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2010 (1) TMI 472 - HC - CustomsEPCG Scheme - Penalty on sick unit. The petition is filed questioning the order passed by the second respondent rejecting the appeal filed by the petitioner on the ground that recommendations of the BIFR provide only for waiver of customs duty and did not concern the fiscal penalty imposed under the Foreign Trade (Development and Regulation) Act 1992. Held that - BIFR recommendation not challenged by the respondent and the same attained finality. Waiver of penalty can be considered. Penalty waiver to be considered by Ministry of Finance and not DGFT. Penalty not recoverable till Finance Ministry takes decision on waiver thereof. Refund of amount deposited ordered.
Issues:
Challenge to rejection of appeal by second respondent based on BIFR recommendations for waiver of customs duty but not fiscal penalty under the 1992 Act. Analysis: The petitioner, a company manufacturing bulk drugs, faced financial difficulties leading to suspension of manufacturing activities and subsequent declaration as a sick industry under the Sick Industrial Companies (Special Provision) Act, 1985. The Board for Industrial Finance and Reconstruction (BIFR) declared the petitioner as a sick unit and approved a rehabilitation scheme. Subsequently, the Commissioner of customs demanded payment of differential customs duty and imposed a penalty under the 1992 Act for non-fulfillment of export obligations. The petitioner's appeal was dismissed on the grounds that BIFR's relief pertained only to customs duty, not the fiscal penalty. The petitioner argued that the penalty should be waived based on the BIFR's recommendations and cited legal provisions and precedents to support this claim. The petitioner contended that the Delhi High Court ruling and Section 16 of the 1992 Act supported their claim for waiver of the penalty due to factors beyond their control affecting export obligations fulfillment. They argued that the BIFR's approval of the rehabilitation package should encompass all related liabilities, including the penalty. The respondents maintained that the penalty imposition was justified under the Act and that the waiver decision rested with the Ministry of Finance or the Chief Commissioner of Customs, not the DGFT. They referenced a modified BIFR order directing waiver considerations to the appropriate authorities. The court found in favor of the petitioner, allowing the writ petition, quashing certain annexures, and restraining the recovery of the fiscal penalty until the Ministry of Finance decides on the waiver recommended by BIFR. The fourth respondent was directed to review the petitioner's case for penalty waiver promptly, and the third respondent was instructed to refund a deposited sum. The judgment emphasized the necessity of implementing BIFR's recommendations to uphold the purpose of the Sick Industrial Companies Act and ensure the relief granted was not undermined by non-compliance with waiver decisions related to penalties.
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