2020 (2) TMI 1364 - HC - Customs

Levy of Fiscal penalties - scheme of amalgamation sanctioned by the High Court of Bombay - HELD THAT - The impugned order was passed on 25-5-2006 and the Scheme was sanctioned by BIFR on 3-6-2003. After the said Scheme became operational, the present appellant has not availed any remedy before the Authorities concerned under the Act to press for such waiver on merits. It is not even explained before the Court as to how the present appellant which stepped into the shoes of KMBL after its merger with it, can revive the cause of KMBL, after KMBL had withdrawn the challenge by withdrawal of the writ petition before the Division Bench of this Court without reserving any such liberty to reagitate the issue. Hence, the Learned Single Judge had dismissed the writ petition. The appellant herein is unable to show any of its right being violated. Admittedly, KMBL has merged with the present appellant Company and the appellant Company is fastened with all the liabilities of KMBL including the fiscal penalty of ₹ 23,38,882/- imposed by the respondent No. 2. Admittedly, the same is imposed as KMBL was not in a position to meet its export obligations during the relevant period and there has been no Scheme of BIFR. waiving the said fiscal penalty. Appeal dismissed.

Summary

Issues:
Challenge to fiscal penalty imposed by Additional Director General of Foreign Trade (ADGFT) on a company after merger with another company under a sanctioned scheme of amalgamation.

Analysis:
The appellant, a limited company, challenged a fiscal penalty of &8377; 23,38,882 imposed by the ADGFT on another company, KMBL, which had merged with the appellant under a sanctioned scheme of amalgamation. The appellant contended that KMBL had previously challenged the penalty successfully but withdrew the challenge later. The Single Judge found that the penalty was compensatory Customs duty for KMBL's failure to meet export obligations, not waived by the Board for Industrial and Financial Reconstruction (BIFR) during KMBL's proceedings before it. The Single Judge dismissed the writ petition, stating that the appellant, having taken over KMBL's liabilities, could not revive the challenge after KMBL's withdrawal without any reservation to re-agitate the issue.

The High Court upheld the Single Judge's decision, noting that the appellant, having merged with KMBL, inherited all liabilities, including the fiscal penalty. The Court emphasized that the penalty was justified due to KMBL's failure to meet export obligations and the absence of any BIFR scheme waiving the penalty. The Court found no violation of the appellant's rights and dismissed the appeal, concluding that the appellant could not challenge the penalty post-merger when KMBL had withdrawn its challenge without reserving the right to revisit the issue.

In conclusion, the High Court affirmed the Single Judge's order, dismissing the appeal and emphasizing that the appellant, as the successor of KMBL, was bound by all liabilities, including the fiscal penalty, and had no grounds to challenge the penalty's imposition. The Court found no merit in the appeal and ruled in favor of the respondent, upholding the fiscal penalty imposed by the ADGFT on KMBL, which now fell under the appellant's responsibility post-merger.