(SS)A NOS.125 TO 128/K/15 M/S NEZONE ALLOYES LTD. ASSESSEE AS NOT PART OF THE PROFIT ON WHICH DEDUCTI ON U/S 80-IC OF THE ACT CAN BE ALLOWED. THE DETAILS OF THE SUBSIDY IN THIS REGARD ARE AS FOLLOWS :- SL.NO. A.Y. NATURE OF THE SUBSIDY AMOUNT 1.2011-12 TRANSPORT SUBSIDY RS.1,65,052/- WORKING CAPITAL INTEREST SUBSIDY RS.1,51,705/- INSURANCE SUBSIDY RS. 1,92,816/- 2. 2012-13 WORKING CAPITAL INTEREST SUBSIDY RS. 1 9,944/- INSURANCE SUBSIDY RS. 36,177/- POWER SUBSIDY RS. 8,61,472/- TRANSPORT SUBSIDY RS.6,68,738/- 8. THE ASSESSEE PREFERRED AN APPEAL BEFORE CIT( A) IN ALL THE AFORESAID ASSESSMENT YEARS CLAIMING THAT THE SUBSIDIES IN QUESTION HAD T O BE REGARDED AS INCOME ELIGIBLE FOR DEDUCTION U/S 80-IC OF THE ACT. THE CIT(A) IN SO FA R AS IT RELATES TO THE VARIOUS SUBSIDIES EXCEPT SALES TAX REMISSION HELD THAT THES E SUBSIDIES WILL HAVE TO BE REGARDED AS PART OF THE PROFITS ELIGIBLE FOR DEDUCTION U/S 8 0-IC OF THE ACT. AS FAR AS THE SALES TAX REMISSION RECEIVED BY THE ASSESSEE IS CONCERNED THE CIT(A) FOUND THAT IN ONE OF GROUP COMPANIES OF ASSESSEE CASE THE HONBLE ITAT, GAUHAT I BENCH IN ITA NO.54/GAU/2013 HELD THAT THE SALES TAX REMISSION RE CEIVED BY THE ASSESSEE WAS ALSO TO BE CONSIDERED AS PART OF THE PROFITS ON WHICH DEDUC TION U/S 80-IC OF THE ACT SHOULD BE ALLOWED. FOLLOWING AFORESAID ORDER, THE CIT(A) HELD THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION U/S 80-IC OF THE ACT BY INCLUDING THE SAL ES TAX REMISSION AS PART OF THE PROFITS ON WHICH DEDUCTION U/S 80-IC OF THE ACT SHO ULD BE ALLOWED. 9. AGGRIEVED BY THE ORDERS OF CIT(A) THE REVENU E HAS PREFERRED THE PRESENT APPEALS BEFORE THE TRIBUNAL. 10. AT THE TIME OF HEARING OF THE APPEAL IT WAS BROUGHT TO OUR NOTICE THAT THE HONBLE SUPREME COURT IN CIVIL NO.7622 OF 2014 JUDGMENT DAT ED 09.03.2016 HAS UPHELD THE 5 IT(SS)A NOS.125 TO 128/K/15 M/S NEZONE ALLOYES LTD. ORDER OF THE HONBLE GAUHATI HIGH COURT IN THE CASE OF MEGHALAYA STEELS LTD (SUPRA). IT WAS ALSO BROUGHT TO OUR NOTICE THAT CBDT HAS ISS UED CIRCULAR NO.39/2016 DATED 29.11.2016 WHEREBY THEY HAVE AFTER TAKING COGNIZANC E OF THE DECISION OF THE HONBLE SUPREME COURT REFERRED TO ABOVE, INSTRUCTED THE OFF ICERS OF THE DEPARTMENT THAT SUBSIDIES OF TRANSPORT, POWER AND INTEREST GIVEN BY THE GOVERNMENT TO THE INDUSTRIAL UNDERTAKINGS ARE RECEIPTS WHICH ARE REIMBURSED FOR COST OF PRODUCTION RELATING TO MANUFACTURE OR SALE OF THE PRODUCTS AND THEREFORE H AVE A DIRECT NEXUS WITH THE PROFITS AND GAINS OF THE INDUSTRIAL UNDERTAKINGS. THE DEPAR TMENT HAS ACCORDINGLY DIRECTED THE OFFICERS IN THE FIELD TO ALLOW DEDUCTION U/S 80IC O F THE ACT ON SUCH RECEIPTS ALSO. THE SAID CIRCULAR ALSO MENTIONS THAT APPEALS FILED BY T HE DEPARTMENT ON THE ABOVE ISSUE SHOULD NOT BE PRESSED. 