Pre-cut-off tax liabilities remain protected under a rehabilitation scheme even when quantified later by reassessment.

Liabilities arising before the rehabilitation scheme cut-off date remain outstanding dues under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, even where a later reassessment order quantifies them after remand. The operative distinction is between pre-cut-off liabilities and current dues: only amounts arising after the cut-off date fall outside the scheme as current dues. On that basis, tax and penalty demands relating to earlier assessment years were treated as covered by the rehabilitation framework, and recovery action based on the later reassessment orders was not permitted to proceed outside that framework.

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Issues: Whether tax and penalty demands raised after the cut-off date in pursuance of reassessment orders relating to earlier assessment years were current dues or outstanding dues, and whether such demands were covered by the rehabilitation scheme under the Sick Industrial Companies (Special Provisions) Act, 1985.

Analysis: The scheme had been framed with a cut-off date, and the distinction between outstanding dues and current dues had to be understood in that rehabilitation context. Dues that accrued before the cut-off date, even if a fresh quantified demand was issued later after remand, retained their character as pre-cut-off liabilities. The protective umbrella of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 extended to such liabilities, while only dues arising after the cut-off date could be treated as current dues outside the scheme.

Conclusion: The demand relating to the assessment years 1983-84 and 1986-87 was held to be covered by the rehabilitation scheme and not to be treated as current dues.

Final Conclusion: The recovery proceedings based on the later reassessment orders could not stand outside the rehabilitation framework, and any amount recovered was to be adjusted in the scheme.

Ratio Decidendi: In a rehabilitation scheme under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, liabilities arising before the cut-off date remain outstanding dues even if they are quantified by a later reassessment order passed after remand.

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