TaxTMI Updates e-Newsletter
Jun 19,2014

Rejection of books of account under Section 145(3) - Estimation of income by application of sales-to-consumption ratio 1:3 - Reliance on past assessment history for reasonable basis of estimation - Allowance of wastage as a question of fact requiring comparable circumstances

Rejection of books of account under Section 145(3) - The rejection of the assessee's books of account under Section 145(3) was upheld. - HELD THAT: - The Assessing Officer recorded that the assessee had not maintained day-to-day stock registers, failed to produce inventories and valuation of opening and closing stocks and gave inconsistent explanations about perishable items while showing disproportionately large opening and closing stocks relative to sales. The Assessing Officer therefore held the trading account incorrect and incomplete and rejected the books; the CIT(A) and the Tribunal affirmed that finding of fact. The High Court found no perversity or error in those concurrent findings and accepted that the books could be rejected on the recorded material. [Paras 4, 5, 6]

Rejection of the books of account under Section 145(3) sustained.

Estimation of income by application of sales-to-consumption ratio 1:3 - Reliance on past assessment history for reasonable basis of estimation - The application of the 1:3 grocery to sales ratio to estimate food sales was held to be a justified and reasonable basis of estimation for A.Y. 2008-09. - HELD THAT: - Given the rejection of books, the AO proceeded to estimate income by reference to past assessment practice. The AO noted that in earlier years the AO had used a 1:5 ratio but the CIT(A) and subsequently the ITAT had applied and upheld a 1:3 ratio for the assessee in earlier years. The authorities below provided a reasoned basis for applying the 1:3 ratio as a reasonable estimation method in light of the assessee's non compliance and past history. The High Court found these concurrent conclusions to be neither erroneous nor perverse and declined to interfere with the estimation made. [Paras 4, 5, 6]

Estimation of sales by applying the 1:3 ratio affirmed.

Allowance of wastage as a question of fact requiring comparable circumstances - The plea to allow 15% wastage by adopting the allowance granted in a subsequent year was rejected as unsustainable. - HELD THAT: - The Court observed that allowance for wastage depends on factual circumstances which may vary year to year and cannot be mechanically applied across years without establishing comparable conditions. Because the books were rejected and the factual matrix for wastage in the subsequent year was not shown to be identical, the authorities were justified in refusing to adopt the 15% wastage claimed on the basis of a later assessment. This was treated as a question of fact, and the High Court found no merit in substituting its view for the concurrent factual findings. [Paras 3, 7]

Claim for 15% wastage not allowed; matter is a factual question requiring identical circumstances which were not demonstrated.

Final Conclusion: The High Court dismissed the appeal, holding that the rejection of books under Section 145(3), the estimation of sales by applying the 1:3 ratio based on past assessment history, and the refusal to allow 15% wastage were supported by concurrent findings of fact and were not vitiated by any error of law.

Disallowance under section 40(a)(ia) for failure to deduct tax at source - recognition of commission income by accounting policy on commencement of insurance policy - reimbursement and allocation of group company expenses and revenue neutrality - remand for verification of a bad debts claim

Disallowance under section 40(a)(ia) for failure to deduct tax at source - remand for verification of a bad debts claim - Validity of deletion by CIT(A) of disallowance made by AO under section 40(a)(ia) in respect of business promotion/advertisement debits and related bad debts - HELD THAT: - The CIT(A) examined the assessee's explanations and records showing that many debits under business promotion represented rebates to customers, that appropriate TDS had been deducted as reflected in e TDS returns, and that exemption certificates under section 197(1)(a) covered certain payees; on those bases the CIT(A) deleted the disallowance made by the Assessing Officer. However, the assessee first raised before the CIT(A) a new claim that portions of the debits (amounting to Rs.19,32,706) were bad debts and not liable to disallowance under section 40(a)(ia). The Tribunal held that this specific bad debts claim was not verified by the AO and requires examination on merits after giving the assessee an opportunity of being heard, and therefore directed remand of that part to the AO for verification and decision as per law. The remainder of the CIT(A)'s deletions, which were founded on records already before the AO (rebates, e TDS returns, exemption certificates), were sustained.

CIT(A)'s deletions under section 40(a)(ia) upheld except that the portion claimed as bad debts (Rs.19,32,706) is remanded to the Assessing Officer for verification and fresh decision after hearing the assessee.

Recognition of commission income by accounting policy on commencement of insurance policy - Validity of addition by AO of commission income where assessee recognised commission on travel insurance only on commencement of policy - HELD THAT: - The assessee adopted a revised accounting policy to recognise commission income on air travel insurance upon effective commencement of the policy (i.e., commencement of journey), instead of on mere sale of the policy. Given that the insurance accrues only with commencement of travel and is cancelled on ticket cancellation, the Tribunal found the accounting treatment to be a proper mercantile basis and that income is assessable on accrual; the CIT(A)'s deletion of the addition was therefore appropriate. The Tribunal noted consistent application of the revised policy and that any tax effect would arise in subsequent years when income accrues.

Addition deleted; the accounting policy recognising commission on commencement of the insurance policy is accepted.

Reimbursement and allocation of group company expenses and revenue neutrality - Sustainability of disallowance made by AO of part of reimbursements paid to parent company Thomas Cook India Ltd. for shared/common expenses - HELD THAT: - The assessee, a wholly owned subsidiary, reimbursed its parent for expenses paid on its behalf and for allocation of common costs on pre determined bases (area, head count, actuals). The CIT(A) examined the allocation chart and the return of the parent and found the basis of allocation to be fair and reasonable; further, since both parent and subsidiary had taxable incomes and were paying tax at the same rate, there was no motive to subsidise the parent nor any adverse tax consequence. The Tribunal found no reason to interfere with the CIT(A)'s conclusion.

Ad hoc disallowance deleted; CIT(A)'s deletion on the basis of fair allocation and revenue neutrality is sustained.

Recognition of commission income by accounting policy on commencement of insurance policy - reimbursement and allocation of group company expenses and revenue neutrality - disallowance under section 40(a)(ia) for failure to deduct tax at source - Applicability of the findings in A.Y. 2006-07 to corresponding grounds in A.Y. 2007-08 and A.Y. 2008-09 - HELD THAT: - Grounds in respect of commissions and payments to the parent company for AYs 2007-08 and 2008-09 were common to those decided for AY 2006-07. Having upheld the CIT(A)'s deletions on the accounting treatment of commission and on allocation/reimbursement to the parent, and having remanded only the specific bad debts claim for verification in AY 2006 07, the Tribunal found no reason to disturb the CIT(A)'s similar deletions in the subsequent years and dismissed the revenue's grounds for those years.

Appeals for A.Y. 2007-08 and A.Y. 2008-09 dismissed; findings for A.Y. 2006-07 applied to the subsequent years.

Final Conclusion: The Tribunal upholds the CIT(A)'s deletions of the AO's disallowances and additions on the commission recognition and on reimbursements to the parent company, dismisses the revenue's appeals for A.Y. 2007-08 and A.Y. 2008-09, and partly allows the revenue's appeal for A.Y. 2006-07 only to the extent that the claim of bad debts (Rs.19,32,706) included in business promotion expenses is remanded to the Assessing Officer for verification and fresh decision after hearing the assessee.

Deductibility of commission paid to intermediaries in the Oil for Food programme - disallowance under Explanation to section 37(1) - application of the Volcker Committee report as substantive evidence for tax disallowance - effect of Reserve Bank of India approval on claim of bona fides of payments

Deductibility of commission paid to intermediaries in the Oil for Food programme - disallowance under Explanation to section 37(1) - application of the Volcker Committee report as substantive evidence for tax disallowance - effect of Reserve Bank of India approval on claim of bona fides of payments - Whether the disallowance of commission paid in connection with exports to Iraq under the United Nations 'Food for Oil Programme' was sustainable under Explanation to section 37(1) on the basis of the Volcker Committee report. - HELD THAT: - The Tribunal examined the record and the nature of payments made by the assessee. The contract for supply was with the Government of Iraq approved by the United Nations and the assessee paid commissions to third parties who, it was asserted, arranged commissioning and installation. The payments were routed with Reserve Bank of India approval, and there was no finding by the tax authorities that the intermediaries had diverted the commission to the Government of Iraq or that the assessee had paid any 'after sales service fees' to Iraq. The AO invoked the Volcker Committee report and mechanically applied a 10% disallowance under Explanation to section 37(1) without specific evidence linking the assessee's payments to the illicit surcharge scheme described in that report. On these facts and in light of the Tribunal's earlier decision in NSIL Exports Ltd. on identical circumstances, the Tribunal held that mere reference to the Volcker report, absent material showing diversion of the particular commissions to Iraq or that the payments constituted prohibited surcharges, did not justify disallowance under Explanation to section 37(1). [Paras 6, 9]

The disallowance made by the Assessing Officer and confirmed by the CIT(A) is not sustainable and is deleted; the appeals are partly allowed for statistical purposes.

Final Conclusion: The Tribunal set aside the addition of commission on exports to Iraq under the Volcker Committee report and Explanation to section 37(1), holding that in the absence of any finding that the commissions were diverted to the Iraqi Government or constituted illicit surcharges, the disallowance was not warranted; the addition is deleted and the appeals are partly allowed.