11. WE FIND THAT THIS ISSUE HAS BEEN ELABORATELY D EALT WITH BY THE HONBLE GAUHATI HIGH COURT IN THE CASE OF CIT VS MEGHALAYA STEELS L TD VIDE ORDER DATED 29.05.2013 WHEREIN THEIR LORDSHIPS HAD CLEARLY DISTINGUISHED T HE DECISION OF THE HONBLE APEX COURT IN THE CASE OF LIBERTY INDIA CASE AND IT IS P ERTINENT TO GO INTO THE OPERATIVE PORTION OF THE HONBLE GAUHATI HIGH COURTS DECISIO N IN RESPECT OF EACH CATEGORY OF SUBSIDY WHICH IS IN DISPUTE BEFORE US:- 1. TRANSPORT SUBSIDY 88. IN THE LIGHT OF WHAT HAVE BEEN DISCUSSED ABOVE , THERE CAN BE ESCAPE FROM THE CONCLUSION THAT TRANSPORT SUBSIDY WAS AIMED AT REDU CING THE COST OF PRODUCTION OF THE INDUSTRIAL UNDERTAKINGS COVERED BY TRANSPORT SU BSIDY SCHEME. THUS, THERE WAS A FIRST DEGREE NEXUS BETWEEN THE TRANSPORT SUB SIDY, ON THE ONE HAND, AND COST OF PRODUCTION, ON THE OTHER. WHEN COST IS REDU CED, IT NATURALLY HELPS IN EARNING OF PROFIT AND, AT TIMES, HIGHER PROFITS. S UCH PROFITS AND GAINS OUGHT TO HAVE BEEN TREATED, AND HAS RIGHTLY BEEN TREATED, BY THE LEARNED TRIBUNAL, TO BE PROFITS AND GAINS DERIVED FROM, OR DERIVED BY, THE INDUSTRIAL UNDERTAKING CONCERNED. 89. THE REVENUE, IT HAS BEEN RIGHTLY CONTENDED BY M R.AGARWALLA, LEARNED SENIOR COUNSEL, HAS NOT EVEN ATTEMPTED TO DISTINGUISH THE DECISION, IN JAI BHAGWAN OIL & FLOUR MILLS CASE (SUPRA), IN ANY MANNER WHATSOEVE R, WHEN THIS DECISION MAKES IT MORE THAN ABUNDANTLY CLEAR THAT TRANSPORT SUBSID Y GOES ON TO REDUCE THE COST OF PRODUCTION OF THE INDUSTRIAL UNDERTAKING LEADING TO EARNING OF PROFITS AND MAKING OF GAINS BY THE INDUSTRIAL UNDERTAKING. 6 IT(SS)A NOS.125 TO 128/K/15 M/S NEZONE ALLOYES LTD. 94. PUT SHORTLY, THERE IS AN EXISTENCE OF DIRECT NE XUS BETWEEN TRANSPORT SUBSIDY, ON THE ONE HAND, AND THE MANUFACTURING/PRODUCTION A CTIVITIES OF INDUSTRIAL UNDERTAKING, ON THE OTHER, STANDS WELL ESTABLISHED. UNLESS SHOWN OTHERWISE, THE INDUSTRIAL UNDERTAKINGS, IN THE PRESENT SET OF APPE ALS, WHICH HAVE BEEN GRANTED TRANSPORT SUBSIDY, ARE ENTITLED TO CLAIM DEDUCTIONS IN TERMS OF THE DIRECTIONS OF THE LEARNED TRIBUNAL. 2. POWER SUBSIDY : 105. FROM A COMBINED READING OF THE TWO DECISIONS , RENDERED IN RAJARAM MAIZE PRODUCTS (SUPRA) AND EASTERN ELECTRO CHEMICAL INDUSTRIES CASE (SUPRA), WHAT BECOMES TRANSPARENT IS THAT POWER SUBSIDY IS M EANT TO ENABLE A PERSON MEET A CERTAIN PERCENTAGE OF EXPENDITURE ON POWER AND IS , THEREFORE, REVENUE IN NATURE. HOWEVER, THOUGH REVENUE IN NATURE, THE FACT REMAINS THAT IT HELPS IN NOT ONLY GROWTH OF THE INDUSTRIAL