Raj Sugars Ltd. is a manufacturer of sugar. The sugar manufactured by the company is sold to government for free supply and in the open market. The Government, to meet the market demand fluctuations, directed the sugar c

In this case the assessee i.e. Raj Sugar Ltd. is storing its own manufactured sugars in its godown as per the directions of the government. Basically, the company is a manufacturer of goods and not storage & warehouse keeper. The subsidy received from the government is not an income. It is an amount given to meet out certain expenses incurred by the assessee to maintain buffer stock as per the government directions. Further, the assessee has received subsidy not on account of services rendered to the government, but is paid as compensation on account of loss of interest, cost of maintenance, cost of insurance etc. Therefore, the subsidy is not taxable as it was also decided in the case of CCE v/s Nahar Industrial Enterprises . Therefore, the contention of the department is not valid as per law.