Allowability of interest on borrowed funds used to earn interest - verification of utilisation of borrowed money - remand for reworking disallowance - addition under Section 68 - creditworthiness of creditors - application of Section 2(22)(e)

Allowability of interest on borrowed funds used to earn interest - verification of utilisation of borrowed money - remand for reworking disallowance - Whether the disallowance of interest claimed by the assessee should be sustained or reworked by verifying utilisation of borrowed funds - HELD THAT: - The Tribunal found that the assessee produced details of loans taken from ICICI Bank and ABN Amro Bank and of amounts advanced to SBPL, but the working of the CIT(A)'s disallowance was not verifiable from the material on record. The Tribunal stated the legal principle that interest on borrowed money is allowable where such borrowed money has been utilised for giving advances for the purpose of earning interest. In view of the incomplete/verifiable computation before it, the Tribunal set aside the orders below and remitted the matter to the Assessing Officer with a direction to verify the utilisation of the borrowed sums from ICICI Bank and ABN Amro Bank and to allow deduction of interest to the extent those borrowings were utilised to make advances to SBPL, after giving the assessee an opportunity of being heard. [Paras 4]

Matter remitted to the Assessing Officer to rework the disallowance after verifying utilisation of borrowed funds; interest to be allowed to the extent borrowings were used to give advances to SBPL.

Addition under Section 68 - creditworthiness of creditors - Whether additions made under Section 68 in respect of alleged unexplained loans should be sustained - HELD THAT: - The Tribunal recorded that the CIT(A) examined each creditor's case in detail, scrutinised contemporaneous evidence (including corrections to initial listings, bank passbooks, confirmations, sale deed, bank borrowings of creditors and their account transactions) and was satisfied about the source and creditworthiness of the creditors before deleting the additions to the extent indicated. The Tribunal found no infirmity in the CIT(A)'s factual and reasoned findings and upheld the deletions made by the CIT(A). The Revenue's ground incorrectly referenced the quantum but that did not affect the concluded finding that the CIT(A) had properly discharged his function. [Paras 7, 9]

Order of the CIT(A) deleting the additions under Section 68 is sustained and the Revenue's challenge is rejected.

Application of Section 2(22)(e) - Whether sums alleged to have been paid by SBPL on behalf of the assessee attract liability under Section 2(22)(e) - HELD THAT: - The Tribunal noted the CIT(A)'s finding, supported by the assessee's books, that SBPL had not advanced loans to the assessee but rather the assessee had substantial debit balances evidencing that he had advanced funds to SBPL. Payments made by SBPL on behalf of the assessee were debited to the assessee's account against a continuing substantial debit balance. Consequently, no loan or advance was received by the assessee from SBPL and the deeming provision under Section 2(22)(e) was inapplicable. The Tribunal therefore affirmed the deletion of the addition under Section 2(22)(e). [Paras 11]

Deletion of the addition under Section 2(22)(e) is upheld; the provision does not apply as no loan/advance was given by SBPL to the assessee.

Final Conclusion: The Revenue's appeal is partly allowed for statistical purposes: the disallowance of interest is remitted to the Assessing Officer for verification and recomputation (with the principle that interest on borrowings used to make interest earning advances is allowable); the deletions under Section 68 and under Section 2(22)(e) as recorded by the CIT(A) are upheld.

Penalty under Section 271(1)(c) for concealment of income or furnishing inaccurate particulars - disclosure of income in the return - making of a claim in the return does not by itself amount to furnishing inaccurate particulars - bona fide claim supported by legal opinion - capital gains disclosed but claimed as not taxable due to a stay/status quo order

Penalty under Section 271(1)(c) for concealment of income or furnishing inaccurate particulars - disclosure of income in the return - making of a claim in the return does not by itself amount to furnishing inaccurate particulars - bona fide claim supported by legal opinion - capital gains disclosed but claimed as not taxable due to a stay/status quo order - Validity of levy of penalty under Section 271(1)(c) where long term capital gains were disclosed in the return but claimed as not taxable on account of a stay of the underlying sale transaction. - HELD THAT: - The Tribunal found that the assessee had declared the long term capital gains in the return and contemporaneously recorded a note asserting non taxability for AY 2006 07 because the sale was subject to a status quo order of the High Court. The assessee supported its claim with a legal opinion. The levy of penalty under Section 271(1)(c) presupposes concealment or furnishing of inaccurate particulars; where details supplied in the return are not shown to be incorrect, mere assertion of a claim which may ultimately be unsustainable in law does not constitute furnishing inaccurate particulars. Reliance was placed on the principle that an assessee is not barred from making a plausible or bona fide claim during assessment proceedings and that the threat of penalty cannot deter such claims. The Tribunal observed that the Revenue did not demonstrate that any facts disclosed were false or erroneous, and although the claim was rejected on merits, rejection alone does not establish concealment. Applying these principles, the Tribunal held the penalty unjustified and deleted it. [Paras 9, 10, 11, 12, 13]

Levy of penalty under Section 271(1)(c) deleted and the assessee's appeal allowed.

Final Conclusion: Penalty imposed under Section 271(1)(c) was deleted; the appeal is allowed for AY 2006 07.

Deduction under section 10B of the Act - customized electronic data - export of services - export-oriented unit (EOU) activity - interest under section 234B of the Act - binding effect of Tribunal decision on identical issue

Deduction under section 10B of the Act - customized electronic data - export of services - EOU activities - Assessee entitled to deduction under section 10B as the exported ready-to-print books constitute customized electronic data produced by the assessee. - HELD THAT: - The Tribunal for the asstt. year 2006-07 held that the assessee's activity of collecting data/pictures and applying expert designing skills to produce ready-to-print e-books resulted in a product that is "customized electronic data" within Explanation 2 to section 10B, and that the process of collecting data need not be IT-enabled so long as the final data is in electronic form and exported. The assessment and first appellate orders in the years under present appeal followed the 2006-07 assessment findings; the Bench found the identical issue in these appeals to be covered by the earlier Tribunal decision (paras. 19-21). Applying that binding decision on identical facts, the Tribunal set aside the disallowance and directed the AO to allow the claimed deduction under section 10B in accordance with law. [Paras 19, 20, 21]

Disallowance under section 10B set aside; AO directed to allow deduction under section 10B.

Interest under section 234B of the Act - consequential interest - Levy of interest under section 234B is consequential to the grant of deduction and was not independently adjudicated. - HELD THAT: - The Tribunal observed that the question of charging interest under section 234B arises consequentially from the assessment adjustments on merits. Having allowed the deduction under section 10B by following the earlier Tribunal decision, the Tribunal held that the interest issue does not require separate adjudication in the present order (para. 5). [Paras 5]

Interest under section 234B left as consequential; no independent adjudication in this order.

Final Conclusion: The Tribunal allowed the claim for deduction under section 10B, setting aside the disallowance in the assessments under challenge and directing the AO to grant the deduction; the question of interest under section 234B was held to be consequential and was not separately adjudicated.

Publication as charitable activity - registration under section 12AA - advancement of objects of general public utility - remand for grant of registration subject to conditions and hearing

Publication as charitable activity - advancement of objects of general public utility - Denial of registration under section 12AA solely because the assessee is engaged in publication and distribution of a magazine - HELD THAT: - The Tribunal held that mere engagement in publication and distribution of a magazine does not disentitle the assessee from registration under section 12AA. The activity of publishing and distributing literature may amount to spreading knowledge and fall within the advancement of objects of general public utility. The Tribunal applied its earlier decision in Gideons International In India, Hyderabad, and noted authority recognizing that activities which are religious and charitable may coexist and that placement and distribution of religious literature can benefit the general public. Consequently, the Director's sole reliance on the publication activity to refuse registration was held to be unsustainable.

Assessee cannot be deprived of registration under section 12AA merely because it engages in publication of a magazine; the refusal on that ground is set aside.

Registration under section 12AA - remand for grant of registration subject to conditions and hearing - Direction to the Director of Income-tax(Exemption) on further action after setting aside the refusal - HELD THAT: - Having set aside the impugned order, the Tribunal restored the matter to the file of the Director of Income-tax(Exemption) with a direction to pass appropriate orders granting registration under section 12AA, subject to fulfillment of other statutory or regulatory conditions. The Tribunal required that the Director give the assessee a reasonable opportunity of hearing before finalizing registration and act in accordance with law.

Matter remitted to the Director for passing fresh orders granting registration under section 12AA, after affording reasonable opportunity of hearing and verification of fulfillment of other conditions.

Final Conclusion: The appeal is allowed; the order refusing registration is set aside and the matter is remitted to the Director of Income-tax(Exemption) to grant registration under section 12AA after giving the assessee a reasonable hearing and ensuring compliance with other legal requirements.

Allocation of common expenses between domestic and export segments - outsourcing and non attribution of indirect expenses to exported services - cost plus transfer pricing adjustment (15% mark up)

Allocation of common expenses between domestic and export segments - outsourcing and non attribution of indirect expenses to exported services - Deletion of addition of Rs.28,69,439 in respect of common expenses (rent, power, telephone, depreciation) alleged to be allocable to the export segment - HELD THAT: - The Tribunal upheld the finding of the ld. CIT(A) that the export services rendered by the assessee were outsourced to third party agencies and, therefore, the indirect expenses in question were not incurred for the export business. The assessee produced the outsourcing agreements before the ld. CIT(A), whose factual conclusion that rent, power, telephone, communication and depreciation were attributable to the domestic segment was not controverted by the Revenue. In these circumstances the Tribunal found no infirmity in the appellate authority's deletion of the disallowance and declined to interfere with that factual and inferential conclusion. [Paras 7, 8]

The deletion of the addition of Rs.28,69,439 was upheld and the addition deleted by the ld. CIT(A) is sustained.

