TaxTMI Updates e-Newsletter
Jun 17,2016

Service of notice of reopening - personal service by delivery to third person - authority of recipient to accept notice - service by postal dispatch and official postal endorsement - reopening of assessment

Personal service by delivery to third person - authority of recipient to accept notice - Service effected by personal delivery to one Krishna Yadav was not valid for the petitioner in the absence of any showing that Krishna Yadav was authorized to receive notice on behalf of the petitioner. - HELD THAT: - The court found that the department failed to demonstrate that the person who purportedly received the notice, Krishna Yadav, had any authority to accept the notice for the petitioner. There was no evidence that Krishna Yadav was an authorized agent or representative entitled to receive communications on behalf of the petitioner. On this limited point the attempt at personal service was held to be ineffective. [Paras 7]

Personal service on Krishna Yadav did not constitute valid service on the petitioner.

Service by postal dispatch and official postal endorsement - service of notice of reopening - reopening of assessment - Service by postal dispatch, which was shown to have been sent and returned with the postal endorsement 'left', was sufficient for the department to proceed with reopening; non-service alone did not vitiate the reopening proceedings. - HELD THAT: - The court noted that the department had dispatched the reopening notice by post and that the postal department's official endorsement recorded that delivery could not be effected because the addressee had left. The petitioner did not dispute that the notice had been dispatched by post, nor did he persist in asserting the wrongness of the postal address; indeed, he accepted having received other communications at the same address. The petitioner also did not join the postal authority to challenge the endorsement. In these circumstances the Income Tax Department was entitled to act on the official remark of the postal department and the reopening could not be set aside solely on the ground of non-service by personal delivery. [Paras 8, 11, 12, 13]

Postal dispatch shown to have been sent and returned with the endorsement 'left' permitted the department to proceed; non-service alone did not invalidate the reopening and the petition was dismissed.

Final Conclusion: The writ petitions challenging the reopening for assessment year 2008-09 were dismissed: personal service on an unauthorized third person was ineffective, but the department's postal dispatch (returned with the endorsement 'left') sufficed to permit reopening and non-service alone did not vitiate the proceedings.

Penalty under Section 271(1)(c) for furnishing inaccurate particulars of income - treatment of capital gain - credit to capital reserve versus profit and loss and impact on book profit for computation under Section 115JB - deeming fiction in Explanation 1 to Section 271(1)(c) - onus of proof and conditions for imposition - difference of opinion on accounting treatment not constituting evasion or inaccuracy

Furnishing inaccurate particulars of income - penalty under Section 271(1)(c) - deeming fiction under Explanation 1 to Section 271(1)(c) - difference of opinion on accounting treatment - Whether penalty under Section 271(1)(c) was rightly imposed for crediting capital gain directly to capital reserve instead of routing through profit and loss thereby reducing book profit. - HELD THAT: - Undisputedly all facts material to computation of total income were disclosed by the assessee with respect to the receipt and sale of shares. The question was one of accounting treatment - whether the capital gain should be credited to the profit and loss account or directly to capital reserve - a difference of opinion between the Assessing Officer and the assessee. The Tribunal and CIT(A) applied the principle that mere assertion of a different legal or accounting view does not amount to furnishing inaccurate particulars of income. Explanation 1 to Section 271(1)(c) may shift the onus of proof, but it permits imposition of penalty only where (a) no explanation is furnished, (b) the explanation is found to be false, or (c) the assessee fails to substantiate a bonafide explanation and to show that all facts material for computation of income were disclosed. On the facts the authorities below correctly found that those conditions were not satisfied. The High Court, relying on the reasoning in the cited Supreme Court decisions, held that a bona fide difference of opinion on presentation of capital gain does not attract penalty under Section 271(1)(c) where material facts have been disclosed and the explanation has been offered and substantiated. [Paras 4, 5, 6]

Penalty under Section 271(1)(c) deleted; Assessing Officer was not justified in holding that inaccurate particulars were furnished.

Final Conclusion: Revenue's appeal is dismissed; the deletion of penalty for Assessment Year 2003-04 is upheld because all material facts were disclosed and a bona fide difference of opinion on accounting treatment does not attract penalty under Section 271(1)(c).

Depreciation on pollution control equipment - interpretation of the word 'being' in Appendix-I of the Income tax Rules - allowability of 100% depreciation for plant components integral to pollution control - weight and acceptance of technical expert's opinion in assessment proceedings

Depreciation on pollution control equipment - allowability of 100% depreciation for plant components integral to pollution control - interpretation of the word 'being' in Appendix-I of the Income tax Rules - Depreciation at 100% was correctly allowed by the Tribunal on certain pollution control equipments held to be integral to the plant despite not being individually listed in Appendix I. - HELD THAT: - The Tribunal accepted the assessee's technical expert report that a substantial part of the assets claimed as pollution control equipment function as an integral part of the main plant and therefore fall within the scope of items eligible for higher depreciation. The assessing officer and the CIT(A) had disallowed part of the claim on the basis that some items were not strictly enumerated in the Appendix I list. The High Court held that the Tribunal rightly placed weight on the expert opinion and, absent any proper procedural challenge by the authorities to that opinion, was justified in reversing the lower authorities. The Court therefore rejected the department's contention that the Appendix I list must be interpreted to exclude equipments which the expert established to be integral to the pollution control system, and sustained the Tribunal's allowance of depreciation. [Paras 5]

Tribunal's allowance of depreciation was correct and is upheld; no interference with the Tribunal's order.

Final Conclusion: The appeal is dismissed; the High Court upholds the Income Tax Appellate Tribunal's allowance of depreciation on the pollution control equipments as just and proper.

Unexplained cash credit under Section 68 of the Income-tax Act - onus on assessee to explain nature and source of credit - not required to prove source of the source - genuineness and creditworthiness of donor - precedent binding on coordinate bench

Unexplained cash credit under Section 68 of the Income-tax Act - genuineness and creditworthiness of donor - Validity of the addition of Rs. 2,20,000 as unexplained cash credit under Section 68. - HELD THAT: - The Tribunal and revenue upheld the addition on the premise that the assessee failed to establish genuineness and creditworthiness of the creditor. The High Court, however, found the facts akin to the coordinate-bench decision in Tax Appeal Nos. 600-602 of 2005, where identification of the donor, receipt by banking channel and contemporaneous evidence were held sufficient to discharge the primary onus under Section 68. The Court held that the Tribunal adopted an impermissible approach by effectively requiring proof of source of the source and by doubting the genuineness despite evidence of bank cheques and confirmations. [Paras 7, 8]

Addition under Section 68 set aside and question answered in favour of the assessee.

Onus on assessee to explain nature and source of credit - not required to prove source of the source - Whether the assessee was required to prove the source of the source to discharge the burden under Section 68. - HELD THAT: - Relying on the coordinate-bench precedents, the Court reiterated the settled principle that while the primary onus is on the assessee to explain the credit entry, the assessee need not prove the source of the source. Once the identity of the donor and the mode of receipt (bank cheques) and confirmations are produced, the primary onus stands discharged and it is for the revenue to pursue the donor if dissatisfied with the donor's sources. [Paras 7, 8]

Assessee cannot be compelled to prove source of the source; burden was discharged in the present case.

Discretionary powers of assessing officer - approach of Tribunal in applying Section 68 - Whether the Assessing Officer's discretionary powers ought to have been exercised to avoid making the addition, having regard to the assessee's age and circumstances. - HELD THAT: - The Court did not find merit in sustaining the addition on the exercise (or non-exercise) of discretion by the Assessing Officer when statutory requirements under Section 68 were not properly applied. The Tribunal's approach of requiring further proof despite documentary confirmations was held unwarranted; the decision follows the coordinate-bench view that discretionary doubts about motive or donor creditworthiness do not supplant the statutory test under Section 68. [Paras 7, 8]

No justification for upholding the addition on discretionary grounds; this ground favours the assessee.

Alternative plea of peak credit - extent of addition vs. quantification - Claim that, alternatively, addition should have been restricted to peak credit rather than the entire sum. - HELD THAT: - The Court answered the substantial questions in favour of the assessee on the primary legal issue of discharge of onus under Section 68 and the impropriety of requiring proof of source of source. Having set aside the addition, there was no requirement to consider subsidiary computation methods such as peak credit; the primary legal conclusion obviated the alternative relief. [Paras 8]

Alternative plea for working out peak credit rendered unnecessary by allowing the appeal.

Final Conclusion: The High Court, applying binding coordinate-bench precedent, held that the assessee was not required to prove the source of the source and that identification of the donor with receipt through banking channels and confirmations discharged the primary onus under Section 68; the addition of Rs. 2,20,000 was set aside and the appeal allowed in favour of the assessee.

Reduction of actual cost of asset by government subsidy - Explanation 10 to Section 43(1) of the Income Tax Act - Computation of written down value of a block of assets - Depreciation based on written down value (WDV)

Reduction of actual cost of asset by government subsidy - Depreciation based on written down value (WDV) - Computation of written down value of a block of assets - Cost of assets forming part of a block set up in assessment year 1993-94 could not be reduced by subsidy received later by adjusting the written down value of the block. - HELD THAT: - The Court adopted the reasoning in paragraphs 9 and 10 of Tax Appeal No.255/2007 that once assets were created and their actual cost determined (1993-94) and thereafter entered a block of assets, they lost independent identity and merged into the block. Sectional scheme for computing WDV of a block permits additions or deductions only in the manner prescribed by section 43(6)(c) and does not contemplate reducing the WDV of a block by applying subsidy attributable to some constituent assets. Consequently, reducing the cost of specific assets out of the written down value of the entire block would indiscriminately reduce the cost of all assets in the block, which the statute does not authorize. On the facts, the subsidy related to assets whose cost had been determined earlier and the statute did not permit retrospective reworking of that computation by adjusting the block WDV. [Paras 5, 6]

Assessee's contention upheld; the Assessing Officer/Tribunal was not justified in reducing the block WDV by the subsidy in respect of assets whose cost was determined in 1993-94.

