Tribunal Grants Stay on Tax Demand for Pharma Manufacturer, Cites Expired Inventory Write-Off

The Tribunal granted a stay of demand on tax, interest, and recovery of refund to the pharmaceutical products manufacturer assessee. The assessee contended that expired inventory worth &8377; 2,51,00,000 was unfit for consumption, supported by a certificate from the Commissioner of Excise. The Tribunal found a prima facie case in favor of the assessee regarding the write-off of inventory, granting the stay subject to the assessee depositing &8377; 10 lakhs in two installments with the Revenue Authorities. The order was pronounced on 22.08.2014.

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Issues:
Stay of demand of tax, interest, and recovery of refund issued.

Analysis:
The assessee, a pharmaceutical products manufacturer, filed its return of income declaring a total loss. The Assessing Officer (AO) made additions/disallowances leading to a revised assessed income. The AO denied set off of carry forward losses against income under "Capital Gain" in a reopened assessment. In appeal, the CIT(A) granted relief on one issue but confirmed additions on others. The assessee appealed to the Tribunal seeking a stay of demand.

The assessee contended that inventory worth &8377; 2,51,00,000 had expired and was unfit for consumption, supported by a certificate from the Commissioner of Excise. The assessee argued that if successful in this appeal, the entire tax demand would be reduced to Nil. The AR emphasized a strong prima facie case and potential irreparable loss if the demand was not stayed. The Revenue argued that the tax demand was justified.

The Tribunal noted the assessee's claim that the expired inventory was unfit for consumption and had lost its value. The Commissioner of Excise also confirmed the products were unfit for human consumption. The Tribunal found a prima facie case in favor of the assessee regarding the write-off of inventory. However, the final decision would depend on evidence presented during the appeal. Considering the circumstances, the Tribunal granted a stay on the demand subject to the assessee depositing &8377; 10 lakhs in two installments with the Revenue Authorities.

The Tribunal allowed the assessee's application for a stay of demand, emphasizing that their observations during the stay application would not impact the final case disposal. The order was pronounced in open court on 22.08.2014.

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