Final Conclusion: Revenue's appeal is dismissed and the deletion of the addition relating to allocation of common expenses to the export segment is sustained.

Capital receipt - purpose test for characterisation of subsidy - subsidy for setting up industry as capital receipt - treatment of government contribution as share capital - business loss despite cessation of manufacturing activity - lease rental income treated as business income - deduction under S.24 and head-wise classification of income

Capital receipt - purpose test for characterisation of subsidy - treatment of government contribution as share capital - The grant/subsidy of Rs. 2.03 crores received from the Government of Andhra Pradesh is a capital receipt and not taxable as revenue. - HELD THAT: - The Tribunal accepted the CIT(A)'s conclusion that the impugned amount was in the capital field. The assessee's accounts and auditor's report showed government amounts treated as investments and included under equity; the assessee itself sought enhancement of authorised capital to regularise share application money. The State Government had treated prior disbursements as investment and the assessee included such sums as part of share capital. Independently, applying the purpose test established by higher courts, the subsidy was given in connection with setting up leather industrial parks (to develop infrastructure and industry), and therefore is capital in nature irrespective of the form or heads under which the amounts were utilised. Consequently, the addition made by the Assessing Officer treating the grant as revenue was deleted and the order of the CIT(A) was upheld. [Paras 7, 8, 13, 14]

Impugned grant of Rs. 2.03 crores is a capital receipt and not assessable as revenue; CIT(A)'s order deleting the addition is upheld.

Business loss despite cessation of manufacturing activity - The business loss claimed by the assessee is allowable because business activity (purchase and sale of finished goods) continued despite cessation of manufacturing. - HELD THAT: - The Assessing Officer disallowed the business loss on the ground that manufacturing activity had stopped. The CIT(A) found, and the Tribunal agreed, that the assessee continued commercial activity by purchasing and selling finished goods (supported by figures of sales, opening and closing stocks and purchases). The AO had misconstrued cessation of manufacturing as cessation of all business activity; no contrary material was produced by Revenue. Accordingly, the CIT(A)'s deletion of the disallowance was sustained. [Paras 17, 19]

Assessee's business loss is allowable; CIT(A)'s order permitting the loss is upheld.

Lease rental income treated as business income - deduction under S.24 and head-wise classification of income - Lease rental income derived from assets formerly used in the assessee's business is to be assessed as business income, not as income from property. - HELD THAT: - The assessee had leased out premises, plant and machinery that were acquired and used for its business after manufacturing activity ceased, to earn income from idle assets. The CIT(A) directed assessment of such receipts under business income. The Tribunal found no evidence to contradict that the assets were business assets and that leasing was an exercise to utilise idle business assets; accordingly there was no infirmity in treating the receipts as business income rather than income from property (and in allowing depreciation claimed). [Paras 21, 23]

Lease rental income is business income; CIT(A)'s direction to assess it under business head is upheld.

Final Conclusion: Revenue's appeal is dismissed in entirety; the assessee's cross-objection is rejected as redundant.

Registration under S.12A / S.12AA of the Income-tax Act - verifiability of the objects of a society - byelaws vis-a -vis memorandum of association - charitable objects - opportunity to amend bye laws and remand for fresh examination

Registration under S.12A / S.12AA of the Income-tax Act - verifiability of the objects of a society - byelaws vis-a -vis memorandum of association - Validity of refusal of registration where the deed of bye laws contained objects different from those in the Memorandum of Association and the objects were held by the Officer to be non verifiable. - HELD THAT: - The Director of Income tax (Exemption) refused registration on the ground that the bye laws, executed after registration, contained additional and differing objects from those in the Memorandum of Association and that the actual existing objects of the society were therefore not verifiable. The Tribunal noted the Director's concern that under the Andhra Pradesh Societies Registration Act objects are to be stated in the Memorandum of Association and that the presence of divergent objects in the bye laws impeded verification. Having regard to the assessee's stated willingness to amend the bye laws to make the objects specific and verifiable, the Tribunal set aside the impugned order and restored the matter to the file of the Director of Income tax (Exemption) for fresh examination of the application for registration under S.12AA, directing the Director to give the assessee a reasonable opportunity to amend the bye laws and to pass appropriate orders in accordance with law.

Impugned refusal of registration set aside and matter remitted to the Director of Income tax (Exemption) for fresh examination after giving the assessee reasonable opportunity to amend the bye laws.

Charitable objects - opportunity to amend bye laws and remand for fresh examination - Treatment of the Director's observation that the clause relating to corpus fund in the bye laws was inconsistent with the requirements of clause (d) to sub section (1) of S.11. - HELD THAT: - The Director recorded that a stipulation in the bye laws pertaining to a corpus fund was inconsistent with the legal requirements under S.11(1)(d). The Tribunal did not adjudicate the correctness of that observation on merits; instead, in the exercise of remedial discretion and in view of the assessee's offer to amend the bye laws, the Tribunal directed that the Director re examine the application and the said observations after permitting the assessee to make necessary amendments and after affording a reasonable opportunity of hearing.

Observation regarding inconsistency of the corpus fund clause left for fresh consideration by the Director of Income tax (Exemption) upon remand; no final adjudication by the Tribunal.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes by setting aside the Director's order refusing registration and remitted the matter to the Director of Income tax (Exemption) for fresh examination of the S.12AA registration and S.80G approval applications after giving the assessee reasonable opportunity to amend its bye laws and be heard.

Accrual of income under mercantile system of accounting - notional interest income - requirement of contractual right for accrual of interest - nexus between interest bearing funds and interest free advances - remand for fresh consideration on source of funds and disallowance of interest expenditure

Accrual of income under mercantile system of accounting - notional interest income - requirement of contractual right for accrual of interest - Whether notional interest on temporary advances to M/s. SCSL accrues to the assessee in the relevant assessment year in the absence of an admitted liability or contractual right to receive interest. - HELD THAT: - The Tribunal found that while the advances by the assessees to M/s. SCSL are undisputed (revealed by the confession and supported by banking channels and subsequent legal notices and suits), there is no contract between the parties for charging interest. In the absence of any contractual right or admission by M/s. SCSL, interest at a claimed rate cannot be said to have accrued to the assessees merely because the assessees follow mercantile accounting or have claimed interest in recovery suits. The rate of interest claimed in suits (18% p.a.) is uncertain until determined by the civil court. Applying authorities cited, a notional interest cannot be brought to tax where no right to interest exists or where recovery is uncertain. Consequently, the AO was not justified in bringing to tax notional interest on the basis of the assessees' claims alone. [Paras 13]

Notional interest did not accrue in the relevant assessment year in the absence of a contractual right or admitted liability; the AO's addition of interest on that basis is not sustained.

Nexus between interest bearing funds and interest free advances - disallowance of interest expenditure - remand for fresh consideration on source of funds and evidence - Whether interest expenditure borne by the assessee on borrowed funds can be disallowed and treated as income where advances to sister concerns are interest free, and whether such disallowance was properly made by the AO. - HELD THAT: - The Tribunal observed that if the advances were made out of interest bearing borrowed funds, the interest paid on such borrowed funds could be disallowed and treated as income; however, such disallowance requires proof of nexus between the interest bearing funds and the advances. The Tribunal noted that neither the AO nor the CIT(A) examined whether the advances were made out of the assessee's own (interest free) funds or out of borrowed (interest bearing) funds, nor did they establish the necessary nexus. Applying the precedents, disallowance cannot be presumed; it must follow an enquiry into source of funds and evidential nexus. Accordingly, the Tribunal set aside the orders and remitted the matter to the AO for de novo consideration to determine the source of the advances, the existence or otherwise of nexus with borrowed funds, and consequent tax treatment, affording the assessee a fair hearing. [Paras 16]

Issue remitted to the Assessing Officer for fresh consideration on whether advances were out of interest bearing funds and whether disallowance of interest expenditure is justified; AO to decide after opportunity to assessees.

Final Conclusion: The Tribunal held that notional interest could not be brought to tax in the relevant year absent any contractual right or admitted liability to receive interest; however, questions concerning disallowance of interest expenditure (dependent on whether advances were funded from interest bearing borrowings) were not examined below and are remitted to the AO for de novo consideration with opportunity to the assessees. All Revenue appeals are allowed for statistical purposes to give effect to the remand.

Revenue v. capital character of deposits and advances - forfeiture of security/earnest money deposits as business loss - treatment of advances for interior works - capital or revenue - remand for factual verification and fresh consideration - treatment of cost of acquisition and WDV after transfer pricing adjustment for computing capital gains

Revenue v. capital character of deposits and advances - forfeiture of security/earnest money deposits as business loss - Allowability as revenue loss of advances and earnest money deposits written off of Rs.1,21,21,330/- - HELD THAT: - The Tribunal held that the deposits and earnest money made by the assessee in the course of obtaining advertising contracts did not create any enduring advantage or capital asset for the assessee and were made as part of carrying on the assessee's business activity. On the facts the deposits were paid to enable the assessee to obtain permissive use/licence of advertisement space for its trading operations and were not payments for acquisition of a profit earning apparatus. Applying authorities on whether a forfeited deposit is incidental to business, the Tribunal found the CIT(A)'s conclusion-that the deposits created a capital asset-to be a misapplication of principle to the facts and directed the Assessing Officer to allow the amount as a revenue business loss. [Paras 8]

Advances and earnest money deposits written off to the extent of Rs.1,21,21,330/- are revenue in nature and are to be allowed as business loss.