UNDERTAKING, BUT ALSO HELP AN INDUSTRIAL UNDERTAKING TO EARN PROFITS AND MAKE GAINS. SUCH A SUBSIDY, THO UGH REVENUE IN NATURE AND TAXABLE ACCORDINGLY, IS NONETHELESS COVERED BY THE PROVISIONS EMBODIED IN SECTION 80IB OR 80IC, AS THE CASE MAY BE. 106. SITUATED THUS, THE PRINCIPLE, DEDUCIBLE FROM T HE CASES OF SAHNEY STEEL & PRESS WORKS LTDS . CASE (SUPRA), RAJARAM MAIZE PRO DUCTS CASE (SUPRA) AND EASTERN ELECTRO CHEMICAL INDUSTRIES CASE (SUPRA), I S THAT WHEN A SUBSIDY, GRANTED BY GOVERNMENT, IS OPERATIONAL IN NATURE, WH ICH HELPS IN GENERATION OF PROFITS FOR ANY INDUSTRIAL UNDERTAKING, SUCH A PROF IT IS, INDEED, COVERED BY THE PROVISIONS EMBODIED IN SECTION 80IB OR 80IC, AS THE CASE MAY BE. 109. WE, NOW, TURN TO THE CASE OF PANCHARATNA CEMEN T (P) LTD. (SUPRA), WHEREIN AMITAVA ROY, J., (AS HIS LORDSHIP, THEN, WAS ), HAS , UPON CONSIDERATION OF THE SUBSIDY INVOLVED, TOOK THE VIEW THAT THE AMOUNT OF SUBSIDY, GIVEN BY WAY OF ASSISTANCE OR GRANTS BY THE GOVERNMENT, SERVES AS S TIMULUS TO THE WILLING INDUSTRIAL ESTABLISHMENTS TO CATER TO THE GROWTH OF THE REGION AND, THUS, REINFORCE THE EVENTUAL INCOME OF THE BUSINESS OF THE UNDERTAK ING. THOUGH THE CASE OF PANCHARATNA CEMENT (P.) LTD. (SUPRA) IS, AS RIGHT P OINTED OUT BY THE LEARNED ASG, AROSE OUT OF A WRIT PETITION AND NOT AN APPEAL UNDER THE ACT, THE FACT REMAINS THAT THE LAW, LAID DOWN THEREIN, IS RELEVAN T IN DETERMINING THE CONTROVERSY, WHICH IS REQUIRED TO BE DEALT WITH IN THIS SET OF APPEALS. THE RELEVANT OBSERVATIONS, APPEARING AT PARA 32, IN PANCHARATNA CEMENT (P.) LTD. (SUPRA), IS, THEREFORE, QUOTED BELOW : ..IT CANNOT BE GAINSAID THAT HAVING REGARD TO TH E LAYOUT OF INVESTMENT AND INCOME DESIGNED FOR ANY COMMERCIAL OR BUSINE SS VENTURE, REIMBURSEMENT OF THE EXPENSES INCURRED TO WHATEVER EXTENT, WOULD LOGICALLY CONTRIBUTE TO THE PROFITS AND GAINS DERIVED FROM THE RELATED ENTERPRI SE AND THUS WOULD AUGMENT THE OVERALL INCOME. THE AMOUNTS OF SUBSIDIES AS THE FACTS OF THE CASE REVEAL ARE BY WAY OF GOVERNMENT ASSISTANCE OR GRANTS UNDER THE SCHEMES TO PROVIDE STIMULUS TO THE WILLING INDUSTRIAL ESTABLISHMENTS T O CATER TO THE INDUSTRIAL 7 IT(SS)A NOS.125 TO 128/K/15 M/S NEZONE ALLOYES LTD. GROWTH IN THE REGION AND, THEREFORE, THE SAME (SUBS IDY) ARE AIMED NECESSARILY AT NEUTRALIZING THE EXPENSES INCURRED AND THUS REIN FORCE THE EVENTUAL INCOME OF THE BUSINESS UNDERTAKING. (EMPHASIS SUPPLIED) 110. WE RESPECTFULLY AGREE WITH THE ABOVE OBSERVATI ONS, MADE IN PANCHARATNA CEMENT (P)LTD. CASE (SUPRA), AND THE LAW LAID DOWN THEREIN. 