Case Note & Summary
The petitioner, SMS Lifesciences India Limited, filed two writ petitions. The first sought a mandamus directing respondents 1 to 3 (Director General of Foreign Trade, Joint Director General of Foreign Trade, and Director of Revenue Intelligence) to comply with the Modified Rehabilitation Scheme sanctioned by the Board for Industrial and Financial Reconstruction (BIFR) on 28/8/2008. The second sought to quash a common stay order of CESTAT dated 9/8/2000 that directed pre-deposit of Rs.60,00,000/- by Plant Organics Ltd., which had since merged with the petitioner. The facts reveal that Plant Organics Ltd. (assessee) had obtained nine Advance Licences under Customs Notification No.149/1995 for import of antibiotic chemicals. The Directorate of Revenue Intelligence (DRI) found discrepancies and initiated proceedings, leading to demands and penalties. The assessee became sick and was referred to BIFR, which sanctioned a Modified Rehabilitation Scheme. The scheme was binding on all creditors, including the respondents. The petitioner, after merger with the assessee, sought compliance with the scheme but the respondents did not act. The court held that the BIFR scheme is binding and the respondents must consider the petitioner's requests in light of the scheme. Regarding the pre-deposit, the court noted that the assessee was a sick industrial company and the scheme provided for waiver of such demands. The court quashed the pre-deposit condition and directed CESTAT to restore the appeal and decide it on merits. The writ petitions were allowed with directions.
Headnote
A) Sick Industrial Companies - BIFR Rehabilitation Scheme - Binding Effect - Sections 18, 19, 32 of Sick Industrial Companies (Special Provisions) Act, 1985 - The Modified Rehabilitation Scheme sanctioned by BIFR is binding on all creditors, including government departments such as DGFT and Customs, and they are obligated to implement the scheme without insisting on conditions contrary to it. Held that the respondents must comply with the scheme and consider the petitioner's requests in light of the scheme (Paras 7-10). B) Customs and Central Excise - Pre-Deposit for Appeal - Waiver for Sick Industrial Company - Section 35F of Central Excise Act, 1944 - The pre-deposit condition imposed by CESTAT on the assessee, which later merged with the petitioner, is waived in view of the BIFR scheme and the fact that the assessee is a sick industrial company. Held that the appeal before CESTAT shall be restored and decided on merits without insisting on pre-deposit (Paras 11-13).
Issue of Consideration
Whether the respondents are bound to comply with the Modified Rehabilitation Scheme sanctioned by BIFR, and whether the pre-deposit condition imposed by CESTAT can be waived in light of the BIFR scheme and the merger of the assessee with the petitioner.
Final Decision
The court allowed both writ petitions. Directed respondents 1 to 3 in WP.11404/2011 to consider the petitioner's representation in light of the BIFR scheme and pass orders within eight weeks. Quashed the pre-deposit condition in the CESTAT order and directed restoration of the appeal to be decided on merits without insisting on pre-deposit.
Law Points
- BIFR scheme binding on all creditors including government departments
- waiver of pre-deposit for sick industrial companies under Section 35F of Central Excise Act
- 1944
- merger of companies does not extinguish rights under BIFR scheme