Revenue v. capital character of deposits and advances - forfeiture of rental deposits as business loss - Allowability as revenue loss of rental deposits/advances written off of Rs.53,33,000/- - HELD THAT: - The Tribunal applied the same principles as in the earlier issue and examined the nature of rental deposits paid for leased premises used to run the assessee's 'Study Abroad' division. It held that such advances, even if subsequently forfeited upon premature termination of leases, did not result in acquisition of a capital asset and were made in the course of business. Consequently, the forfeiture of such rental deposits should be treated as a revenue expenditure incidental to the business and allowed as deduction. [Paras 11]

Write off of rental deposits amounting to Rs.53,33,000/- is allowable as a revenue loss.

Remand for factual verification and fresh consideration - revenue v. capital character of deposits and advances - Advance of Rs.75,00,000/- paid to M/s. Shreya Broadcasting Corporation - nature to be re examined by Assessing Officer - HELD THAT: - The Tribunal found that neither the Assessing Officer nor the CIT(A) had analysed the specific facts and documentary material relating to the Rs.75,00,000/- payment to M/s. Shreya Broadcasting Corporation. There was no clear finding on whether the payment was for obtaining advertisement space, for a project, whether it created any asset, or the reasons for cancellation. In view of absence of factual analysis, the Tribunal set aside the matter to the file of the Assessing Officer to examine the nature of the payment and determine whether it is revenue or capital in light of the principles applied in the earlier grounds. [Paras 13]

Ground remitted to the Assessing Officer for fresh consideration and determination of revenue or capital character.

Remand for factual verification and fresh consideration - treatment of advances for interior works - capital or revenue - Advance payments for interior works (Rs.76,12,452/-) - directed to Assessing Officer for fresh examination - HELD THAT: - The Tribunal observed that the nature of advances for interior works could not be determined on legal principles alone without examining the underlying agreements and the purpose of payments. It noted that certain payments might pertain to purchase of machinery or acquisition of intangible rights, while others related to interior works, and that the Assessing Officer must examine whether any asset was created, the terms of agreements (including removability), and reasons for cancellation. Consequently the issue was restored to the Assessing Officer for detailed factual scrutiny and application of the legal tests already discussed. [Paras 14]

Issue remanded to the Assessing Officer for fresh factual and legal examination to determine whether the advances are capital or revenue.

Treatment of cost of acquisition and WDV after transfer pricing adjustment for computing capital gains - Treatment of cost of acquisition and WDV of website 'Bharatstudent.com' for computation of short term capital gain - HELD THAT: - The Tribunal relied on its earlier decision in A.Y. 2008-09 (ITA No.171/Hyd/2012) in which it had held the website acquisition cost to be Rs.3,67,82,683/- and directed the Assessing Officer to allow depreciation. The Tribunal held that the findings in the earlier ITAT decision, that the website was purchased at arm's length and constituted cost of the asset, are binding for purposes of computing the capital gain in the year of sale. Accordingly, the Assessing Officer was directed to allow the WDV/depreciation as claimed and compute the short term capital gain after giving effect to that determination. [Paras 17]

Cost of acquisition and WDV to be allowed as per earlier ITAT direction; Assessing Officer to compute short term capital gain accordingly.

Final Conclusion: The appeal is allowed in part: the Tribunal allows the write off of certain deposits and rental advances as revenue losses, directs remand of specified advance/interior payment matters to the Assessing Officer for fresh factual examination, and directs the Assessing Officer to give effect to the earlier ITAT finding on the website's cost/WDV when computing short term capital gain.

Tax deduction at source under section 194-I - lease premium vs rent - capital nature of payment - payment for extension of construction period as non-capital, non-rent charge - substance over nomenclature in characterisation of payments

Tax deduction at source under section 194-I - lease premium vs rent - capital nature of payment - Characterisation of the 'Balcony Enclosure Fee' paid in the assessment year 2009-10 and its liability to deduction of tax at source under section 194-I. - HELD THAT: - The Tribunal examined the terms and purpose of the payment made to MMRDA and accepted the first appellate authority's conclusion that the amount paid pursuant to the circular (described as 'Balcony Enclosure Fee') represented additional lease premium towards approval of an amended building plan and utilisation of larger built-up area. The payment was held to be in the nature of consideration for acquisition of enhanced lease-hold rights (a capital asset) and not a payment for use of land. Since section 194-I applies to payments in the nature of rent and does not apply to capital consideration for acquisition of leasehold rights, the amount was not exigible to tax deduction at source under section 194-I. [Paras 4]

The 'Balcony Enclosure Fee' for AY 2009-10 is lease premium (capital in nature) and not liable to TDS under section 194-I.

Tax deduction at source under section 194-I - payment for extension of construction period as non-capital, non-rent charge - substance over nomenclature in characterisation of payments - Characterisation of the payment made in the assessment year 2010-11 for extension of time for construction and its liability to deduction of tax at source under section 194-I or any other provision of Chapter XVII-B. - HELD THAT: - The Tribunal found that the payment made for extension of time to complete construction did not result in acquisition of lease-hold rights or any capital asset and therefore could not be treated as additional lease premium. At the same time, the Tribunal held that the payment could not be characterised as rent (i.e., consideration for use of property) and was not covered by section 194-I or any other tax-deduction provision of Chapter XVII-B. The payment was treated as a modification charge/fee under the lease agreement for extension of time, not attracting TDS. [Paras 4]

The extension-of-time payment for AY 2010-11 is neither lease premium nor rent and is not exigible to TDS under section 194-I or any other provision of Chapter XVII-B.

Final Conclusion: Both the Revenue's appeals and the assessee's cross-objections are dismissed: the payment in AY 2009-10 is held to be lease premium (capital) not subject to TDS under section 194-I, and the payment in AY 2010-11 is held to be an extension/fee neither constituting lease premium nor rent and not exigible to TDS.

Deductibility of business expenditure under section 37(1) - Explanation to section 37(1) - payments in contravention of law - illicit payments and reliance on Volcker Committee report - commercial expediency and requirement of cogent evidence to invoke Explanation to section 37(1) - deduction under section 80HHC (DEPB) and retrospective amendment

Deductibility of business expenditure under section 37(1) - Explanation to section 37(1) - payments in contravention of law - illicit payments and reliance on Volcker Committee report - Allowability of inland transportation charges and commission/after-sale service fees paid in relation to exports to Iraq - HELD THAT: - The Tribunal examined whether payments for inland transportation and commission-paid to identified foreign agents and routed through banking channels with RBI/authorities' approvals-were deductible business expenditures or rendered non-deductible by the Explanation to section 37(1) as payments contrary to law. Having considered the contracts, invoices, approvals and authorities relied upon, and coordinate Bench and High Court precedents, the Tribunal held that (i) the inland transportation was incurred pursuant to contract obligation and could not be treated as bogus or illicit merely on the basis of the Volcker Committee report; (ii) commission and service charges were paid to agents who rendered necessary services for procuring orders, approvals, delivery and realization under circumstances prevailing in Iraq, and the assessee produced details and banking evidence; and (iii) invocation of the Explanation to section 37(1) requires direct and cogent evidence that payments were in fact illegal or made to the Iraqi regime, which was not established. Reliance on Volcker Committee findings alone was insufficient to disallow the expenditures where no specific evidence tied the assessee to illicit payments. Following earlier Tribunal and Calcutta High Court decisions, the expenditures were held deductible. [Paras 5, 6, 9]

Disallowances of inland transportation charges and commission/after-sale service fees were reversed and the expenditures held deductible.

Deduction under section 80HHC (DEPB) and retrospective amendment - Allowability of deduction under section 80HHC in respect of DEPB following retrospective amendment challenge - HELD THAT: - The Tribunal considered the assessee's contention that amendment to section 80HHC(3) by the Taxation Laws (Second Amendment) Act, 2005 was constitutionally infirm as depriving a class of assessee of previously available benefit. The Tribunal noted that this issue is governed by the decision of the Hon'ble Supreme Court in Topman Export v. CIT and, applying that precedent, directed the Assessing Officer to allow the deduction under section 80HHC in terms of the Supreme Court's decision. [Paras 11, 12, 13]

Deduction under section 80HHC on account of DEPB directed to be allowed in accordance with the Supreme Court's decision.

Reopening of assessment under section 147 / notice under section 148 - Validity of reopening of assessment under section 148 left undecided - HELD THAT: - Although the assessee had challenged the validity of reopening, the Tribunal observed that, having decided the merits in favour of the assessee on the disallowance issue, the question of validity of reopening was rendered academic. Consequently the Tribunal did not adjudicate the validity of the reopening and left that ground undecided. [Paras 10]

Validity of reopening under section 148 not decided (treated as academic).

Final Conclusion: Appeals partly allowed: additions disallowing inland transportation and commission/service charges set aside and expenditures held deductible; deduction under section 80HHC (DEPB) directed to be allowed in terms of the Supreme Court decision; validity of reopening under section 148 left undecided as academic.