3.INTEREST SUBSIDY : 112. THE FACTS ARE, THEREFORE, NOT IN DISPUTE O N THIS ASPECT. THE DISPUTE IS : WHETHER THE INTEREST SUBSIDY IS PAYABLE ON NON-OPER ATIONAL OR OPERATIONAL SUBSIDY? IF THE OBJECT OF THE RELEVANT SCHEME IS BO RNE IN MIND, IT CLEARLY SHOWS THAT INTEREST SUBSIDY, HAVING AIMED AT REDUCING THE INTEREST PAYABLE ON WORKING CAPITAL BY AN INDUSTRIAL UNDERTAKING, HELPS DIRECTL Y IN REDUCING THE COST OF MANUFACTURING OR PRODUCTION ACTIVITIES AND ESTABLIS H THEREBY DIRECT AND FIRST DEGREE NEXUS BETWEEN THE INDUSTRIAL ACTIVITIES OF T HE ASSESSEE-RESPONDENTS, ON THE ONE HAND, AND THE INTEREST SUBSIDY, ON THE OTHER, R ECEIVED BY THE ASSESSEE- RESPONDENTS AND, IN CONSEQUENCE THEREOF, SINCE INTE REST SUBSIDY RESULTS INTO PROFITS AND GAINS DERIVED FROM, OR DERIVED BY, AN I NDUSTRIAL UNDERTAKING, THERE IS NO REASON AS TO WHY SUCH PROFITS AND GAINS, EARNED BY AN INDUSTRIAL UNDERTAKING ON THE STRENGTH OF SUCH A SUBSIDY, NAMELY, INTEREST SUBSIDY, BE NOT ALLOWED TO BE DEDUCTED FROM THE TAXABLE INCOME OF THE INDUSTRIAL UNDERTAKING CONCERNED. 12. THE HONBLE GAUHATI HIGH COURT HAD DISTINGUISH ED THE DECISION OF THE HONBLE APEX COURT IN LIBERTY INDIA CASE AS FOLLOWS:- 124. LOGICALLY EXTENDED, THIS WOULD MEAN THAT THE RE WAS NO RELATIONSHIP OR NEXUS BETWEEN THE EXPORT INCENTIVE, ON THE ONE HAND , AND MANUFACTURING/PRODUCTION, ON THE OTHER. DEPB ENTITL EMENT WAS BASED ON THE ARTIFICE OF DEEMED IMPORT CONTENT OF EXPORT PRODUCT AND WAS NOT EVEN BASED ON ACTUAL IMPORT CONTENT OF THE EXPORT PRODUCT; WHEREA S, IN THE CASES AT HAND, THE TRANSPORT SUBSIDY WAS MADE AVAILABLE ON THE RAW MAT ERIAL ACTUALLY CONSUMED IN THE MANUFACTURING PROCESS AND FINISHED GOODS, WHICH WERE ACTUALLY PRODUCED AND TAKEN TO THE EXISTING MARKET FOR SALE AND, SIMI LARLY, POWER SUBSIDY, INTEREST SUBSIDY, AND INSURANCE SUBSIDY ARE, AS ALREADY INDI CATED ABOVE, MADE AVAILABLE ON THE ACTUAL AMOUNT OF THE POWER BILL, INTEREST AN D INSURANCE PREMIUM PAID BY THE ASSESSEE-RESPONDENTS CONCERNED THE INFERENCE, S O DRAWN, GETS REINFORCED FROM THE FACT THAT DEPB ENTITLEMENT WAS FREELY TRANSFERA BLE AND SALEABLE RESULTING IN PROFIT OR LOSS. 125. THAT THE CASE OF LIBERTY INDIA CASE (SUPRA) I S NOT APPLICABLE TO THE CASES AT HAND IS ALSO EVIDENT FROM THE FACT THAT THE OBJECT BEHIND DEPB WAS TO NEUTRALIZE THE INCIDENCE OF CUSTOMS DUTY PAYMENT ON THE IMPORT DUTY OF THE EXPORT PRODUCT AND, HENCE, THE DEPB SCHEME WAS NOT AIMED AT NEUTRA LIZING THE COST OF 8 IT(SS)A NOS.125 TO 128/K/15 M/S NEZONE ALLOYES LTD. PRODUCTION; RATHER, AS OBSERVED BY THE SUPREME COUR T, IT WAS AN INCENTIVE FOR EXPORT AND ENTITLEMENT AROSE, WHEN EXPORT WAS MADE AND NOT OTHERWISE. 