2004 (4) TMI 95 - HC - Central Excise

Summary

Issues:
Challenge to order of Customs, Excise & Service Tax Appellate Tribunal requiring pre-deposit for hearing appeals under Article 226 of the Constitution.
Interpretation of provisions of Sick Industrial Companies (Special Provisions) Act, 1985 regarding protection against coercive action for recovery of arrears of excise duty.
Applicability of protection under Section 22(1) of the SICA for dues prior to registration as a sick industrial company.
Requirement for sick industrial companies to pay current taxes like sales-tax.
Resolution of dispute regarding pre-deposit order for demand prior to registration of reference as a sick industrial company.

Analysis:

The High Court of Gujarat at Ahmedabad addressed a petition challenging the order of the Customs, Excise & Service Tax Appellate Tribunal, Mumbai, which mandated a pre-deposit for hearing appeals under Article 226 of the Constitution. The petitioners contended that being a sick industrial company under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), no coercive action for recovery of excise duty arrears could be taken against them as per Section 22 of the SICA. The petitioners argued that the demand in question related to a period preceding their registration as a sick industrial company by the BIFR, entitling them to protection under Section 22(1) of the SICA. Reference was made to previous court decisions supporting this stance.

On the contrary, the respondents maintained that while the petitioners might be shielded from past dues under Section 22(1) of the SICA, no such safeguard applied to dues accruing after the registration of the reference. Citing a specific court decision, the respondents contended that sick industrial companies must still pay current taxes like sales-tax, as failing to do so would mean passing on the tax burden to purchasers without remitting the taxes to the government.

The High Court, in line with a prior decision, ruled that the protection under Section 22(1) of the SICA extended to dues preceding the registration of the reference as a sick industrial company. Consequently, the impugned order of the Customs, Excise & Service Tax Appellate Tribunal was quashed, allowing the appeals to proceed without any pre-deposit. However, the petitioners were directed to continue paying current excise duty for the period following the registration of the reference with the BIFR. The court made the rule absolute to this extent, with no order as to costs.