Explanation 10 to Section 43(1) of the Income Tax Act - Reduction of actual cost of asset by government subsidy - Explanation 10 to Section 43(1), insertedor coming into force w.e.f. 1.4.1999, could not be applied to compel reduction of actual cost of assets that were determined much earlier and had already become part of a block. - HELD THAT: - The Court noted that Explanation 10 was not on the statute book when the assessee invested in fixed capital and the actual cost was computed in accordance with the law then prevailing. Explanation 10 came into effect prospectively from 1.4.1999 and therefore could not be applied retrospectively to alter the computation of actual cost or to justify reduction from the WDV of a block when the assets had been set up and their costs determined prior to the insertion of the Explanation. [Paras 5, 6]

Explanation 10 to section 43(1) has no application to assets whose cost was determined before its insertion; the assessee's challenge succeeds.

Final Conclusion: Both questions framed by the Court were answered in favour of the assessee: subsidy received thereafter could not be used to reduce the cost or WDV of assets whose actual cost was determined in 1993-94, and Explanation 10 to section 43(1) could not be applied retrospectively to such assets.

Disallowance of interest under section 36(1)(iii) - deduction under section 80IC - commercial expediency of inter-group advances - use of interest-free funds for advances to sister concerns - precedential effect of overruling earlier tribunal decisions by higher courts

Disallowance of interest under section 36(1)(iii) - use of interest-free funds for advances to sister concerns - precedential effect of overruling earlier tribunal decisions by higher courts - Validity of the disallowance of interest of Rs.1,22,51,965/- made by the Assessing Officer and confirmed by the CIT(A) under section 36(1)(iii) in respect of advances to sister concerns - HELD THAT: - The Tribunal examined whether the advances to sister concerns were made out of interest-bearing borrowings or out of the assessee's own interest-free funds. It found that the assessee had substantial interest-free funds and fixed deposits available, and that higher judicial decisions had overruled the authorities relied upon below. In particular, the Tribunal recorded that the ITAT decision relied upon by the authorities was reversed by the Jurisdictional High Court and that the Supreme Court's decision in Hero Cycles had overruled the earlier rule applied in Abhishek Industries. Having regard to the factual finding that the impugned advances were made from interest-free sources and to the change in legal precedent, the Tribunal held that disallowance under section 36(1)(iii) was not justified and deleted the addition. [Paras 8, 9, 10]

The disallowance of interest under section 36(1)(iii) in respect of advances to sister concerns is deleted and the assessee's appeal is allowed.

Deduction under section 80IC - commercial expediency of inter-group advances - Whether the CIT(A) was correct in allowing deduction under section 80IC in respect of profits from the assessee's manufacturing unit (including sale of paper) despite part of the work being undertaken by job work outside the specified area - HELD THAT: - The Tribunal applied its earlier decision in the assessee's own case for assessment years 2005-06 to 2009-10, noting that the factual matrix (including audited books, vouchers, GRs and delivery challans) supported the assessee's claim. The Tribunal found no infirmity in the CIT(A)'s detailed factual findings and accepted authorities permitting deduction under section 80IC in relation to profits from manufacturing including job-work items. Consequently, the Revenue's contention that the assessee lacked infrastructure and manpower and that sales of paper were trading income was rejected. [Paras 15, 16]

The Revenue's appeal is dismissed and the CIT(A)'s allowance of deduction under section 80IC is upheld.

Final Conclusion: The Tribunal deleted the addition disallowing interest under section 36(1)(iii) and allowed the assessee's appeal, and dismissed the Revenue's appeal challenging the allowance of deduction under section 80IC; the assessment for AY 2010-11 stands accordingly.

Determination of arm's length price - notional interest on interest-free advance (LIBOR as benchmark) - profit shifting by diversion of funds - treatment of corporate guarantee as international transaction - Letter of Comfort-whether constitutes international transaction - application of Section 14A and Rule 8D(2)

Determination of arm's length price - notional interest on interest-free advance (LIBOR as benchmark) - profit shifting by diversion of funds - Arm's length interest on interest-free advances to Associate Enterprises determined on notional basis by applying LIBOR rate. - HELD THAT: - The Tribunal found that although the assessee contended the advances were made from surplus equity raised for business expansion, the pattern of diverting equity funds abroad while borrowing in India and incurring interest (Rs. 10.05 Crores) indicated an attempt to shift profit outside India. The Court held that use of borrowed funds in India to pay interest, concomitant with deployment of equity funds abroad, reduces taxable profit in India and that notional interest must be imputed on the interest-free advances. LIBOR being an internationally accepted benchmark for international loans, the Transfer Pricing Officer's adoption of LIBOR under the CUP/Yield approach to compute arm's length interest on the advances was upheld. [Paras 5, 6]

Confirmed the TPO/DRP adjustment; arm's length price of the advances computed by applying LIBOR is upheld.

Treatment of corporate guarantee as international transaction - determination of arm's length price - Whether corporate guarantee given to an Associate Enterprise attracts an arm's length adjustment - held not to be an international transaction in the facts of this case, and the TPO/DRP adjustment deleted. - HELD THAT: - On identical facts considered in Redington (India) Ltd. (a coordinate Bench decision), the Tribunal concluded that providing a corporate guarantee did not involve any cost to the guarantor and therefore fell outside the scope of international transaction requiring arm's length determination. The Tribunal observed that mere pendency of appellate proceedings elsewhere did not warrant departing from the coordinate Bench's view; accordingly the TPO's notional imputation (based on LIBOR/interest) was not justified and the addition was deleted. [Paras 10]

Followed the coordinate Bench precedent and set aside the TPO/DRP adjustment in respect of the corporate guarantee.

Application of Section 14A and Rule 8D(2) - disallowance of expenditure relating to exempt income - Disallowance under Section 14A upheld by applying the second and third limbs of Rule 8D(2) to compute notional expenditure. - HELD THAT: - The assessee claimed no exempt income (dividend) was earned and that no expenditure was incurred; however, it failed to maintain separate books for investments or substantiate that investments were predominantly in Associate Enterprises. Given the admitted interest outgo and absence of a direct link between expenditure and exempt income, the Tribunal held that the notional disallowance should be computed by taking the average of amounts under the second and third limbs of Rule 8D(2). In the absence of further details, the DRP's confirmation of the TPO's disallowance under the prescribed Rule was sustained. [Paras 15]

Confirmed the disallowance under Section 14A by applying Rule 8D(2) as directed by the DRP/TPO.

Letter of Comfort-whether constitutes international transaction - treatment of guarantee-like assurances - Notional adjustment in respect of Letter of Comfort deleted; Letter of Comfort treated as akin to guarantee which, on the coordinate Bench view, does not involve cost and is outside international transaction. - HELD THAT: - The Tribunal regarded a Letter of Comfort as effectively a guarantee enabling the Associate Enterprise to borrow. While the Revenue argued that such an assurance exposes the issuer to risk and economic benefit accrues to the recipient, the Tribunal followed the earlier coordinate Bench decision in Redington (India) Ltd., holding that issuance of a Letter of Comfort/guarantee did not involve any cost to the issuer and therefore did not require an arm's length adjustment. Consequently the TPO/DRP notional addition (near 1% or actual payments) was set aside. [Paras 19]

Deleted the notional addition relating to the Letter of Comfort and set aside the lower authorities' adjustment.

Final Conclusion: The appeal is partly allowed: the TPO/DRP adjustment imputing LIBOR based notional interest on interest free advances is sustained; adjustments in respect of corporate guarantee and Letter of Comfort are deleted following a coordinate Bench view; disallowance under Section 14A applying Rule 8D(2) is confirmed.

Most appropriate method - Transaction Net Margin Method (TNMM) - Comparable Uncontrolled Price (CUP) method - arm's length price - identification of comparable uncontrolled transactions - estimation of arm's length price - Rule 10B of Income-tax Rules, 1962

Most appropriate method - Comparable Uncontrolled Price (CUP) method - identification of comparable uncontrolled transactions - estimation of arm's length price - Rule 10B of Income-tax Rules, 1962 - Whether the Transfer Pricing Officer was justified in adopting the CUP method and disallowing 75% of the management fee (estimating ALP at 25%) without identifying comparable uncontrolled transactions, contrary to the assessee's adoption of TNMM and the DRP's findings. - HELD THAT: - Rule 10B governs determination of arm's length price and requires comparison with comparable uncontrolled transactions or appropriate adjustments thereto. Under the CUP method the price for services must be compared with prices in comparable uncontrolled transactions and adjusted for material differences; under TNMM net profit margins from comparable uncontrolled transactions are to be considered with adjustments. The TPO did not identify any comparable uncontrolled transactions or comparable services; instead he concluded, without demonstrating a basis, that only 25% of the payment could be allowed and estimated the remainder as excessive. Such an undocumented estimation, without identifying comparable transactions or explaining the basis for the 25% figure, is outside the proper exercise of transfer pricing adjustment under Rule 10B. In absence of identified comparables or an explained basis, the TPO could not legitimately conclude that the volume and quality of services were disproportionate to the payment. The DRP therefore correctly found that the method and the estimation adopted by the TPO were unjustified and upheld the assessee's transfer pricing study adopting TNMM. The Tribunal concurs with the DRP and finds no reason to interfere. [Paras 5, 6, 7, 8, 9]

The Transfer Pricing Officer's adoption of CUP by way of an unexplained estimation (allowing only 25%) is not justified; the DRP's acceptance of the assessee's TP study is upheld and the TPO's disallowance is set aside.

Final Conclusion: Revenue's appeal is dismissed; the Dispute Resolution Panel's decision upholding the assessee's transfer pricing study (and rejecting the TPO's unexplained estimation under CUP) is confirmed.

Speculative transactions as defined under section 43(5) - distinction between a separate speculation business and loss in ordinary business - treatment and set off of speculative loss vis a vis regular business loss - Explanation 2 to section 28 - when speculative transactions constitute a separate business

Speculative transactions as defined under section 43(5) - distinction between a separate speculation business and loss in ordinary business - Explanation 2 to section 28 - when speculative transactions constitute a separate business - Whether the loss of Rs. 33,18,790 arising from contracts settled otherwise than by delivery was a loss of a speculative business (disallowable for set off) or a loss of the assessee's regular business and therefore allowable. - HELD THAT: - The Assessing Officer treated the settled contracts as speculative transactions under section 43(5) and disallowed the loss as arising from a speculation business. The CIT(A) found that although the contracts were settled otherwise than by delivery and thus fall within the definition of speculative transactions, the transactions were isolated (three contracts out of seventy three, about 4% of transactions and about 9.13% of total purchases) and were entered into to ensure uninterrupted supply of raw material. On that basis the CIT(A) held that these transactions did not constitute a separate speculative business under Explanation 2 to section 28 and, therefore, the resultant loss was a loss in the assessee's regular business. The Tribunal concurred, holding that section 73 (set off of speculative losses) must be read with section 28 and section 43(5), and that the Revenue had failed to establish that the impugned transactions formed a separate business of speculation. Consequently the loss was correctly allowed as business loss in the lower appellate proceedings. [Paras 5, 6]

Tribunal affirms CIT(A): the loss is a business loss of the assessee's regular ginning business, not a loss of a separate speculative business; Revenue's appeal dismissed.

Final Conclusion: The Tribunal upheld the CIT(A)'s finding that the settled contracts, though falling within the statutory definition of speculative transactions, were isolated and formed part of the assessee's regular cotton ginning business; therefore the loss was allowable as business loss and the Revenue's appeal is dismissed.

Short-term capital loss-genuineness of transaction - Burden on assessing officer to disprove genuineness of share transactions - Colourable device doctrine and tax avoidance allegation - Specific identification of share certificates versus FIFO method - Allowability of interest expenditure where nexus to interest income is established

Short-term capital loss-genuineness of transaction - Burden on assessing officer to disprove genuineness of share transactions - Colourable device doctrine and tax avoidance allegation - Specific identification of share certificates versus FIFO method - Allowability of short-term capital loss on sale of shares of Inter Active Technologies Pvt. Ltd. - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the purchase and sale of shares were genuine and that the Assessing Officer (AO) erred in treating the sale as a paper transaction entered into to offset short-term capital gain on sale of land. The assessee produced allotment letters, board resolution, bank payments, ROC filings, physical share certificates with distinctive numbers and evidence of receipt of sale consideration by account-payee cheques. The AO did not controvert the purchase at Rs.100 per share in remand proceedings and no infirmity was shown by the ROC. The Tribunal accepted the commercial explanation that fresh purchases were made to rescue and recapitalise the company, noting subsequent improvement in book value and tax payments by the company. Sale of part holding in falling market to minimise losses was held to be a bona fide business decision; transfer to a relative was not by itself indicative of a non-genuine transaction where delivery and payment are on record. The Tribunal further held that where specific distinctive share numbers could be correlated, specific identification must be adopted rather than applying FIFO (relying on CBDT Circular No.704/1995), and therefore the AO was not justified in applying FIFO. Following precedents on genuineness of transactions, the loss was directed to be allowed. [Paras 7, 8]

The short-term capital loss on sale of shares was held to be allowable; the Assessing Officer's disallowance was set aside and the loss of Rs. 1,82,10,800/- was directed to be allowed.

Allowability of interest expenditure where nexus to interest income is established - Deletion of disallowance of interest expenditure treated as excess over interest received. - HELD THAT: - The AO had disallowed interest expenditure as excessive on the basis that the assessee failed to demonstrate nexus of borrowing to earning interest income. The CIT(A) and the Tribunal noted that the AO had accepted in substance that the interest expenditure was incurred to earn interest income and that the assessee explained why interest paid exceeded interest received (concessionary rates on old loans, shorter periods on advances, rotation of funds). The remand report did not establish diversion of borrowed funds to capital investments. Section 56 does not prescribe any condition regarding rates of interest. In these circumstances, the AO's disallowance of the excess interest was held to be unjustified and deleted. [Paras 9, 10]

The disallowance of interest expenditure of Rs. 9,87,264/- was deleted; the CIT(A)'s order in this regard was upheld.

Final Conclusion: Both grounds of the Revenue appeal were dismissed and the CIT(A)'s order was upheld; the assessee's cross-objection was not pressed and is dismissed.

Survey disclosure - surrendered income - allocation of disclosed income across assessment years - taxability linked to receipt/sale versus unrealized sale price - interpretation of conditional declaration - requirement of evidential foundation to attribute sales to a particular year

Survey disclosure - allocation of disclosed income across assessment years - interpretation of conditional declaration - taxability linked to receipt/sale versus unrealized sale price - requirement of evidential foundation to attribute sales to a particular year - Whether the Assessing Officer was justified in making an addition of the balance of the surrendered amount by treating the entire survey disclosure as taxable in assessment year 2007-08 - HELD THAT: - The assessee made a written disclosure during survey covering the entire project and appended a clear note that the declaration related to completion and sale of the entire project up to AY 2007-08 but that amounts relating to flats/shops remaining unsold would be declared in the next year when realised. The books of account for AY 2007-08 recorded only the portion realised in that year (Rs.35 lakhs) in accordance with the conditional declaration. The AO's addition of the balance on the ground that the declaration could not be prolonged and that the assessee had admitted area sold lacked supporting evidence that the unsold flats/shops had in fact been sold or that the sale proceeds were received in AY 2007-08. The Tribunal agreed with the First Appellate Authority that taxability must follow receipt/sale and that unrealised sale price cannot be taxed without evidence linking the receipts or sales to the year sought to be taxed. In these circumstances the balance of the disclosed amount was assessed in the subsequent year and the AO's addition for AY 2007-08 was unsustainable. [Paras 6]

Addition of the balance of the surrendered amount to income of AY 2007-08 is unwarranted; the CIT(A)'s deletion is upheld.

Final Conclusion: The Revenue's appeal is dismissed; the order of the CIT(A) is upheld on the ground that the survey disclosure, being conditional and tied to actual sale/receipt, was appropriately allocated and taxed over AY 2007-08 and AY 2008-09, and the AO's addition for AY 2007-08 is set aside.

Determination of fair market value for cost of acquisition - application of section 55(2) cost of acquisition / fair market value rule - weight and admissibility of valuation evidence including letter from Sub Registrar - valuation by a registered valuer and site inspection - principles of natural justice and confrontation of adverse material - appellate interference with factual valuation findings

Determination of fair market value for cost of acquisition - weight and admissibility of valuation evidence including letter from Sub Registrar - valuation by a registered valuer and site inspection - principles of natural justice and confrontation of adverse material - appellate interference with factual valuation findings - Whether the value of the land as on 1.4.1981 for computing indexed cost of acquisition should be taken at Rs. 2.23 per sq. mtr. (AO), Rs. 25 per sq. mtr. (CIT(A)) or Rs. 40 per sq. mtr. (assessee). - HELD THAT: - Assessing Officer adopted Rs. 2.23 per sq. mtr. based on a letter from the Sub Registrar; that letter was not confronted to the assessee during assessment. The assessee produced valuation reports by registered valuers and relied on a comparable acceptance of Rs. 18 per sq. mtr. in respect of neighbouring land. CIT(A) examined the survey/map and found that the assessee's land enjoyed locational advantages (main road frontage, proximity to civic amenities, transport and industrial area) making it of higher value than lesser advantaged land in the vicinity. In view of these features and the departmental acceptance of Rs. 18 per sq. mtr. for a less advantaged plot, CIT(A) fixed the fair market value at Rs. 25 per sq. mtr. The Tribunal found this to be a reasoned factual conclusion on valuation, observed that the Assessing Officer's failure to confront the assessee with the departmental letter did not render the addition invalid but underscored the necessity of proper appreciation of site specific factors, and held that there was no warrant to disturb the CIT(A)'s factual valuation. Accordingly the Tribunal upheld the appellate authority's valuation and directed recomputation of long term capital gain on that basis. [Paras 4, 6, 7]

CIT(A)'s determination of fair market value at Rs. 25 per sq. mtr. is sustained and the Assessing Officer is directed to compute the long term capital gain accordingly; Revenue's appeal and assessee's cross objection dismissed.

Final Conclusion: The Tribunal upheld the CIT(A)'s reasoned valuation of the land at Rs. 25 per sq. mtr. for computation of indexed cost of acquisition and dismissed both the Revenue's appeal and the assessee's cross objection.

Deduction under section 80IA - infrastructure facility and 'inland port' - Container Freight Station as 'infrastructure facility' - deemed dividend under section 2(22)(e) - assessment of deemed dividend in the hands of the registered shareholder for whose benefit the advance/loan was given

Deduction under section 80IA - infrastructure facility and 'inland port' - Container Freight Station as 'infrastructure facility' - Container Freight Station qualifies as an 'inland port' and consequently as an 'infrastructure facility' for purposes of deduction under section 80IA. - HELD THAT: - The Tribunal considered the decision of the Delhi High Court in M/s Container Corporation of India Ltd., which held that Container Freight Stations were notified by Customs, involved customs clearance and were treated as Inland Ports in the Office Memorandum of the Ministry of Commerce; therefore they fall within the meaning of 'infrastructure facility' as inland ports for section 80IA purposes. The CIT(A) followed that view in the assessee's earlier year and directed allowance of the deduction. Having regard to the Delhi High Court's authoritative consideration of the same issue and the consistent treatment by administrative notifications and memoranda, the Tribunal found no reason to interfere with the CIT(A)'s order and confirmed allowance of deduction under section 80IA for the Container Freight Station operations. [Paras 5]

The CIT(A)'s allowance of deduction under section 80IA treating the Container Freight Station as an inland port/infrastructure facility is confirmed.

Deemed dividend under section 2(22)(e) - assessment of deemed dividend in the hands of the registered shareholder for whose benefit the advance/loan was given - Capital advance received by the assessee from a company with common shareholders is not assessable as deemed dividend in the hands of the assessee-company; any deemed dividend must be assessed in the name of the registered shareholders for whose benefit the advance was given. - HELD THAT: - The Tribunal reviewed section 2(22)(e) and noted that the deeming applies to advances or loans received by a registered shareholder and, where advanced for the benefit of a shareholder or other person, is assessable in the name of the registered shareholder for whose benefit the advance was given. Here the assessee was not a shareholder of the payer company; the advance was for the benefit of common individual shareholders. Therefore, any taxability as deemed dividend would lie in the hands of those shareholders, not in the hands of the assessee-company. The CIT(A)'s deletion of the addition under section 2(22)(e) was accordingly upheld. [Paras 10]

The addition under section 2(22)(e) in the hands of the assessee is deleted; assessment, if any, should be made in the hands of the registered shareholders for whose benefit the advance was given.

Final Conclusion: Both issues decided in favour of the assessee; the CIT(A)'s allowance of deduction under section 80IA for Container Freight Station operations is confirmed and the addition under section 2(22)(e) in the hands of the assessee is deleted. The Revenue appeals and the assessee's cross-objection are dismissed.

Reopening of assessment - notice under section 148 of the Act - notice under section 143(2) of the Act - revised return - time bar for issuance of notice - escapement of income - scope of reassessment - quashing of reassessment proceedings - penalty under section 271(1)(c) of the Act

Reopening of assessment - notice under section 148 of the Act - notice under section 143(2) of the Act - revised return - time bar for issuance of notice - scope of reassessment - quashing of reassessment proceedings - Validity of notice issued under section 148 when time remained available to issue notice under section 143(2) after filing of a revised return - HELD THAT: - The assessee filed the return on 30.10.2002 and furnished a revised return on 31.3.2004 within the time permitted by section 139(5). Computation of the twelve month period for issuance of notice under section 143(2) runs from the end of the month in which the (revised) return was furnished, leaving the Assessing Officer time up to 31.3.2005 to issue notice under section 143(2). The Tribunal held that provisions governing regular scrutiny assessments under section 143(2) and reassessment proceedings under section 148 are placed for different contingencies and carry different scopes; issuance of a notice under section 148 when the Assessing Officer had the unexpired period to issue notice under section 143(2) was not in accordance with law. Allowing the Department to substitute a section 148 notice in place of a section 143(2) notice where time for the latter remains would undermine the statutory scheme, particularly since section 148 presupposes escapement of income and carries a different, generally extended, temporal reach. The Tribunal followed precedent of the Madras High Court in CIT Vs. Qatalys Software Technologies Ltd. and CIT Vs. K.M. Pachaiyappan, holding that reassessment proceedings cannot be validly initiated so long as assessment proceedings pending on the filed return have not been terminated. Accordingly, the notice under section 148 issued within the period available for section 143(2) was held invalid and the consequential reassessment order was quashed. [Paras 7, 8, 9, 10, 11]

Notice issued under section 148 and the consequential reassessment order quashed; assessee's appeal allowed.

Penalty under section 271(1)(c) of the Act - quashing of reassessment proceedings - Consequences for penalty levied under section 271(1)(c) following quashing of reassessment - HELD THAT: - The penalty imposed under section 271(1)(c) was founded upon additions made in the reassessment order. Having quashed the reassessment, the Tribunal found no basis to sustain the penalty and deleted the same as consequential relief. [Paras 14]

Penalty under section 271(1)(c) deleted; assessee's appeal allowed.

Final Conclusion: The notice issued under section 148 of the Act, when the Assessing Officer had time available to issue a notice under section 143(2) in respect of the revised return, was held invalid and the reassessment order was quashed; consequentially, the penalty under section 271(1)(c) was deleted. The assessee's appeals are allowed and the Revenue's appeal is dismissed as infructuous.

Exclusion of agricultural land from capital asset under section 2(14) - definition of agricultural income under section 2(1A) - character of land not altered by presence of buildings or out structures - income from capital gains - classification of land for land acquisition purposes

Exclusion of agricultural land from capital asset under section 2(14) - character of land not altered by presence of buildings or out structures - definition of agricultural income under section 2(1A) - income from capital gains - Whether the compensation received on compulsory acquisition of the 30 cents of land is exigible to tax as capital gains or is exempt as agricultural land/agricultural income for AY 2011-12. - HELD THAT: - The Tribunal held that the entire 30 cents retained the character of agricultural land and was therefore excluded from the definition of "capital asset" under the statute. The presence of a small dwelling, well, pump house, septic tank, compound wall, cattle shed and trees did not convert the land into non agricultural land; the statutory definition of agricultural income (including income from a building occupied by the receiver in immediate vicinity of the land) supported the assessee's claim. Documentary evidence - village officer certificates, village records showing 'Nilam' classification, acceptance of declared agricultural income, and valuation of improvements - corroborated the agricultural character. The land was not within the notified municipal limits or within the specified distance from such limits. On these findings the Assessing Officer's and CIT(A)'s treatment of two thirds of the property as a capital asset was not justified; the AO's concession that one third could be regarded as agricultural was insufficient in view of the evidence. Accordingly the addition brought to tax as capital gains was held to be incorrect and was set aside. [Paras 6, 7]

Addition of Rs.58,76,920/- treated as capital gains was deleted; the entire 30 cents of land was held to be agricultural and not a capital asset for AY 2011-12, and the assessee's appeal was allowed.

Final Conclusion: The assessee's appeal is allowed: the compensation on compulsory acquisition of the 30 cents is treated as arising from agricultural land (not a capital asset) and is not exigible to tax as capital gains for Assessment Year 2011-12; the addition confirmed by the AO/CIT(A) is set aside.

Customs Valuation - Transaction value (Rule 4 of the Valuation Rules) - Best judgment assessment (Rule 8 of the Valuation Rules) - Remand for fresh consideration

Customs Valuation - Best judgment assessment (Rule 8 of the Valuation Rules) - Validity of the CESTAT's affirmation of the Commissioner's order where Rule 8 was applied instead of considering transaction value material - HELD THAT: - The Court found that the CESTAT's statement that the point regarding payment and transaction value was not urged before the Commissioner was incorrect. The record contains the Commissioner's own reply which expressly refers to documentary proof of payment and states that the machines were purchased and payment was made in December 2004. Given this, the conclusion that Rule 8 was the only permissible basis for valuation was unsupported. The Supreme Court therefore concluded that the matter could not be left on the footing adopted below and that the appellate tribunal's affirmation must be set aside to permit fresh consideration of valuation on the basis of material before the authorities.

Impugned orders affirming valuation under Rule 8 were set aside and the CESTAT's judgment reversed to the extent it rested on the incorrect factual premise that the transaction-value point was not urged before the Commissioner.

Transaction value (Rule 4 of the Valuation Rules) - Remand for fresh consideration - Whether the question of transaction value and documentary proof of payment requires fresh adjudication by the CESTAT - HELD THAT: - The Supreme Court held that the presence of documentary material and the Commissioner's own averment about payment (and entitlement to treat the machines as purchased) require that the question of applicability of transaction value under Rule 4 be reconsidered. The Court expressly remitted the matter to the CESTAT for fresh determination, permitting the appellants to place before that Tribunal any documentary proof (including bank evidence) and to make all submissions afresh. The remand is for adjudication of valuation and related issues on merits, not merely for quantification.

The matter is remitted to the CESTAT for fresh adjudication on the applicability of transaction value and related contentions, with liberty to the parties to place documentary evidence and make submissions afresh.

Final Conclusion: The Supreme Court set aside the CESTAT's affirmation of the Commissioner's valuation order insofar as it proceeded on the incorrect finding that the transaction-value point was not urged before the Commissioner, and remitted the case to the CESTAT for fresh consideration of valuation (including the applicability of transaction value and documentary proof of payment), permitting the parties to make all submissions afresh.

Scheme of Amalgamation - sanction of scheme - Accounting Standard 14 - compliance with Income Tax Act and Rules - preservation of books and records under Section 396A - dispensation of meetings of equity shareholders and unsecured creditors - filing of scheme with Registrar of Companies and stamp adjudication

Scheme of Amalgamation - sanction of scheme - Sanction of the Scheme of Amalgamation of Sheth Housing Finance Private Limited with Swapna Srushti Horizon Private Limited. - HELD THAT: - Having considered the Scheme, the affidavit of the Director regarding publication and absence of objections, the report of the Official Liquidator and the observations of the Regional Director together with the petitioner's replies, the Court found it appropriate to grant sanction. The Court recorded that the affairs of the transferor company were not conducted in a manner prejudicial to members or public interest and thereby sanctioned the Scheme of Amalgamation.

The Scheme of Amalgamation is sanctioned.

Accounting Standard 14 - Validity of the Regional Director's observation that Clause 11 of the Scheme did not comply with Accounting Standard 14. - HELD THAT: - The petitioner explained that Clause 11, read as a whole, accords with AS14 and, without prejudice, undertook that both companies will comply with AS14. In view of the petitioner's explanation and undertaking, the Court did not uphold the Regional Director's observation as a bar to sanctioning the Scheme.

The Regional Director's observation regarding non-compliance with AS14 is not sustained; companies to comply with AS14.

Compliance with Income Tax Act and Rules - Response to the Regional Director's observation regarding comments from the Income Tax Department. - HELD THAT: - The petitioner's reply noted that the Regional Director's letter recorded no adverse remarks from the Income Tax Department and, further, the companies gave an undertaking to comply with the Income Tax Act and Rules. The Court accepted this position and did not treat the Regional Director's observation as preventing sanction.

Companies directed to undertake compliance with the Income Tax Act and Rules; no adverse tax comments recorded that would impede sanction.

Preservation of books and records under Section 396A - Request of the Official Liquidator that the petitioner preserve books, papers and records and not dispose of them without prior Central Government permission under Section 396A. - HELD THAT: - The Official Liquidator's report confirmed absence of prejudicial conduct and requested preservation of records. The Court directed that the petitioner shall preserve its books of accounts, papers and records and shall not dispose of them without prior permission of the Central Government under Section 396A of the Companies Act, 1956.

Petitioner directed to preserve books and records and not to dispose of them without prior Central Government permission under Section 396A.

Dispensation of meetings of equity shareholders and unsecured creditors - Order dispensing with meetings of equity shareholders and unsecured creditors of the transferor company. - HELD THAT: - Earlier Company Application No.106 of 2016 was allowed by the Court, dispensing with the requirement to convene meetings of equity shareholders and unsecured creditors after recording there were no secured creditors and upon the petitioner's application. That dispensation was treated as part of the procedural history leading to sanction and was not reopened.

Meetings of equity shareholders and unsecured creditors dispensed with as previously ordered.

Filing of scheme with Registrar of Companies and stamp adjudication - Directions regarding post-sanction formalities - lodging of order and scheme for stamp adjudication and filing with Registrar of Companies. - HELD THAT: - The Court directed the petitioner to lodge a copy of the order, the schedule of immovable assets as on the date of the order and the Scheme authenticated by the High Court with the Superintendent of Stamps for adjudication of stamp duty within 60 days. The petitioner was also directed to file the order and Scheme with the Registrar of Companies electronically via EForm 21 and in physical form as required by the Act. The Court dispensed with drawn up order and permitted authorities to act on the authenticated copy issued by the Registrar, High Court of Gujarat.

Petitioner to lodge authenticated copy for stamp adjudication and file the order and Scheme with the Registrar of Companies as directed; drawn up order dispensed with.

Costs - Determination of costs of the petition. - HELD THAT: - The Court fixed the cost of the petition and ordered payment to the counsel for the Central Government and the Official Liquidator as a contribution towards their costs in relation to the petition.

Costs of the petition quantified and awarded to the counsel for the Central Government and the Official Liquidator.

Final Conclusion: The Court sanctioned the Scheme of Amalgamation, directed preservation of records subject to Central Government permission under Section 396A, accepted the petitioner's undertakings concerning compliance with AS14 and the Income Tax Act and Rules, ordered specified post-sanction filings for stamp adjudication and with the Registrar of Companies, dispensed with drawn up order, and awarded costs as directed.

Cenvat credit availment without utilization - Liability to pay interest on wrongly availed credit - Reversal of ineligible credit - Rule 14 of the Cenvat Credit Rules - Loss to the Revenue

Cenvat credit availment without utilization - Liability to pay interest on wrongly availed credit - Reversal of ineligible credit - Rule 14 of the Cenvat Credit Rules - Whether interest is payable where cenvat credit was wrongly availed but not utilized and was subsequently reversed - HELD THAT: - The Tribunal found that the appellant had only availed the cenvat credit in respect of online information services received by its branch but had not utilized the said credit and had reversed it when pointed out by the department. The Commissioner (Appeals) had held that interest was payable despite non-utilization, relying on Ind-Swift Laboratories Ltd., but this Bench observed precedent in T.V. Sundram Iyengar & Sons Ltd. and Nova Petrochemicals Ltd. which support the proposition that mere availment without utilization, followed by reversal, does not cause loss to the revenue and therefore does not attract interest. The Tribunal noted that Rule 14 of the Cenvat Credit Rules, as amended, and the cited decisions distinguish cases where credit was utilized or caused revenue loss. The Tribunal rejected the Revenue's contention that Ind-Swift governs the facts here, observing that earlier decisions (including Bombay Dyeing as noted in T.V. Sundram) were not considered in Ind-Swift and that, on the present facts of non-utilization and voluntary reversal, demand of interest is not sustainable.

Demand of interest set aside as there was only availment and no utilization of cenvat credit and the credit was reversed, resulting in no loss to the revenue.

Final Conclusion: The appeal is allowed; the impugned order demanding interest is set aside because the Tribunal held that where only availment and subsequent reversal of ineligible cenvat credit occurred without utilisation and without loss to revenue, interest is not payable.

Inclusion of airport tax and passenger service fee in assessable value - service tax on carriage of passengers by air embarking in India for international journey - taxes and fees collected on behalf of airport/authority not includable in taxable service value

Inclusion of airport tax and passenger service fee in assessable value - taxes and fees collected on behalf of airport/authority not includable in taxable service value - Whether airport tax and passenger service fee collected by the airline on behalf of airport/authorities are includable in the assessable value for levy of service tax on international air passenger transport services - HELD THAT: - The Tribunal applied its prior decision in M/s Continental Airlines Inc. vs. CST, New Delhi, holding that airport taxes and passenger service fees collected by airlines on behalf of airports and remitted to the authorities are not includable in the assessable value for service tax. The same legal position had earlier resulted in setting aside service tax demands against the appellant for the earlier period in Lufthansa German Airlines vs. CST (Adjn.), New Delhi. On the basis that the issue is covered by these decisions, the impugned demand, interest and penalties based on inclusion of such taxes and fees in the taxable value were found not maintainable and were set aside. [Paras 4, 5]

Impugned order confirmedly demanding service tax (with interest and penalties) by including airport tax and passenger service fee in the assessable value is set aside; appeal allowed with consequential relief to the appellant.

Final Conclusion: The Tribunal allowed the appeal, holding that airport taxes and passenger service fees collected by the airline on behalf of airports/authorities are not includable in the assessable value for service tax on international passenger air transport; the impugned demand (including interest and penalties) was set aside and consequential relief granted.

Condonation of delay - principles of natural justice - computation of limitation from date of receipt of order - power of Commissioner(Appeals) to condone delay under Section 85(3A) of the Finance Act, 1994 - remand for fresh consideration of delay application

Computation of limitation from date of receipt of order - condonation of delay - principles of natural justice - Validity of dismissal of the appeal as time-barred without granting personal hearing and correctness of the date of receipt of the adjudication order for computing limitation. - HELD THAT: - The Tribunal found that the Commissioner(Appeals) recorded the date of receipt of the Order in Original as 24/12/2012 despite the appellant producing an acknowledgement countersigned by the Inspector of Excise showing receipt on 07/01/2013. The appellants filed the appeal on 27/03/2013 and sought condonation of delay; when computed from 07/01/2013 the appeal would fall within the two month period and within the further one month period which the Commissioner(Appeals) can condone under the statutory power. The Commissioner(Appeals) dismissed the appeal as time barred without affording the appellant an opportunity of personal hearing, which the Tribunal held to be a blatant violation of the principles of natural justice and prejudicial to the appellant. For these reasons the Tribunal concluded that the dismissal on time barred grounds was not sustainable. [Paras 4]

The dismissal of the appeal as time barred without affording personal hearing was set aside and held to be unsustainable; the appeal is within the period that the Commissioner(Appeals) can condone if satisfied.

Remand for fresh consideration of delay application - condonation of delay - Remedial direction whether the matter should be remanded to the Commissioner(Appeals) for consideration of the delay petition and permitted amendments to procedural forms. - HELD THAT: - The Tribunal directed that the matter be remanded to the Commissioner(Appeals) to consider the delay application afresh. The appellant was to be given an opportunity to amend the delay petition and Form ST 4 to correct the date of receipt of the order and the calculation of days of delay. The Commissioner(Appeals) was directed to consider the corrected delay petition and dispose of the appeal as per law, exercising the statutory power to condone delay if sufficient cause is shown. [Paras 4, 5]

The appeal is remanded to the Commissioner(Appeals) with directions to permit amendment to the delay petition and Form ST 4 and to decide the condonation application and the appeal in accordance with law.