127. MOST IMPORTANTLY, POINTED OUT THE SUPREME COU RT, IN LIBERTY INDIA CASE (SUPRA), THAT THE RULES DO NOT ENVISAGE A REFUND OF AN AMOUNT ARITHMETICALLY EQUAL TO EXEMPTION DUTY OR CENTRAL EXCISE DUTY AC TUALLY PAID BY AN INDIVIDUAL IMPORTER/MANUFACTURER. THIS IS THE STRIKING DIFFERE NCE BETWEEN SUBSIDIES ON TRANSPORTATION COST, POWER, INTEREST AND INSURANCE, IN THE CASES AT HAND, ON THE ONE HAND, AND DUTY DRAWBACK SCHEME, ON THE OTHER, I NASMUCH AS THE SUBSIDIES, SO PROVIDED TO THE ASSESSES CONCERNED, ARE ARITHMET ICALLY EQUIVALENT TO THE COST OF RAW MATERIALS ACTUALLY USED IN THE MANUFACTURING PR OCESS AND THE FINISHED GOODS, WHICH IS ACTUALLY TAKEN TO THE EXISTING MARKET FOR SALE WITHIN AND OUTSIDE THE NORTH-EASTERN REGION AND, SIMILARLY, THE ASSESSEES CONCERNED HAVE THE RIGHT TO RECEIVE POWER SUBSIDY, ARISING OUT OF POWER BILLS P AID, OR INTEREST SUBSIDY OR INSURANCE SUBSIDY, EQUIVALENT TO THE AMOUNT PAID ON INTEREST AND INSURANCE RESPECTIVELY. THESE ASPECTS OF DEPB AND DUTY DRAWBA CK SCHEME GIVE RISE TO THE INFERENCE THAT THE DECISION, IN LIBERTY INDIA (SUPR A), WAS RENDERED, IN THE LIGHT OF ITS OWN FACTS, AND NOT FOR UNIVERSAL APPLICATION. T HIS INFERENCE GETS STRENGTHENED FROM THE FOLLOWING OBSERVATIONS MADE IN LIBERTY IND IA CASE (SUPRA) : THE NEXT QUESTION IS WHAT IS DUTY DRAWBACK? SEC TION 75 OF THE CUSTOMS ACT, 1962 AND SECTION 37 OF THE CENTRAL EXC ISE ACT, 1944 EMPOWER GOVERNMENT OF INDIA TO PROVIDE FOR REPAYMEN T OF CUSTOMS AND EXCISE DUTY PAID BY AN ASSESSEE. THE REFUND IS OF T HE AVERAGE AMOUNT OF DUTY PAID ON MATERIALS OF ANY PARTICULAR CLASS OR D ESCRIPTION OF GOODS USED IN THE MANUFACTURE OF EXPORT GOODS OF SPECIFIE D CLASS. THE RULES DO NOT ENVISAGE A REFUND OF AN AMOUNT ARITHMETICALLY EQUAL TO CUSTOMS DUTY OR CENTRAL EXCISE DUTY ACTUALLY PAID BY AN IND IVIDUAL IMPORTER-CUM- MANUFACTURER. SUB-SECTION (2) OF SECTION 75 OF THE CUSTOMS ACT REQUIRES THE AMOUNT OF DRAWBACK TO BE DETERMINED ON A CONSID ERATION OF ALL THE CIRCUMSTANCES PREVALENT IN A PARTICULAR TRADE AND A LSO BASED ON THE FACTS SITUATION RELEVANT IN RESPECT OF EACH OF VARI OUS CLASSES OF GOODS IMPORTED. BASICALLY, THE SOURCE OF DUTY DRAWBACK RE CEIPT LIES IN SECTION 75 OF THE CUSTOMS ACT AND SECTION 37 OF THE CENTRAL EXCISE ACT (EMPHASIS SUPPLIED) 128. IN SHORT, THUS, THE DEPB AND DUTY DRAWBACK SCH EME WERE NOT, AS ALREADY INDICATED ABOVE, RELATED TO THE BUSINESS OF INDUSTR IAL UNDERTAKING PER SE FOR ITS MANUFACTURING OR PRODUCTION. ENTITLEMENT FOR DEPB O R DUTY DRAWBACK SCHEME AROSE, WHEN THE UNDERTAKING DECIDED TO EXPORT AFTER MANUFACTURING OR PRODUCTION AND THIS INCENTIVE WAS RESTRICTED ONLY TO THE EXPOR T OF GOODS OF A SPECIFIED CLASS. CONSEQUENTLY, IF THERE WAS NO EXPORT, THERE WAS NO INCENTIVE FROM DEPB OR DUTY DRAWBACK. THIS APART, DEPB OR DUTY DRAWBACK SCHEME DID NOT PROVIDE REFUND OF EXEMPTION FROM CENTRAL EXCISE DUTY ACTUALLY PAID . 