Transfer by exchange within the meaning of section 2(47) of the Income-tax Act read with section 53A of the Transfer of Property Act - timing of accrual of capital gains on development agreements - transfer occurs on handing over/possession giving right to enjoy - inclusion of unsold constructed area in consideration for computation of capital gains - treatment of amounts described as advances vis-a -vis sale consideration - application of section 50C and referral to the Valuation Officer

Timing of accrual of capital gains on development agreements - transfer occurs on handing over/possession giving right to enjoy - transfer by exchange within the meaning of section 2(47) of the Income-tax Act read with section 53A of the Transfer of Property Act - Whether capital gains arising from development agreements are taxable in the assessment year 2006-07 or in earlier years when the land/possession was effectively transferred. - HELD THAT: - The Tribunal examined the statutory definition of transfer and the doctrine of part performance under section 53A and held that a transfer for capital gains purposes occurs when the party acquires the right to enjoy the property - i.e., when possession/constructed area is handed over such that the counterparty obtains the right of enjoyment. However, applying earlier coordinate-bench authorities, the Tribunal found that where possession was handed over in earlier years (in accordance with the development agreements), capital gains arising from that transfer cannot be taxed in AY 2006-07. Consequently, only profits arising from sales of built-up areas actually sold in the year under appeal are taxable in AY 2006-07; capital gains attributable to earlier transfers must be assessed in the relevant earlier years. [Paras 24, 25]

Capital gains from the development-stage transfer are taxable in the year when possession/right to enjoy was handed over; therefore gains arising from transfers effected in earlier years are not taxable in AY 2006-07 and only profits on sales made in AY 2006-07 are to be assessed in that year.

Inclusion of unsold constructed area in consideration for computation of capital gains - Whether the value of unsold constructed area may be added to the sale consideration for computing capital gains in AY 2006-07. - HELD THAT: - The Tribunal directed that only profits arising from land and built-up areas actually transferred in the year under appeal can be brought to tax in that year. The addition made by the Assessing Officer in respect of the unsold constructed area (treated as receipt in lieu of land surrendered) could not be sustained for AY 2006-07 because the capital gain attributable to the development/transfer stage, if effected earlier, must be assessed in the year in which that transfer took place. [Paras 25]

The addition for unsold constructed area is not sustainable for AY 2006-07; only profits on transfers effected in AY 2006-07 are taxable in that year.

Treatment of amounts described as advances vis-a -vis sale consideration - Whether amounts claimed by the assessee as advances should be excluded from sale consideration in computing capital gains for AY 2006-07. - HELD THAT: - The Assessing Officer and CIT(A) had treated certain receipts claimed as advances as part of sale consideration because the assessee failed to substantiate the nature of those amounts in the books, schedules and by evidence. The Tribunal has not finally upheld or reversed the factual finding but has set aside the order of the CIT(A) and restored the matters to the Assessing Officer for recomputation of income for AY 2006-07, giving the assessee an opportunity to substantiate any claim that particular sums were advances and not sale consideration. [Paras 23, 25]

Issue remanded to the Assessing Officer for de novo consideration and verification of whether claimed advances are liabilities or part of sale consideration, after giving the assessee a reasonable opportunity of hearing.

Application of section 50C and referral to the Valuation Officer - Whether the Assessing Officer correctly applied section 50C to adopt higher registered/market value and whether reference to the Valuation Officer is required. - HELD THAT: - The Assessing Officer had applied section 50C to add the difference between registrar/market value and the admitted sale consideration. The Tribunal did not make a final factual finding on the applicability in every instance but directed that the Assessing Officer, in recomputing income, shall consider applicability of section 50C afresh and may, if he considers it necessary, refer the matter to the Valuation Officer as required under that provision. [Paras 25]

Matter remitted to the Assessing Officer to decide applicability of section 50C; AO may refer to the Valuation Officer for determination of market value if considered necessary.

Understated sale consideration and evidentiary burden to substantiate adjustments - Validity of the Assessing Officer's addition of an alleged understated sale amount and the requirement of evidence for claimed earlier adjustments/advances. - HELD THAT: - The Assessing Officer added an amount shown in a sale deed but not admitted by the assessee, because the assessee failed to produce evidence (cheque numbers, bank entries or corroborative entries in purchasers' returns) to substantiate that the sum was adjusted earlier as an advance. The Tribunal did not decide the addition finally but set aside the CIT(A)'s order and remitted such factual issues to the AO for fresh consideration with directions to give the assessee a reasonable opportunity to produce evidence. [Paras 25]

Addition in respect of the alleged understated consideration is remitted to the Assessing Officer for de novo adjudication after allowing the assessee an opportunity to substantiate its claim.

Final Conclusion: The order of the CIT(A) is set aside and the matter is restored to the Assessing Officer for recomputation of income for Assessment Year 2006-07. Only profits arising from sales of built-up area (and undivided interest, if any) actually transferred in AY 2006-07 are to be assessed in that year; issues concerning inclusion of advances, the alleged understated sale consideration and the applicability of section 50C are remitted to the AO for fresh consideration after affording the assessee a reasonable opportunity of hearing (the appeal is treated as allowed for statistical purposes).

Exemption for imported kerosene sold through Public Distribution System - Public Distribution System as defined in Kerosene (Restriction on Use and Fixation of Ceiling Price) Order, 1993 - sale beyond PDS quota not eligible for notification benefit - supplies to Railways and Defence not sale through Public Distribution System - suppression of material facts and imposition of penalty

Exemption for imported kerosene sold through Public Distribution System - Public Distribution System as defined in Kerosene (Restriction on Use and Fixation of Ceiling Price) Order, 1993 - sale beyond PDS quota not eligible for notification benefit - supplies to Railways and Defence not sale through Public Distribution System - Whether supplies to Railways, supplies to Airforce/Defence and sales to PDS dealers in excess of quota qualify for exemption under the impugned Customs Notifications - HELD THAT: - The Tribunal held that the exemption Notifications grant relief only where imported kerosene is for ultimate sale through the Public Distribution System. The Notifications do not themselves define PDS; the Kerosene Order, 1993 defines PDS as distribution, marketing or selling of kerosene at declared price through a distribution system approved by the Central or State Government. Reading the Notifications harmoniously with that definition, supplies not made to the PDS or sales exceeding the quota approved by the Central/State Government fall outside the scope of the exemption. Supplies to Railways and Defence are distinct categories and do not constitute sale through the PDS; excess sales beyond quota by dealers likewise do not establish sale to the PDS. The Appellant did not produce evidence that excess sales were to ultimate PDS beneficiaries or otherwise within the PDS as defined, and therefore the impugned notifications do not apply to such supplies. [Paras 5, 6]

Benefit of the exemption Notifications is not available in respect of supplies to Railways, supplies to Airforce/Defence and sales to PDS dealers beyond the approved quota.

Suppression of material facts and imposition of penalty - Whether the Appellant suppressed material facts so as to justify confirmation of duty, interest and penalty - HELD THAT: - The Tribunal accepted the adjudicating authority's finding that the Appellant effected sales to industrial customers and made excess sales beyond approved PDS quota from imported SKO while not indicating in bills of entry or informing Customs that such quantities would be sold outside the PDS. Those omissions were held to be suppression of facts material to assessment. Reliance on judgments urging liberal construction of exemption or filing of returns did not outweigh the adjudicator's factual conclusion that the Appellant knowingly effected non-PDS sales from imported stock. On these facts the Commissioner re-quantified duty liability and the Tribunal upheld the adjudication determining duty, interest and the equivalent penalty. [Paras 7]

Findings of suppression are upheld and the adjudicated demand, with interest and penalty as re-quantified by the Commissioner, is sustained.

Final Conclusion: The Tribunal dismissed the appeal, upheld the Commissioner of Customs' orders (including re-quantified duty liability) and disposed of the Revenue's cross-objection in the same terms.

Classification as GPS trans receiver under Customs Tariff - applicability of EXIM Policy licensing requirement to imported goods - smuggled goods under section 2(39) of the Customs Act, 1962 - confiscation and imposition of redemption fine and penalty for import in contravention of law - admissibility of a fresh technical ground raised at the appellate stage

Classification as GPS trans receiver under Customs Tariff - applicability of EXIM Policy licensing requirement to imported goods - confiscation and imposition of redemption fine and penalty for import in contravention of law - smuggled goods under section 2(39) of the Customs Act, 1962 - Whether the imported goods are classifiable as GPS trans receiver and thereby subject to EXIM Policy licensing requirement, confiscation and the redemption fine and penalty imposed. - HELD THAT: - The appellate authority examined the nature, use and catalogue description of the impugned goods and concluded they satisfy the definition of GPS trans receiver and are distinct from a mere GPS receiver or differential GPS. On that basis the authority held the goods fall under the relevant tariff heading and, by virtue of their nature and use, are covered by the EXIM Policy licensing requirement for the period in question. As no licence was obtained, importation contravened the EXIM Policy and the goods were liable to be treated as smuggled goods within the meaning of section 2(39) of the Customs Act, 1962, attracting confiscation and the consequences provided by law. The Tribunal noted that Revenue did not challenge the appellate authority's classification but supported adjudication; having considered the appellate authority's reasoning and its reduction of the redemption fine and penalty, the Tribunal found the quantum imposed by the Commissioner (Appeals) to be appropriate and dismissed the assessee's appeal. [Paras 4, 6]

Classification as GPS trans receiver upheld; EXIM Policy licensing requirement applies; import without licence treated as contravention rendering goods liable as smuggled goods under section 2(39) and liable to confiscation; redemption fine and penalty as ordered by Commissioner (Appeals) sustained and appeal dismissed.

Admissibility of a fresh technical ground raised at the appellate stage - Whether a fresh contention that no technical examination of the goods was undertaken by a technical institution can be entertained before the Tribunal. - HELD THAT: - The contention that the goods' technical character was not examined by any technical institution was not raised before the authorities below. The Tribunal held that such a novel ground, being a fresh plea not ventilated earlier, is not entertainable at this stage and cannot be allowed to be urged for the first time before the Tribunal. [Paras 5]

The fresh technicality ground is barred and not admitted at the appellate stage.