Final Conclusion: Impugned order set aside; appeal allowed by way of remand to the Commissioner(Appeals) to permit amendment of procedural documents and to decide the delay petition and appeal afresh in accordance with law, after affording the appellant an opportunity of hearing.

Penalty under Section 78 of the Finance Act, 1994 - penalty under Section 77 of the Finance Act, 1994 - payment of service tax prior to issuance of show cause notice - abatement for Goods Transport Agency services - registration obligation for Renting of Immovable Property services - contentious taxability of Renting of Immovable Property - application of Sub-section (3) of Section 73 of the Finance Act, 1994 - penalty waiver under Section 80 (amendment) of the Finance Act, 1994

Penalty under Section 78 of the Finance Act, 1994 - payment of service tax prior to issuance of show cause notice - contentious taxability of Renting of Immovable Property - penalty waiver under Section 80 (amendment) of the Finance Act, 1994 - Validity of the penalty imposed under Section 78 in respect of non-payment/non-registration for Renting of Immovable Property and related payment made prior to show cause notice - HELD THAT: - The Tribunal applied the principle in Sethi Tools Pvt. Ltd. to hold that the penalty under Section 78 was not legal or proper in the facts of this case. The appellant had paid the service tax (with interest) in respect of the Renting of Immovable Property category prior to the issuance of the show cause notice and the taxability of that service was a contentious issue. Given the payment prior to the show cause notice and the subsequent legislative provision permitting waiver of penalty within a specified period, the imposition of the penalty under Section 78 was set aside as impermissible in the circumstances. [Paras 7]

Penalty imposed under Section 78 is set aside.

Penalty under Section 77 of the Finance Act, 1994 - registration obligation for Renting of Immovable Property services - Sustenance of penalty under Section 77 for failure to obtain service tax registration - HELD THAT: - The Tribunal found that the appellant failed to establish a cogent reason for not taking registration for the taxable service. Unlike the circumstances warranting setting aside of the Section 78 penalty, the failure to register attracted the statutory consequence under Section 77. The original finding of the authority that registration was not taken and penalty under Section 77 was leviable was therefore upheld. [Paras 7, 8]

Penalty imposed under Section 77 is sustained.

Final Conclusion: The appeal is partly allowed: the penalty under Section 78 of the Finance Act, 1994 is set aside, while the penalty under Section 77 and the confirmation of demand and interest are upheld.

Payment of service tax with interest prior to issuance of show cause notice bars initiation of proceedings under Section 73(3) - penalty under Section 78 of the Finance Act, 1994 - suppression of facts with intent to evade - reduced penalty/option to pay 25% reduced penalty

Payment of service tax with interest prior to issuance of show cause notice bars initiation of proceedings under Section 73(3) - suppression of facts with intent to evade - Whether an equal amount penalty under Section 78 can be sustained where the assessee paid service tax and interest before issuance of the show cause notice and where there was no suppression with intent to evade - HELD THAT: - The Tribunal found as an undistputed fact that the appellant discharged the service tax liability and paid interest before the show cause notice was issued. Sub-section (3) of Section 73 was held to prohibit issuance of a show cause notice after payment of service tax with interest. On the factual matrix the original authority's imposition of an equal amount penalty under Section 78 rested on an allegation of suppression; however, the assessee's bona fide belief and prompt payment on being pointed out by the department negated the circumstances warranting equal penalty. Consequently, the equal amount penalty was held unsustainable while the tax liability and interest remained unaffected. [Paras 7, 8]

Equal amount penalty under Section 78 set aside; confirmation of service tax demand and interest left undisturbed.

Reduced penalty/option to pay 25% reduced penalty - Treatment of the reduced penalty paid by the appellant - HELD THAT: - The original order offered an option of a reduced penalty of 25% if the determined tax, interest and the reduced penalty were paid within 30 days. The appellant paid the reduced 25% penalty and does not challenge that payment. The Tribunal therefore did not disturb the concession already availed by the appellant and left the paid reduced penalty intact. [Paras 3, 7, 8]

The 25% reduced penalty already paid by the appellant is not disturbed.

Final Conclusion: Appeal partly allowed: the equal amount penalty imposed under Section 78 is set aside; the demand of service tax and interest is confirmed; the 25% reduced penalty paid by the appellant remains unaltered.

Valuation of inputs removed as such to sister unit - Cenvat credit reversal on inputs cleared as such - transaction value from sale to independent buyers - value determined under Section 4 of the Central Excise Act - application of Board Circular dated 01/07/2002 - distinction between transfer and sale for valuation

Valuation of inputs removed as such to sister unit - Cenvat credit reversal on inputs cleared as such - transaction value from sale to independent buyers - application of Board Circular dated 01/07/2002 - distinction between transfer and sale for valuation - Whether inputs cleared as such to a sister unit must be valued by reference to transaction value shown on sales to independent buyers or by reference to the invoice value on which Cenvat credit was taken, for the purpose of reversal of Cenvat credit. - HELD THAT: - The Tribunal found that the appellant had reversed Cenvat credit on inputs cleared as such to its sister unit and that the factual character of those removals was transfer and not sale. The Board Circular dated 01/07/2002 distinguishes removals made on sale from removals made by transfer to a sister unit and instructs that where goods are transferred (and not sold) it is reasonable to adopt the value shown in the supplier's invoice on the basis of which Cenvat credit was taken. The Tribunal relied upon the ratio in Ispat Metallics Industries Ltd. (upheld by the Apex Court) which applied that circular: where removal is a transfer to a sister unit (and not a sale), post-manufacturing expenses cannot be loaded and the invoice value on which credit was originally taken is the appropriate basis. Applying that principle to the undisputed facts here, the value ascertained from sales to independent buyers is not the determinative measure for transfers to a sister unit; instead the supplier invoice value (basis of Cenvat credit) is to be adopted. Consequently the departmental contention that the value must be re-determined by reference to sales to independent buyers was rejected as inconsistent with the circular and the precedent. [Paras 6, 7, 8, 9]

Impugned orders holding that inputs transferred to the sister unit must be valued at prices fetched from independent sales are unsustainable; appeal allowed and impugned orders set aside.

Final Conclusion: The Tribunal allowed the appeal: transfers of inputs to a sister unit (not sales) are to be valued by adopting the supplier invoice value on which Cenvat credit was taken as clarified by the Board Circular dated 01/07/2002 and applied in Ispat Metallics, and the impugned orders demanding differential duty on the basis of independent-sale prices were set aside.

Valuation of excisable goods - loan licensee as manufacturer - transaction value / normal price for excise valuation - principal-to-principal transactions - related persons under Section 4 of Excise Act - cum-duty price

Loan licensee as manufacturer - valuation of excisable goods - transaction value / normal price for excise valuation - principal-to-principal transactions - cum-duty price - Whether goods manufactured by the respondent under a loan licence agreement are to be treated as manufactured by the loan licensee and valued for excise on the price charged by the loan licensee to the principal. - HELD THAT: - The Tribunal accepted the detailed findings of the Commissioner (Appeals) that the respondent manufactured medicines for MAPL under a loan licence agreement and the contractual pricing mechanism recorded a margin to MAPL so that the price charged by the respondent to MAPL was substantially lower than MAPL's price to its distributors. There was no allegation of any additional consideration paid to the respondent by MAPL, nor any relationship bringing the parties within the mischief of related persons under Section 4 of the Excise Act. On these findings the transactions were properly treated on a principal-to-principal basis and the price charged by the loan licensee to the principal constituted the relevant transaction/normal value for discharge of excise duty. The Tribunal also noted consistent judicial authorities holding that a loan licensee who manufactures the goods is to be treated as the manufacturer for excise purposes and that the contract price may be the transaction value. The Revenue did not effectively controvert the appellate findings; accordingly the demand based on adopting MAPL's resale price did not survive.

The appellate findings that the respondent (loan licensee) is the manufacturer and that excise duty is to be charged on the price charged by the respondent to MAPL are upheld; the Revenue's appeal is rejected.

Final Conclusion: The Tribunal dismissed the Revenue appeal, upholding the Commissioner (Appeals)'s conclusion that the loan licensee is the manufacturer and that excise valuation is correctly based on the contract price charged by the loan licensee to the principal; the demand based on MAPL's resale price was not sustained.

Deduction for transportation charges under Section 4(1)(b) of the Central Excise Act read with Rule 5 of the Valuation Rules - FOR destination sale - transaction value excluding cost of transportation - cost of transportation shown separately in invoices - actual cost of transportation and averaged freight as cost of transportation

Deduction for transportation charges under Section 4(1)(b) of the Central Excise Act read with Rule 5 of the Valuation Rules - FOR destination sale - cost of transportation shown separately in invoices - Whether deduction for freight/transportation is allowable from the composite FOR-destination price for valuation of excisable goods. - HELD THAT: - The Tribunal held that the supplies were made FOR destination (delivery at customer premises) and therefore fell under the regime of Section 4(1)(b) read with Rule 5 of the Valuation Rules, whereby the transaction value excludes the cost of transportation from place of removal to place of delivery. Rule 5 permits exclusion of transportation cost where (i) goods are sold for delivery at a place other than place of removal, (ii) freight is in addition to the price of goods, and (iii) transportation cost is shown separately in the invoices. The record showed delivery FOR destination, the freight component was charged in addition to the basic price and was indicated separately in the invoices. Rule 5's Explanation further recognises both actual transportation cost and averaged freight (calculated in accordance with generally accepted costing principles) as deductible. On these facts, and having regard to a coordinate bench decision on identical facts, the Tribunal found no justification to disallow the freight deduction and upheld the Commissioner (Appeals) order allowing the deduction.