9 IT(SS)A NOS.125 TO 128/K/15 M/S NEZONE ALLOYES LTD. 129. THUS, THE RELATIONSHIP UNDER THE DEPB OR DUTY DRAWBACK SCHEME, ON THE ONE HAND, AND THE MANUFACTURING OR PRODUCTION, ON T HE OTHER , WAS NOT PROXIMATE AND DIRECT. THE ENTITLEMENT WAS BASED ON THE ARTIFI CE OF AVERAGE AMOUNT OF DUTY PAID. IN THE CASE OF TRANSPORT SUBSIDY, POWER SUBSI DY AND INSURANCE SUBSIDY, THE RELATION BETWEEN SUBSIDY RECEIVED, ON THE ONE HAND, AND THE PROFITS EARNED OR THE GAINS MADE, BY AN INDUSTRIAL UNDERTAKING, STAND, AS ALREADY OBSERVED AT PARAGRAPH 127, WELL ESTABLISHED. 131. LIBERTY INDIA CASE (SUPRA), IT MAY BE NOTED, I S, THUS, AN EXPOSITION OF LAW ON THE SCHEMES OF DEPB AND DUTY DRAWBACK SCHEME, WHICH RELATE TO EXPORT OF GOODS BY AN INDUSTRIAL UNDERTAKING; WHEREAS THE SCH EME OF TRANSPORT SUBSIDY, INTEREST SUBSIDY, POWER SUBSIDY AND INSURANCE SUBSI DY, IS INEXTRICABLY AND DIRECTLY CONNECTED WITH THE REDUCTION OF COST OF PR ODUCTION AND MANUFACTURING OF AN INDUSTRIAL UNDERTAKING ENTITLING THEREBY THE ELI GIBLE INDUSTRIAL UNDERTAKINGS TO CLAIM DEDUCTION UNDER SECTION 80IB OR 80IC, AS THE CASE MAY BE. 132. THE DECISION, IN LIBERTY INDIA CASE (SUPRA), I S, THEREFORE, NOT, IN OUR CONSIDERED VIEW, RELEVANT TO THE SCHEMES OF SUBSIDI ES AT HAND. 13. THE HONBLE SUPREME COURT HAS ALSO CONFIRMED THE AFORESAID VIEW OF THE HONBLE GAUHATI HIGH COURT. IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT ON IDENTICAL ISSUE ON THE VERY SAME SUBSIDY AND TAK ING INTO CONSIDERATION ALL THE ABOVE ASPECTS, WE ARE OF THE VIEW THAT THE ORDERS OF CIT( A) WHICH IS IN CONFORMITY WITH THE DECISION OF THE HONBLE SUPREME COURT AND CBDT CIRC ULAR REFERRED TO ABOVE, DOES NOT CALL FOR ANY INTERFERENCE. WE THEREFORE DO NOT FIND ANY MERIT IN THESE APPEALS BY THE REVENUE. ACCORDINGLY THE APPEALS OF THE REVENUE ARE DISMISSED. 14. IN THE RESULT, ALL THE FOUR APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 07.12.2016 SD/- SD/- [N.V.VASUDEVAN] [DR.ARJUN LAL SAINI] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 07.12.2016 PKM,SR.P.S. COPY OF THE ORDER FORWARDED TO: 10 IT(SS)A NOS.125 TO 128/K/15 M/S NEZONE ALLOYES LTD. 1. M/S. NEZONE ALLOYS LTD., 5 TH FLOOR, D.D.TOWER, G.S.ROAD, CHRISTIAN BASTI, GUWAHATI-781005. 2 THE D.C.I.T., CENTRAL CIRCLE-2(2), KOLKATA. 3. THE CIT(A)-20, KOLKATA. 4. CIT-CENTRAL-I, KOLKATA. 5. DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES