Case Note & Summary
The petitioner, SMS Lifesciences India Limited, filed two writ petitions. The first sought a writ of 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 August 2008. The second sought a writ of certiorari to quash the common stay order dated 9 August 2000 passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai, insofar as it directed pre-deposit of Rs.60,00,000/- by Plant Organics Ltd., which had since merged with the petitioner pursuant to the BIFR order. The background is that Plant Organics Ltd. (the assessee) had obtained nine Advance Licences under the Duty Entitlement Export Certificate (DEEC) scheme for import of antibiotic chemicals, availing benefit under Customs Notification No.149/1995. The Directorate of Revenue Intelligence (DRI) inspected the imports and found discrepancies, leading to proceedings. The assessee was directed to pre-deposit Rs.60,00,000/- as a condition for hearing its appeal before CESTAT. Subsequently, the assessee became sick and was referred to BIFR, which sanctioned a Modified Rehabilitation Scheme on 28 August 2008, under which Plant Organics Ltd. merged with SMS Lifesciences India Limited. The petitioner argued that the BIFR scheme is binding on all parties, including the revenue authorities, and that the pre-deposit condition no longer survives after the merger. The respondents opposed, contending that the BIFR scheme does not extinguish the pre-deposit liability. The court held that the BIFR scheme is binding under Section 18 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), and the revenue authorities are bound to comply with it. The court further held that the pre-deposit condition imposed by CESTAT stood extinguished upon the merger, as the liability of the sick company was taken over by the petitioner under the scheme. Accordingly, the court allowed WP No.11404 of 2011 by directing the respondents to comply with the BIFR scheme, and allowed WP No.10265 of 2011 by quashing the pre-deposit condition and restoring the appeal to CESTAT for hearing on merits.
Headnote
A) Sick Industrial Companies Act - Binding Effect of BIFR Scheme - Section 18 of SICA - The Modified Rehabilitation Scheme sanctioned by BIFR is binding on all parties including revenue authorities. The court directed the respondents to comply with the scheme and held that the pre-deposit condition imposed by CESTAT stood extinguished upon merger of the sick company with the petitioner under the scheme. (Paras 2-10) B) Customs Law - Pre-deposit Condition - Merger of Companies - The pre-deposit of Rs.60,00,000/- directed by CESTAT as a condition for hearing the appeal was held to be unsustainable after the merger of Plant Organics Ltd. with SMS Lifesciences India Limited under the BIFR scheme. The court quashed the stay order to the extent of the pre-deposit and restored the appeal to CESTAT. (Paras 3-12)
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 survives after the merger of the assessee with the petitioner under the BIFR scheme.
Final Decision
WP No.11404 of 2011 is allowed, directing respondents 1 to 3 to comply with the Modified Rehabilitation Scheme sanctioned by BIFR on 28/8/2008. WP No.10265 of 2011 is allowed, quashing the common stay order dated 9/8/2000 insofar as it directs pre-deposit of Rs.60,00,000/-, and restoring the appeal to CESTAT for hearing on merits. No costs. Connected miscellaneous petitions are closed.
Law Points
- BIFR scheme binding on all parties including revenue authorities
- merger under SICA extinguishes pre-deposit liability
- writ of mandamus for compliance with BIFR order
- writ of certiorari for quashing pre-deposit condition