Deduction for freight/transportation from the composite FOR-destination price is allowable; Revenue's appeal dismissed.

Final Conclusion: The Tribunal dismissed the Revenue appeal and upheld the first appellate authority's allowance of deduction for freight from the composite FOR-destination price under Section 4(1)(b) read with Rule 5 of the Valuation Rules.

Exemption for non-conventional energy devices/systems specified in List 9 - scope of description at Sl. No. 16 of List 9 - conversion devices producing energy - treatment of component parts/knocked down supplies as devices - availability of exemption to chimneys and parts integral to biomass boilers - reliance on precedential decisions in identical factual matrix

Exemption for non-conventional energy devices/systems specified in List 9 - scope of description at Sl. No. 16 of List 9 - conversion devices producing energy - treatment of component parts/knocked down supplies as devices - Whether the goods supplied by the appellant (including chimneys and listed components) qualify for exemption under Notification No.6/2000-CE as non-conventional energy devices/systems specified in List 9. - HELD THAT: - The Tribunal examined the description in Sl. No. 16 of List 9 and held that its wide and comprehensive language covers conversion devices required for producing energy from waste; consequently goods supplied in knocked down form or as individual components which contribute to the manufacture of biomass-fired boilers fall within that description. The Bench agreed with the Commissioner (Appeals) that a chimney, being made for the particular purpose of use in a biomass-fired boiler, must be treated as a non-conventional energy device. The Tribunal relied on its earlier decisions in CCE v. Rachitech Engineers Pvt. Ltd. and Shree Venkateswara Engg Corporation v. CCE, which support allowing exemption where individual parts attain identity and contribute to the ultimate energy-conversion device, and rejected the narrower approach that would deny exemption solely because the items were supplied as parts rather than as a single assembled machine. [Paras 6, 7]

Impugned order set aside; appeal allowed and exemption under Notification No.6/2000-CE afforded to the goods in question with consequential benefit, if any.

Final Conclusion: The Tribunal allowed the appeal, holding that the listed components (including chimneys) supplied for fabrication of biomass boilers qualify for exemption under List 9 (Sl. No. 16) of Notification No.6/2000-CE; the impugned order was set aside and consequential relief granted.

Chargeability of interest on retrospective levy of excise duty - Interest under Section 11AB of the Central Excise Act, 1944 - Delay in payment of excise duty - Applicability of co ordinate bench precedent

Chargeability of interest on retrospective levy of excise duty - Interest under Section 11AB of the Central Excise Act, 1944 - Delay in payment of excise duty - Applicability of co ordinate bench precedent - Interest is not chargeable for the period prior to date of enactment when duty was levied retrospectively; interest is chargeable only from the date the duty became payable on enactment until actual payment. - HELD THAT: - The Tribunal found that the only dispute was whether interest under Section 11AB is payable for the period antecedent to the enactment date when the levy was made retrospective. The adjudicating authority had confirmed interest for the period 08.04.2011 to 31.05.2011 but had dropped interest for 29.04.2010 to 31.03.2011. The Tribunal held that where a statutory amendment levying duty is given retrospective effect only upon enactment, the duty was not leviable and hence not payable prior to the date of enactment; consequently there was no short levy or short payment prior to enactment that could attract interest. The Tribunal applied the reasoning of the co ordinate bench in Premier Industries Ltd., which ruled that interest cannot be demanded for periods before the date of enactment of a retrospective levy. Distinguishing authorities relied upon by Revenue, the Tribunal observed that those cases involved duties payable in the normal course (i.e., duty already leviable before any amendment), whereas in the present facts the levy itself became effective only on enactment. The respondent had paid interest for the period from enactment (08.04.2011) to actual payment (31.05.2011), and the Tribunal held that only that interest is recoverable.

Revenue's appeal dismissed; interest not chargeable for 29.04.2010 to 07.04.2011, interest payable only from 08.04.2011 to date of payment.

Final Conclusion: The impugned order confirmed in part and upheld: interest on the duty retrospectively levied by Finance Act, 2011 is not chargeable for the period prior to enactment (before 08.04.2011); only interest from 08.04.2011 until actual payment is recoverable; Revenue's appeal dismissed.

Eligibility for exemption notification where Cenvat credit is sought to be treated as reversed - reversal of Cenvat credit under Rule 57CC(1) - condition of non availment of Cenvat credit for claiming exemption - proportionate allocation of input credit between dutiable and exempted products - remand for quantification and verification of reversed credit

Eligibility for exemption notification where Cenvat credit is sought to be treated as reversed - reversal of Cenvat credit under Rule 57CC(1) - Whether payment of 8% of the value of the final product under Rule 57CC(1) operates as reversal of Cenvat credit such that the condition of non availment of credit in the exemption notification is satisfied and the exemption is available. - HELD THAT: - The Tribunal endorsed the reasoning of the Commissioner (Appeals) that Rule 57CC applies where the final product is admittedly exempt and that payment of 8% in terms of Rule 57CC constitutes a statutory mechanism of reversal of Cenvat credit. Reliance was placed on the Supreme Court precedent cited by the Commissioner (Appeals) to support the proposition that statutory reversal under the Rule can satisfy the non availment condition of the exemption notification. Consequently, the primary legal question of whether the 8% reversal can operate as reversal of credit was held in favour of the assessee as a matter of law. [Paras 6, 7]

Payment of 8% under Rule 57CC(1) can, in law, amount to reversal of Cenvat credit and thereby satisfy the non availment condition of the exemption notification, as held by the Commissioner (Appeals).

Proportionate allocation of input credit between dutiable and exempted products - remand for quantification and verification of reversed credit - Whether the 8% reversal already made by the assessee actually equals full reversal of the Cenvat credit availed in respect of inputs used in the manufacture of exempted goods, and the consequence if it does not. - HELD THAT: - The Tribunal observed that, although the legal proposition that an 8% reversal can constitute reversal of credit is accepted, the factual question whether the 8% paid by the assessee fully extinguishes the credit actually availed remains open. The Tribunal recognised that the 8% payment might be less than or greater than the credit availed, and therefore factual verification and computation are necessary. Given practical difficulties in tracing specific inputs to specific vehicles, the Tribunal directed that the original Adjudicating Authority should determine, on a proportionate basis with cooperation from the assessee, the quantum of inputs attributable to exempted products and the corresponding credit availed; taking into account the 8% already reversed, any shortfall must be made good by the assessee (or excess dealt with accordingly). For this purpose the matter was set aside and remanded for fresh computation and opportunity to the assessee to reverse any shortfall. [Paras 8]

The question of whether the 8% reversal equals full reversal of credit is remanded to the original Adjudicating Authority for proportionate computation, verification and adjustment; the assessee must be given an opportunity to make good any shortfall.

Final Conclusion: The Tribunal upheld the Commissioner (Appeals) on the legal point that payment of 8% under Rule 57CC(1) can operate as reversal of Cenvat credit satisfying the exemption condition, but set aside the adjudicating order and remanded the matter to the original Adjudicating Authority to quantify, on a proportionate basis, the credit attributable to exempted goods and to compute any differential reversal required; the appeal is disposed accordingly.

Claim for refund under Section 11B of the Central Excise Act - Mandatory statutory limitation - Unjust enrichment - Burden to prove that incidence of duty was not passed on - Recovery without authority of law

Claim for refund under Section 11B of the Central Excise Act - Mandatory statutory limitation - Refund claim was barred by the statutory time limit prescribed under Section 11B and therefore not maintainable. - HELD THAT: - The Tribunal recorded that the duty in question was paid in December 2006 and March 2007, while the refund application was filed on 05/01/2010, i.e. well beyond the one-year period prescribed by Section 11B from the relevant date. Reliance was placed on binding precedents holding that the time limit in refund provisions is mandatory and authorities cannot grant refunds beyond the statutory period. Applying that principle, the claim was held to be time-barred and not maintainable. [Paras 3]

Refund claim dismissed as barred by limitation.

Unjust enrichment - Burden to prove that incidence of duty was not passed on - Appellant failed to discharge the onus to show that the incidence of the duty had not been passed on to its buyers; ledger extract alone was insufficient. - HELD THAT: - The Tribunal agreed with the lower authority's application of the principle against unjust enrichment. The appellant, though a Central Government undertaking, did not produce cogent and convincing evidence to establish that the disputed duty burden was not passed on to customers. Merely placing a ledger extract or balance-sheet entry was held inadequate to rebut the presumption of passing on the duty and to meet the statutory requirement that the incidence had not been passed on. [Paras 3]

On the merits of unjust enrichment and evidentiary burden, the appellant's claim fails for want of proof.

Final Conclusion: The appeal is dismissed: the refund claim is time-barred under Section 11B and, additionally, the appellant has not proved that the duty incidence was not passed on to buyers.