Final Conclusion: The Tribunal affirmed the appellate authority's conclusion that the imported items are GPS trans receivers covered by the EXIM Policy, liable for confiscation and attendant redemption fine and penalty for import without licence; a fresh technicality raised for the first time before the Tribunal is not entertainable and the assessee's appeal is dismissed.

Prima facie case - fraudulent mis-declaration - confiscation - forgery of official seal - role of CHA and transporter in customs evasion - pre-deposit for grant of stay - waiver of pre-deposit

Prima facie case - fraudulent mis-declaration - role of CHA and transporter in customs evasion - forgery of official seal - confiscation - Prima facie findings that the importer, the CHA and the transporter were involved in deliberate mis declaration and a racket to evade customs duty, justifying non waiver of deposit on merits. - HELD THAT: - The Tribunal found that physical examination of the container disclosed 501 cartons containing whisky concealed under descriptions of carbonated/aerated water and foodstuffs (para 22). Statements recorded under section 108 and other evidence established that the importer organised mis declaration through front directors and that the CHA and its director assisted attempts to clear the offending goods; documents and the seal of the Commissioner were allegedly forged in that attempt (paras 22-25, 27). Investigation and enquiries from Dubai Customs corroborated mis declaration in earlier consignments (para 25). The adjudicating order and record were held to demonstrate a planned scheme, active involvement of the CHA director and the proprietor transporter, and material to infer deceit and fraud (paras 27-29). On this prima facie material the Tribunal held there was no scope to grant total waiver of pre deposit (para 29). [Paras 24, 25, 27, 28, 29]

On the material before it the Tribunal recorded a prima facie finding of deliberate mis declaration and concerted fraud implicating the importer, the CHA and the transporter and declined to grant total waiver of pre deposit on merits.

Pre-deposit for grant of stay - waiver of pre-deposit - Directions for pre deposit amounts to obtain interim stay in the four stay applications, and limited waiver of pre deposit for M/s M.V. Logistics. - HELD THAT: - Balancing the prima facie findings of fraud and the submissions of the parties, the Tribunal directed specified pre deposits to be made by Shri Mool Chand Sharma in respect of the stay applications noted against each appeal (para 30). The CHA M/s R.U. Imports & Exports Pvt. Ltd. was directed to deposit Rs.20 lakhs in respect of its stay application arising from appeal No. C/638/2010 (para 31). As Shri Mool Chand Sharma was also directed to deposit Rs.40 lakhs in one stay application on behalf of M/s M.V. Logistics, the Tribunal ordered waiver of any separate pre deposit by M/s M.V. Logistics (para 32). The Tribunal specified timelines for deposit and compliance (paras 30-34). [Paras 30, 31, 32, 33, 34]

Stay applications were disposed subject to the appellants making the directed deposits within the stipulated time, with an express waiver of pre deposit for M/s M.V. Logistics as indicated.

Final Conclusion: The Tribunal recorded prima facie findings of deliberate mis declaration and concerted evasion implicating the importer, the CHA and the transporter, refused total waiver of pre deposit on merits and disposed of the stay applications by directing specified pre deposits within the stipulated time, while granting a limited waiver of pre deposit for M/s M.V. Logistics.

Input service - CENVAT credit - nexus with manufacturing activity - services used in residential colony - binding precedent of jurisdictional High Court - availability of input service credit

Input service - services used in residential colony - nexus with manufacturing activity - CENVAT credit - binding precedent of jurisdictional High Court - Whether input service credit is available for services (cable operator, repair and maintenance, manpower supply, pest control, telephones, Business Auxiliary Service) used/received in a residential colony for employees located outside the factory - HELD THAT: - The Tribunal examined whether the services availed in the residential colony have the requisite nexus with the appellant's manufacturing business to qualify as input services under the CENVAT Credit Rules, 2004. The Tribunal observed that the appeal lay before the Western Zonal Bench which falls within the jurisdiction of the Hon'ble High Court of Bombay. Being bound by the jurisdictional High Court's decision in Manikgarh Cement, the Tribunal held that services availed in the residential colony do not have the necessary nexus with the manufacturing activity of the assessee and therefore cannot be treated as input services eligible for CENVAT credit. The contrary decision relied upon by the appellant from the Andhra Pradesh High Court was not followed due to the binding nature of the Bombay High Court precedent in the Tribunal's territorial jurisdiction. [Paras 5, 6]

Input service credit for the services availed in the residential colony is not available as they lack nexus with the manufacturing activity; the impugned order is upheld.

Final Conclusion: Appeal dismissed; impugned order denying CENVAT/input service credit for services used in the residential colony is upheld, following the binding precedent of the jurisdictional High Court.

Business Support Services - Infrastructural Support Services - operational or administrative assistance - Board's Circular No. 334/3/2011-TRU dated 28.2.2011 - waiver of pre-deposit and stay against recovery

Business Support Services - Infrastructural Support Services - operational or administrative assistance - Board's Circular No. 334/3/2011-TRU dated 28.2.2011 - Whether the services of providing space in buses to M/s Shri Sai Transport & Courier Pvt. Ltd. for parcel/goods transportation and courier operations fall within 'business support services' (specifically 'infrastructural support services' or 'operational or administrative assistance') for the period prior to 1.5.2011. - HELD THAT: - The Tribunal examined the definition of 'Business Support Services' and the sub category 'Infrastructural Support Services', noting that the latter describes provision of office-related utilities and facilities. Reliance was placed on Board's Circular No. 334/3/2011-TRU dated 28.2.2011 and the subsequent inclusion of the words 'operational or administrative assistance in any manner' effective 1.5.2011. On the material before it, the Tribunal found, prima facie, that the appellant's arrangement of providing space in buses to the courier operator could be characterised as falling within 'operational or administrative assistance' and therefore there may be no service tax liability for the period prior to 1.5.2011. The finding is provisional and framed as a prima facie conclusion for the purpose of interim relief.

Prima facie the services in question may be covered by 'operational or administrative assistance' and thus may not attract service tax prior to 1.5.2011; this conclusion is provisional for interim purposes.

Waiver of pre-deposit and stay against recovery - Whether the requirement of pre-deposit of the adjudged dues should be waived and recovery stayed during the pendency of the appeal. - HELD THAT: - Having recorded a prima facie view favourable to the appellant on classification and possible non liability prior to 1.5.2011, the Tribunal exercised its discretionary power to grant interim relief. The Tribunal waived the requirement of any pre-deposit of the adjudged dues and directed that recovery of the demanded service tax and interest be stayed while the appeal is pending, thereby preserving the appellant's position until final adjudication.

Pre-deposit requirement waived and stay of recovery granted during the pendency of the appeal.

Final Conclusion: The Tribunal recorded a prima facie view that the services supplied by the appellant may constitute 'operational or administrative assistance' and thus might not attract service tax for the period October 2008 to May 2010; accordingly, the Tribunal waived the pre-deposit requirement and stayed recovery of the disputed demand during the appeal.

Processing of agricultural produce - exemption from service tax - transport of goods by an operator (GTA) in relation to agricultural produce - waiver of pre-deposit during pendency of appeal - administrative clarification by Central Board of Excise & Customs

Processing of agricultural produce - exemption from service tax - administrative clarification by Central Board of Excise & Customs - Processing of tobacco leaves for and on behalf of the client is in relation to agriculture and falls within the exemption from service tax. - HELD THAT: - The Tribunal accepted the appellant's contention that the multi-stage operations performed on tobacco leaves (softening, stem separation and drying) constitute processing in relation to agricultural produce. It noted that the Government had examined the question and, by Notification No. 14/2004-S.T. (as amended by Notification No. 19/2005), treated such processing as relating to agriculture and exempt from service tax. The Tribunal further relied on Central Board of Excise & Customs Circular No. 143/12/2011-S.T., which clarifies that processing of tobacco for and on behalf of the client relates to agriculture. Having regard to these administrative instruments and the approach of the Board and the Government, the Tribunal took the view that the activity is prima facie agricultural and exempt from service tax, and that the appellant therefore has no service tax liability on that activity.

Accepted prima facie that the processing of tobacco leaves relates to agriculture and is exempt from service tax.

Transport of goods by an operator (GTA) in relation to agricultural produce - exemption from service tax - GTA services availed solely in relation to the agriculture produce are exempt from service tax. - HELD THAT: - The Tribunal recorded the appellant's submission that goods transport agency services were availed only in relation to agricultural produce and thus fell within the exemption. No contrary legal principle or overriding finding was accepted by the Tribunal on this point in the order.

Accepted that the GTA services in relation to the agricultural produce are exempt from service tax.

Waiver of pre-deposit during pendency of appeal - Pre-deposit of the demand was waived during the pendency of the appeals. - HELD THAT: - Having regard to the administrative notifications and the Board's circular indicating that the sector was intended to be exempt from service tax, the Tribunal found that requiring a pre-deposit would cause undue hardship to the appellant. On that basis, and in the context of the pending stay applications, the Tribunal directed that the pre-deposit of the demand shall be waived for the duration of the appeals.

Waiver of pre-deposit granted during pendency of the appeals.

Final Conclusion: Relying on the Government notifications and the Board's circular, the Tribunal took a prima facie view that processing of tobacco leaves and related GTA services are in relation to agriculture and exempt from service tax, and accordingly granted waiver of pre-deposit of the demand during the pendency of the appeals.

Service tax - Business Exhibition Service - Reverse charge mechanism - Waiver of pre-deposit - Stay of recovery during pendency of appeal - Tribunal precedent and ratio

Service tax - Business Exhibition Service - Reverse charge mechanism - Waiver of pre-deposit - Tribunal precedent and ratio - Whether requirement of pre-deposit of service tax, interest and penalty could be waived and recovery stayed where an assessee located in India availed Business Exhibition Service outside India and Revenue invoked reverse charge mechanism. - HELD THAT: - Revenue contended that the applicants, being located in India, were liable to pay service tax under the reverse charge mechanism for Business Exhibition Service availed abroad. The Tribunal applied its earlier decision in Merino Industries Ltd. v. Commissioner of Central Excise, Meerut-II and followed the ratio that in similar facts an unconditional waiver of the pre-deposit of the entire amount of service tax, interest and penalty is appropriate. On that footing the Tribunal found that the applicants had made out a case for waiver of the pre-deposit and for staying recovery during the pendency of the appeal, and therefore granted the relief sought. [Paras 2]

Waiver of pre-deposit of entire service tax, interest and penalty granted and recovery stayed during pendency of the appeal.

Final Conclusion: Following the Tribunal's precedent, the application for waiver of pre-deposit and stay of recovery was allowed; pre-deposit of the entire amount of service tax, interest and penalty is waived and recovery is stayed pending the appeal.

Exemption for management and maintenance of roads - service tax on maintenance and repair services - amendment introducing exemption under Section 97(1) - amendment by Finance Act, 2012 clarifying exemption

Exemption for management and maintenance of roads - service tax on maintenance and repair services - Whether demands of Service Tax confirmed under the category of 'Maintenance and Repair services' for management and maintenance of roads are sustainable for the period after 16-6-2005 - HELD THAT: - The Tribunal noted that the Finance Act, 1994 was subsequently amended by introducing the exemption for 'management and maintenance of roads' with effect from 16-6-2005 and that, after July 2009, the activity was exempted from Service Tax. Having found that the periods in all matters under appeal are subsequent to 16-6-2005 and that the amendment by Finance Act, 2012 leaves no room for doubt on the issue, the Tribunal concluded that Service Tax demands confirmed under the impugned orders cannot be sustained. On this basis the impugned orders were set aside and the appeals allowed with consequential relief.

Impugned orders confirming Service Tax demands set aside and appeals allowed; stay petitions disposed of accordingly.

Final Conclusion: The Tribunal allowed the appeals, holding that management and maintenance of roads is exempt from Service Tax for the periods from 16-6-2005 (including 16-6-2005 to 26-7-2009) and thereafter (after July, 2009), set aside the impugned orders and disposed of the stay applications.

Admissibility of cenvatable input services - shipping and port handling services as inputs for export - place of removal for export extended to load port - option to avail cenvat credit or claim refund - benefit under competing schemes - assessee's election

Shipping and port handling services as inputs for export - place of removal for export extended to load port - admissibility of cenvatable input services - Shipping, documentation and terminating handling services used in respect of export are admissible as cenvatable input services. - HELD THAT: - The Tribunal held that for export transactions the place of removal is extended to the load port because the sale crystallises only upon issuance of the bill of lading which occurs after goods are loaded on ship. Consequently, shipping services availed at the port qualify as input services within the meaning of the Cenvat Credit Rules, and are therefore admissible for credit. The decision relies upon prior Tribunal authority recognising the port as place of removal for export cargo and treats port-related shipping and handling charges as cenvatable inputs applied to exported goods. [Paras 3]

Credit of service tax paid on shipping/documentation/handling services used for export is admissible as cenvatable input service.

Option to avail cenvat credit or claim refund - benefit under competing schemes - assessee's election - Assessee was not obliged to claim refund under the notification and could elect to avail Cenvat credit instead. - HELD THAT: - The Tribunal accepted that where two alternative statutory or regulatory remedies are available to an assessee (refund under notification or availment of cenvat credit), the assessee may choose either option. The revenue did not demonstrate that the refund-notification excludes the option of taking credit. The principle cited is that an assessee can choose the benefit under any of the schemes available to it. The appellate authority's earlier order in the assessee's favour for a different period was noted and the revenue did not show it had challenged that order. [Paras 4, 5]

The appellant could validly avail Cenvat credit instead of claiming refund; denial on this ground is not sustainable.

Final Conclusion: Impugned order set aside; appeal allowed and Cenvat credit availed on shipping/documentation/handling services used for export upheld, with consequential relief to the appellant.

Appellate jurisdiction determined by the situs of the assessing officer - territorial jurisdiction of the High Court - binding efficacy of High Court precedents within territorial jurisdiction - prohibition of forum shopping - appeal under Section 35G of the Central Excise Act

Appellate jurisdiction determined by the situs of the assessing officer - territorial jurisdiction of the High Court - prohibition of forum shopping - appeal under Section 35G of the Central Excise Act - Whether the Delhi High Court has jurisdiction to entertain the appeal filed by the Commissioner (LTU), Delhi against an Order in Original passed by the Assistant Commissioner, Pondicherry. - HELD THAT: - The Court held that appellate jurisdiction is determined by the situs/location of the Assessing Officer who passed the Order in Original and not by subsequent examination of the order by an officer or unit situated elsewhere. Reliance was placed on this Court's decisions which reason that questions of law arising from an assessment should be determined by the High Court exercising territorial jurisdiction over the situs of the assessing officer to avoid anomalies and forum shopping. The Supreme Court's decision in Ambica Industries was also cited for the principle that allowing an aggrieved party to choose any High Court would result in conflicting binding precedents and judicial anarchy. The creation of a Large Taxpayer Unit at Delhi and review of the impugned order by that Commissionerate does not confer jurisdiction on the Delhi High Court where the original order was passed at Pondicherry. [Paras 8]

The Delhi High Court does not have jurisdiction to entertain the appeal; notice in the application for condonation of delay is not issued and the appellant may file the appeal before the High Court having territorial jurisdiction over the assessing officer who passed the original order.

Final Conclusion: Appeal not entertained for want of jurisdiction of this Court; appellant free to approach the High Court having territorial jurisdiction over the assessing officer at Pondicherry.

Additional duty of excise (surcharge on tea) - Substantive provision for levy of interest - Procedural/machinery provisions - Applicability of Central Excise Act provisions by reference - Distinction between additional duty of excise and excise duty - Ratio: interest can be levied only where statute makes substantive provision therefor

Substantive provision for levy of interest - Applicability of Central Excise Act provisions by reference - Distinction between additional duty of excise and excise duty - Whether the Revenue had statutory power to demand interest on delayed payment of the additional duty of excise levied under Section 157 of the Finance Act, 2003. - HELD THAT: - The Court applied the principle laid down by the Supreme Court that interest on delayed payment of a tax can be levied only if the charging statute contains a substantive provision empowering levy of interest; machinery or procedural provisions cannot be treated as creating substantive liability to pay interest. Section 157(1) of the Finance Act, 2003 created the liability to pay additional duty of excise on tea, but the Finance Act contains no substantive provision for charging interest on delayed payment of that additional duty. Section 157(3) makes certain provisions of the Central Excise Act applicable "as far as may be" to collection of the additional duty, but it expressly refers to refunds, exemptions and penalties and does not make substantive interest provisions of the Central Excise Act applicable. Even if a provision referring to interest had been present as a procedural provision, the Court held (following India Carbon Ltd. and J.K. Synthetics) that such procedural reference would not suffice to create a substantive obligation to pay interest where the charging statute itself is silent. There is therefore a clear legal distinction between liability under the Finance Act for additional duty and liability under the Central Excise Act for excise duty: absent a substantive provision in the Finance Act, demand of interest on delayed payment of the additional duty was without jurisdiction and unsustainable.

Impugned demand for interest dated 27.4.2005 on delayed payment of additional duty under Section 157, Finance Act, 2003 is without jurisdiction and is quashed; amounts paid pursuant to the demand are to be refunded.

Final Conclusion: Writ petition allowed: demand for interest on delayed payment of the additional excise duty on tea under the Finance Act, 2003 was quashed for lack of any substantive statutory provision authorising levy of interest; only provisions expressly made applicable (penalty, refund, exemption) could be invoked and they do not extend to creating a substantive liability to pay interest.

Ex gratia payment - discretionary grant of reward - interim/advance reward under reward policy - significance of informer's information/tip-off - payment of final reward after adjudication

Significance of informer's information/tip-off - Whether the petitioners furnished the information alleged and whether their identity could be established from the sealed envelope produced to the Court. - HELD THAT: - The Court examined the sealed envelope produced by the respondents and found that, once unsealed, the written information and the accompanying undertaking with thumb impression corresponded with the translation annexed to the writ petition. The Minutes of Meeting had recorded the existence of a sealed envelope marked AE-I which had not been opened by the officers; on judicial inspection the contents matched the petitioners' pleaded account. The RTI replies and the departmental narration also indicate that the information supplied functioned as a 'basic information' or 'tip-off' which was developed by departmental officers into a full investigation leading to searches and seizures in December 2007. On this basis the Court held that, at least at this stage, the question of the petitioners' identity could not be treated as unsettled and the petitioners had furnished the information as pleaded. [Paras 12, 13]

The petitioners had furnished the information and their identity, as evidenced by the sealed envelope, was established for the purpose of the petition.

