Useful Budget clarifications
IN the midst of the Budget Making exercise, the TRU also found it prudent to come out with some clarifications and make a mention in its D.O letter rather than issuing a Circular and making a big issue of it.
DDT feels that these may go un-noticed if not highlighted.
Here are some of them as appearing in D.O.F. No. 334/8/2016-TRU dated February 29, 2016.
Clarification by TRU
Central Excise
++ A doubt has been raised with reference to the area based excise duty exemption for the North Eastern Region including Sikkim vide notification No.20/2007-CE dated 25.04.2007, as to whether an industrial unit which is presently availing of the said excise duty exemption, again undertakes substantial expansion by not less than 25% before 31.03.2017 and satisfies the conditions as stipulated under Para 5 and Para 6 of the said notification, will again be eligible for excise duty exemption from such expanded capacity with effect from the date commencement of commercial production for a further period of 10 years. It is clarified that in absence of a provision to the contrary, the area based excise duty exemption presently available to the North Eastern States including Sikkim vide notification No.20/2007-CE dated 25.04.2007 [for which the sunset clause is 31.03.2017] will be available to an existing unit on second substantial expansion as well, provided that the concerned unit commences commercial production from such expanded capacity not later than 31.03.2017. [Page 34, Sr. no.3]
Netizens may also see Is there rampant misuse of Notification Nos 49 & ?
++ Notification No.108/95-CE, dated 28th August, 1995 provides full exemption from excise duty to goods supplied to the projects financed by the UN or an international organization and approved by the Government of India subject to certification by the authorities concerned that the said goods are required for the execution of the said project. A doubt has been raised as to whether the benefit of excise duty exemption is intended to be restricted to direct supplies by the contractor to the project. In this regard, it is clarified that the exemption from excise duty, under notification No.108/95-CE dated 28.08.1995 is also available to sub-contractors for manufacture and supply of goods for or on behalf of the main contractor (who has won the contract for the supply of goods to the projects financed by the UN or an international organization and approved by the Government of India) for execution of the said project, subject to compliance of other specified conditions, if any. [Page 34, Sr. no.4]
The Madras High Court in the case of Caterpillar India Pvt. Ltd. - while dismissing the Revenue appeal against the CESTAT order - 2005-TIOL-423-CESTAT-DEL had observed -
"8. We do not find any justifiable ground to interfere with the order of the CESTAT based on a factual finding and there was no material placed by the Revenue on the allegations of the possible misuse of the goods for unintended purposes by the Sub-Contractors. Secondly, being the beneficial Notification issued in public interest and the project itself being executed fully by the Contractors as per the directions of the Project Implementing Authority, the fact that the machineries were not given directly to the project implementing authority but given to the agency executing the work in fact cannot go against the assessee's claim. Thus ultimately, as the machineries had been put in use by the sub-contractors, who were given the job of execution the claim for exemption cannot be denied. The use of the phrase 'supplied to the projects financed by the said United Nations or an International Organisation and approved by the Government of India' clearly shows that the condition for grant of exemption is supply of the goods towards the project and nothing beyond. …In the circumstances, we do not find any justification to introduce any condition or read in a restrictive manner."
In a similar case of Sunbeam Generators Pvt. Ltd. - 2015-TIOL-1146-CESTAT-MAD, the CESTAT had allowed the appeal of the assessee by relying upon the High Court order (supra).
Presumably, the aforementioned High Court decision has been gracefully accepted by the Board. Nonetheless, this clarification is a step in the right direction.
Incidentally, it is understood that the Supreme Court had on 1st March 2016, a day after the Budget, dismissed the Revenue Appeal in the Caterpillar case.