Compounded levy - re-determination of Annual Production Capacity - change in parameters - short payment of duty - time limitation for recovery under Section 11A - penalty and interest under Rule 96ZP - principle of natural justice

Re-determination of Annual Production Capacity - change in parameters - short payment of duty - Validity of the demand for duty short paid for the period 01.09.1997 to 16.10.1997 on account of non-consideration of revised parameters - HELD THAT: - The Tribunal upheld the Commissioner s finding that the revised parameters were made effective only with effect from 17.10.1997. The assessee's earlier communications (01.09.1997 and 11.09.1997) did not constitute timely notification of completed parameter changes warranting retrospective adjustment. Under Rule 4 of the Capacity Determination Rules, 1997, re-determination of APC and benefit of concessional rate based on the d factor is warranted only where change in existing parameters is effective; since the change was held to be effective from 17.10.1997, the Commissioner correctly fixed APC for the prior period on existing parameters. The Tribunal found no infirmity in confirming the demand for duty short paid and did not disturb the conclusion reached by the Commissioner. [Paras 4]

Demand for duty short paid for 01.09.1997 to 16.10.1997 confirmed

Penalty and interest under Rule 96ZP - time limitation for recovery under Section 11A - principle of natural justice - Sustainability of penalty and interest under Rule 96ZP and the applicability of time bar/contention raised by the assessee - HELD THAT: - The Tribunal accepted that the Commissioner imposed penalty and directed recovery of interest under Rule 96ZP; however, in view of the authoritative pronouncement of the Supreme Court in Shree Bhagwati Steel Rolling Mills (noted in the order), the provisions prescribing interest and penalty under the corresponding Rules have been declared invalid. Consequently, the Tribunal held that the penalty and interest under Rule 96ZP could not be sustained. The Commissioner s reliance on a Board circular and precedent to reject the assessee s time bar contention was discussed in the impugned order but the Tribunal's modification was limited to disallowing penalty and interest in light of the Supreme Court s decision. The Tribunal did not find violation of natural justice, noting ample opportunities were afforded to the assessee for personal hearing. [Paras 5]

Penalty and interest under Rule 96ZP set aside; time bar contention not upheld but penalty/interest held unsustainable

Final Conclusion: The impugned order is modified: the demand for duty short paid for 01.09.1997 to 16.10.1997 is confirmed, but the penalty and interest levied under Rule 96ZP are quashed in view of the Supreme Court authority; appeal disposed accordingly.

Exemption under conditional notification - production of certificate prior to clearance of goods - substantial compliance versus formal/technical non-compliance - subsequent production of original document - rejection of benefit on purely procedural grounds

Production of certificate prior to clearance of goods - substantial compliance versus formal/technical non-compliance - Whether non-production of the original certificate before clearance (when a photocopy was sent) defeats the assessee's claim for exemption under the notification. - HELD THAT: - The Tribunal examined the condition attached to the exemption notification which requires that, before clearance of the goods, the manufacturer produce a certificate from the Chairman or Managing Director of DMRC to the effect that the goods are procured by or on behalf of DMRC for use in the MRTS project. The adjudicating authorities disallowed the exemption on the ground that the original certificate was not produced prior to clearance and only a photocopy was sent. The Tribunal found no express requirement in the condition that the original document alone must be furnished before clearance; the condition speaks only of production of a certificate. In these circumstances, a mere technical or procedural objection to the production of a photocopy (followed subsequently by production of the original before the adjudication) could not be sustained, particularly where the Revenue did not contend that the certificate was factually incorrect. The Tribunal held that such formalistic rejection frustrated the purpose of the notification and amounted to upholding a procedural objection in absence of any allegation of falsity or inaccuracy in the certificate. [Paras 5]

The technical objection based on non-production of the original certificate before clearance cannot be upheld and does not disentitle the assessee from the exemption.

Subsequent production of original document - rejection of benefit on purely procedural grounds - Whether the subsequent production of the original certificate to the Deputy Commissioner (before the adjudication) warranted grant of the exemption and relief from confirmed demand, interest and penalty. - HELD THAT: - The Tribunal noted that the assessee produced the original certificate prior to the passing of the adjudicating order. Given that the Revenue did not allege that the certificate misrepresented facts, the Deputy Commissioner could and should have taken notice of the original certificate when it was produced. The Tribunal observed that sustaining a demand on the basis of a procedural technicality, when substantive compliance (i.e., availability and correctness of the certificate) was established, was not justified. In view of this, the impugned orders confirming demand, interest and penalty were set aside and the appeal was allowed with consequential relief. The Tribunal also recorded that an identical objection in an earlier period in the same assessee's case had been decided in favour of the assessee by a prior final order of the Tribunal. [Paras 5, 6]

Original produced subsequently should have been taken into account; the demand, interest and penalty confirmed by lower authorities are set aside and the appeal is allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeal, holding that a purely technical objection to non-production of the original certificate before clearance (when a copy was sent and the original was later produced prior to adjudication) cannot defeat the entitlement to exemption under the notification; the impugned demand, interest and penalty were set aside and consequential relief granted.

CENVAT credit - shortages and excesses in inventory - tolerance limits/minuscule shortages - accounting system reliability - bona fide taking of credit - burden of proof for clandestine removal - demand under Rule 57-I - binding effect of Supreme Court precedent

CENVAT credit - shortages and excesses in inventory - tolerance limits/minuscule shortages - accounting system reliability - Whether demands for reversal of CENVAT credit on account of shortages in stock can be sustained where shortages are minuscule and the assessee maintains an elaborate, reliable accounting system. - HELD THAT: - The Tribunal noted that the appellant operated a sophisticated computerized accounting system and that there was no allegation of clandestine removal or mischief. The shortages and excesses detected during periodic stock-taking were of very small percentages (shortages 0.01%-0.21%; excesses 0.01%-0.08%). Relying on the reasoning in Maruti Udyog Ltd. as approved by the Hon'ble Supreme Court, the Court treated such minuscule variances, certified by management and auditors and occurring in the context of a sound accounting system, as commercially inadvertent and not indicative of irregular or unauthorised utilisation of inputs. In those circumstances a demand under Rule 57-I could not be sustained in absence of evidence of clandestine removal or diversion, and normal commercial tolerance limits must be respected by tax authorities. [Paras 4, 5]

Demand for reversal of CENVAT credit on account of the stated shortages set aside and appeal allowed.

Bona fide taking of credit - burden of proof for clandestine removal - binding effect of Supreme Court precedent - Whether the decision in Maruti Udyog Ltd. (and its approval by the Supreme Court) is applicable where the value of shortages exceeds the value of excesses. - HELD THAT: - The Tribunal held that the Maruti principle was not contingent upon the excesses exceeding shortages; rather it rested on the minuscule percentage of discrepancies and the absence of any evidence of clandestine removal, together with the existence of reliable accounting and auditor certification. The Supreme Court in Maruti emphasised the small percentage of shortage and the presence of excesses as supporting bona fides, but the Tribunal in the present case observed that Maruti's rationale focuses on the immateriality of the shortages and on the absence of evidence of irregularity. Consequently, even though the appellant's shortages exceeded its excesses in value, the law and precedent still required dismissal of the demand in the factual context before the Tribunal. [Paras 4, 5]

Maruti precedent applies despite the quantitative relation between shortages and excesses; impugned order set aside and appeal allowed.

Final Conclusion: The Tribunal set aside the impugned confirmation of demands for reversal of CENVAT credit, holding that the minuscule inventory variances in the context of a reliable accounting system and absence of evidence of clandestine removal do not justify a demand under Rule 57-I; the appeal is allowed.

Stay/waiver of pre-deposit - prima facie case - undue hardship - duty to apply mind by appellate authority and tribunal when considering interim relief - balance between rights of individual and the State in recovery of sovereign dues - interim protection against coercive measures pending disposal of appeal

Stay/waiver of pre-deposit - prima facie case - undue hardship - duty to apply mind by appellate authority and tribunal when considering interim relief - Whether the appellate authority and the Tribunal applied their mind to the existence of a prima facie case and to the assessee's financial condition while granting interim relief or directing deposit. - HELD THAT: - The Court held that while deciding applications for stay or waiver of pre-deposit the appellate authority and the Tribunal must apply their mind to whether the appellant has a strong prima facie case on merits and to whether insisting on deposit would cause undue hardship. The authorities' orders must reflect that these considerations were applied; mere routine orders granting partial stays without recording application of mind are unsatisfactory. The balance between protection of sovereign dues and preservation of the right of appeal requires examination of pros and cons so that the right of appeal is not rendered illusory. The judgment relies on prior decisions recognising that where, on cursory glance, the demand appears unsustainable, it is undesirable to require full or substantial payment.

Appellate authority and Tribunal are required to apply their mind to prima facie merits and financial condition when dealing with stay/waiver of pre-deposit; the impugned orders did not show such application of mind.

Interim protection against coercive measures pending disposal of appeal - Relief to be granted to the assessee pending disposal of the first appeal. - HELD THAT: - In view of the failure of the appellate authority and Tribunal to indicate consideration of prima facie case and financial condition, the Court directed interim protection: no coercive measures shall be taken against the assessee for a limited period. This protective direction is granted to preserve the status quo and the efficacy of the appellate remedy while the first appellate authority reconsiders the appeal expeditiously.

No coercive measures shall be taken against the assessee for three months or until the first appellate authority decides the appeal, whichever is earlier.

Duty to apply mind by appellate authority and tribunal when considering interim relief - Direction to the first appellate authority regarding the manner and time-frame for adjudicating the appeal. - HELD THAT: - The Court disposed of the revision by directing the first appellate authority to decide the appeal filed by the assessee expeditiously, specifically within two months from receipt of a certified copy of this order. The direction is remedial and procedural, intended to ensure early adjudication so that the appellate forum applies the required considerations (prima facie merits and undue hardship) in accordance with law.

First appellate authority directed to decide the first appeal expeditiously within two months from receipt of certified copy of this order.

Final Conclusion: Revision disposed directing the first appellate authority to decide the first appeal within two months; interim protection granted so that no coercive measures are taken for three months or until the appellate decision, and appellate/tribunal orders on stay/pre-deposit must record application of mind to prima facie merits and financial hardship.