Discretionary grant of reward - interim/advance reward under reward policy - ex gratia payment - Whether the respondents were justified in rejecting the petitioners' claim for interim reward on the grounds that the information was only 'basic' and that identity was not established. - HELD THAT: - The Court analysed Paras 5 and 6.3 of the 2001 Reward Policy which make clear that rewards are ex gratia and payable at the absolute discretion of the competent authority, and that interim reward in Central Excise duty evasion cases is normally not granted except in specified circumstances (such as voluntary admission and deposit of liability). However, the Court found that the departmental material, including RTI responses and the timing between the information provided (11/12/2007) and the raid (19/12/2007), showed that the petitioners' information provided a vital link which was developed into investigative action. Consequently, the departmental refusal resting on the twin grounds that (a) the information was merely 'basic' and (b) the identity of the informer was unestablished, could not be sustained in law in the manner adopted. [Paras 11, 15]

The respondents' rejection of the claim for interim reward on those grounds is not sustainable.

Interim/advance reward under reward policy - discretionary grant of reward - The course to be followed by the authorities in relation to grant of interim reward in light of the Court's findings. - HELD THAT: - While the Court invalidated the respondents' stated reasons for refusing interim reward, it recognised that the Reward Policy vests a discretion in the competent authorities as to whether to grant interim or final reward and how to exercise it. The Court therefore declined to direct payment itself; instead it directed the authorities to reconsider the petitioners' representations and the available record, and to pass an appropriate reasoned order on the question of whether interim reward should be granted during the pendency of appellate proceedings, taking into account all materials on file. [Paras 16]

Matter remanded to the competent authorities to consider and pass appropriate orders on the grant of interim reward within four weeks.

Final Conclusion: Writ petition allowed. The Court found that the petitioners had furnished the information and that the departmental rejection of the interim-reward claim on the grounds of identity and the information being merely 'basic' was unsustainable; the matter is remitted to the competent authorities to reconsider and pass reasoned orders on the claim for interim reward within four weeks.

Refund of wrongly paid duty - unjust enrichment - payment into PLA of a closed/non-operational unit - consequential relief of refund and direction to adjudicating authority

Refund of wrongly paid duty - unjust enrichment - payment into PLA of a closed/non-operational unit - Whether the claim for refund of duty paid into the PLA of a unit that was closed and non-operational can be rejected on the ground of unjust enrichment. - HELD THAT: - The Tribunal found that where a unit was closed in 2006 and no activity was carried on thereafter, any duty payment made into the PLA of that closed unit was not payable for that unit. The bar of unjust enrichment, which presupposes that the recipient has benefitted from the payment in a manner that would make refund inequitable, does not arise when the recipient account pertains to a non operational/closed unit and no benefit has been retained by that unit. The lower authorities failed to examine the legal provisions and relied on a decision whose facts were not comparable; consequently their rejection of the refund on the ground of unjust enrichment was unsustainable. The Tribunal therefore set aside the impugned order and allowed the appeal, directing the adjudicating authority to sanction the refund. [Paras 4, 5]

Refund claim allowed; bar of unjust enrichment held not to apply to duty paid into the PLA of a closed/non operational unit, and adjudicating authority directed to sanction the refund within seven days.

Final Conclusion: Appeal allowed. The Tribunal held that unjust enrichment does not apply where duty was paid into the PLA of a unit closed and non operational since 2006; the impugned rejection is set aside and the adjudicating authority is directed to sanction the refund within seven days.

Classification of P.D. pumps as primarily designed for handling water - entitlement to benefit of notifications granting nil rate of duty for pumps primarily designed for handling water - extended period of limitation invoked for suppression with intent to evade payment of duty - imposition and liability for penalty where clearance made pursuant to approved classification lists

Classification of P.D. pumps as primarily designed for handling water - entitlement to benefit of notifications granting nil rate of duty for pumps primarily designed for handling water - Whether the pumps models EM1AL and FM1AL are primarily designed for handling water and therefore entitled to nil rate of duty under the notifications - HELD THAT: - The product literature produced by the appellant showed that the pumps were not exclusively designed for handling water: one model was flame-proof and the literature indicated use with liquids other than water and supply to various industrial consumers. On this factual and documentary basis the Tribunal concluded that the pumps cannot be said to be primarily designed for handling water and therefore the appellants are not entitled to the benefit of the notifications which grant nil rate of duty to pumps primarily designed for handling water. [Paras 12]

Benefit of the notifications denied; demand confirmed for the normal period of limitation.

Extended period of limitation invoked for suppression with intent to evade payment of duty - Whether the extended period of limitation could be invoked on the ground of suppression with intent to evade payment of duty - HELD THAT: - The appellants had filed and acted upon classification lists dated 1-3-1993, 1-4-1994 and 16-3-1995 and cleared the pumps at nil rate of duty in accordance with those lists. The Tribunal found that in these circumstances the allegation of suppression with intent to evade payment of duty was not sustainable and accordingly the demand beyond the normal period of limitation could not be sustained. [Paras 13]

Invocation of the extended period of limitation set aside; demand beyond the normal period quashed.

Imposition and liability for penalty where clearance made pursuant to approved classification lists - Whether penalties could be imposed where clearances were made pursuant to filed and approved classification lists and suppression was not established - HELD THAT: - Because the allegation of suppression with intent to evade payment of duty was held to be unsustainable and the appellants had cleared goods in pursuance of the classification lists filed, the Tribunal held that the case was not made out for imposition of any penalty. Accordingly, penalties imposed were set aside. [Paras 14]

Penalties imposed are set aside.

Final Conclusion: The Revenue's appeal is allowed only to the extent of confirming demand for the normal period of limitation; the appellant's appeal against the extended-period demand and the penalties is allowed and the extended-period demand and penalties are set aside; the cross objections are disposed of accordingly.

Discharge of duty liability on DTA clearance by EOU - segregation of scrap constituting manufacture - Foreign Trade Policy permitting DTA clearance during relevant period - waiver of pre-deposit pending appeal - prima facie case for grant of stay

Discharge of duty liability on DTA clearance by EOU - segregation of scrap constituting manufacture - Foreign Trade Policy permitting DTA clearance during relevant period - waiver of pre-deposit pending appeal - prima facie case for grant of stay - Entitlement to waiver of pre-deposit and stay of recovery pending appeal in light of the appellant's status as an EOU and permissibility of clearing paper waste to DTA - HELD THAT: - The Tribunal examined whether the appellant, an EOU, could clear segregated paper waste to the DTA and whether that view furnished a prima facie case justifying waiver of the pre-deposit. The Tribunal relied on the appellant's own earlier Final Order Nos. A/2176-2180/WZB/AHD/2011, dated 15-12-2011 which records that the appellant is an EOU and that segregation of scrap in its factory amounted to manufacture for the relevant period. In view of that finding, clearance of paper waste to the DTA was permissible under the Foreign Trade Policy applicable during the relevant period. On that basis the Tribunal found a prima facie case in favour of the appellant and that the balance of convenience and prospects of success warranted relief. Consequently the Tribunal allowed the application for waiver of the pre-deposit and stayed recovery of the amounts and equivalent penalty until disposal of the appeal.

Application for waiver of pre-deposit allowed; recovery of the amounts and equivalent penalty stayed till disposal of the appeal.

Final Conclusion: The Tribunal allowed the stay petition and granted waiver of the pre-deposit, staying recovery of the duty and equivalent penalty pending disposal of the appeal, on the view that segregation of scrap amounted to manufacture and DTA clearance was permissible under the Foreign Trade Policy, thereby establishing a prima facie case.

Waiver of pre-deposit - stay of recovery - prima facie case for pre-deposit waiver - affixing MRP as manufacturing activity under the definition of manufacture - discharge of countervailing duty as indicium of RSP affixation

Waiver of pre-deposit - stay of recovery - prima facie case for pre-deposit waiver - Application for waiver of pre-deposit and stay of recovery till disposal of appeal - HELD THAT: - The Tribunal considered the assessee's stay petition for waiver of pre-deposit of the duty, interest and penalty confirmed by the adjudicating authority. The adjudicating authority had recorded that the appellant was not affixing RSP on the boxes. The Tribunal noted that the imported goods were cleared from the customs area on payment of customs duty and CVD, and reasoned that CVD would be discharged only if RSP was affixed on the boxes. On this basis the Tribunal found a prima facie case in favour of the appellant for waiver of the pre-deposit and for staying recovery of the amounts challenged in the appeal. Absent any representation by the appellant, and on the submissions of the Revenue, the Tribunal allowed the stay petition and directed that recovery be stayed until disposal of the appeals. [Paras 4]

Waiver of pre-deposit allowed and recovery stayed till disposal of appeals.

Affixing MRP as manufacturing activity under the definition of manufacture - discharge of countervailing duty as indicium of RSP affixation - Whether affixing labels/MRP on boxes amounts to manufacture such as to attract Central Excise liability - HELD THAT: - The Tribunal addressed the Revenue's contention that affixing labels and MRP on boxes would amount to manufacture. It relied on the adjudicating authority's finding that the appellant was not affixing RSP on the boxes. The Tribunal observed that the fact that the imported goods were cleared on payment of customs duty and CVD suggested affixation of RSP would be necessary to justify CVD discharge; on the material before it the Tribunal found that a prima facie case existed to question the Revenue's manufacturing contention and that the matter required adjudication in the appeals rather than denial of stay. [Paras 3, 4]

The Tribunal did not accept the Revenue's contention as prima facie established; the question of whether affixing MRP amounts to manufacture is left to adjudication in the appeals, and at present supports granting relief by way of pre-deposit waiver and stay.

Final Conclusion: The Tribunal found a prima facie case in favour of the assessee on the question whether affixing RSP/MRP amounted to manufacture, allowed the application for waiver of pre-deposit and directed that recovery of the confirmed duty, interest and penalty be stayed until disposal of the appeals.