2017 (4) TMI 694 - HC - Central Excise

Interest - Section 11AA of the CEA, 1944 - BIFR Scheme by which appellant was granted permission to pay duty in five instalments with waiver of interest and penalty - The sheet anchor of the case of the petitioner is the scheme sanctioned by BIFR on 21.07.2008 and the order passed by AAIFR on 03.12.2014 - whether petitioner is liable to pay interest or not? Held that - the petitioner has to be seen as a person who gained advantage from a Civil Court by way of an interim order and by the time the interim order got vacated, the petitioner secured protection under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985. This protection was enjoyed by the petitioner from the year 1990 till the year 2008 when the modified scheme was sanctioned. It must be remembered that the scheme first sanctioned, failed due to the inability of the company to get revived and BIFR recommended winding up. But by repeatedly litigating, the petitioner survived. A person, who gained an advantage by an interim order of the Court, cannot subsequently turn around and seek umbrage under Section 32 of the Sick Industrial Companies (Special Provisions) Act, 1985. De hors the above, the Delhi High Court and AAIFR granted liberty to the Department to examine the question of waiver of interest and penalty. This has been done by the 1st respondent, with specific reference to the mandate of Section 11AA of the Central Excise Act, 1944. Therefore, there are no merits in the writ petition - petition dismissed - decided against petitioner.

Summary

Issues Involved:
1. Demand of interest under Section 11AA of the Central Excise Act, 1944.
2. Waiver of interest and penalty as per the scheme sanctioned by BIFR.
3. Validity of the appeal by the Department before AAIFR.
4. Effect of Section 32 of the Sick Industrial Companies (Special Provisions) Act, 1985 on the sanctioned scheme.

Issue-wise Detailed Analysis:

1. Demand of interest under Section 11AA of the Central Excise Act, 1944:
The petitioner, a manufacturer of cement and clinker, was aggrieved by an Order in Original confirming a demand of interest under Section 11AA of the Central Excise Act, 1944. The demand was a consequence of the petitioner’s ineligibility for the benefit of Notification No.124/1987, as determined by the Division Bench of the Delhi High Court on 06.09.1999. The petitioner had attempted to adjust the duty amount but was ultimately held liable for a total amount of ?6.29 crores. The Department issued six show cause notices demanding ?3,49,66,090/- for clearances made without payment of duty. These show cause notices were adjudicated, and the demand was confirmed by the Order in Original dated 06.11.2001, which was upheld by the Commissioner (Appeals) on 11.09.2012.

2. Waiver of interest and penalty as per the scheme sanctioned by BIFR:
The petitioner was declared a sick industrial company by BIFR on 23.07.1990, and a revival scheme was sanctioned on 21.07.2008, allowing the petitioner to pay the excise duty liability in five installments and granting waiver of interest and penalty. However, the Department contended that Section 11AA of the Central Excise Act, 1944, effective from 26.05.1995, did not provide for waiver of interest or penalty. The AAIFR, on 03.12.2014, directed the Department to consider and decide the issue of waiver of interest and penalties in terms of the directions of the Delhi High Court, which had observed that the issue of waiver should be examined on merits.

3. Validity of the appeal by the Department before AAIFR:
The Department filed an appeal before AAIFR, which was initially opposed by the petitioner on the ground of being time-barred. However, AAIFR held that the appeal was within time, a decision upheld by the Delhi High Court on 01.09.2014. The Delhi High Court noted that the BIFR scheme was sanctioned without notice to the Department, constituting a violation of natural justice principles. Consequently, the AAIFR was directed to consider the appeal on merits, but it mistakenly concluded that the Delhi High Court had already decided the issue, leading to a cryptic disposal of the appeal.

4. Effect of Section 32 of the Sick Industrial Companies (Special Provisions) Act, 1985 on the sanctioned scheme:
The petitioner argued that the scheme sanctioned by BIFR had attained finality and that the Department was bound by it under Section 32 of the Act, which contains a non obstante clause. However, the Court found that the scheme did not specifically mention the waiver of interest and penalty under the Central Excise Act, 1944, though it did for the Income Tax Act. Furthermore, the Delhi High Court’s judgment on 01.09.2014 and AAIFR’s order on 03.12.2014 granted liberty to the Department to examine the waiver issue, effectively modifying any implicit waiver in the BIFR scheme. Thus, the protection under Section 32 was not available to the petitioner.

Conclusion:
The Court dismissed the writ petition, holding that neither the AAIFR order nor Section 32 of the Act supported the petitioner’s challenge against the impugned Order in Original. The petitioner, having benefited from interim orders and prolonged litigation, could not seek protection under Section 32 after the Delhi High Court and AAIFR allowed the Department to decide the waiver issue. The demand for interest under Section 11AA was upheld, and the miscellaneous petitions were closed without costs.