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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: (i) Whether the rehabilitation scheme sanctioned by the BIFR bound the Pollution Control Board and required implementation by the respondent authorities. (ii) Whether recovery of water cess, penalty and interest could proceed against the company in view of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.
Issue (i): Whether the rehabilitation scheme sanctioned by the BIFR bound the Pollution Control Board and required implementation by the respondent authorities.
Analysis: The company had been declared sick under the Sick Industrial Companies (Special Provisions) Act, 1985 and a rehabilitation scheme was later finalised by the BIFR under the statutory scheme. The Pollution Control Board was represented in those proceedings, and the scheme specifically required Government and statutory authorities to reassess their demands after taking into account the period during which the unit had remained closed. The scheme also expressly contemplated acceptance of water cess on actual discharge and waiver of interest and penalty. No appeal was filed against the BIFR order. In these circumstances, the sanctioned scheme operated as a binding arrangement on the parties before the BIFR.
Conclusion: The rehabilitation scheme was binding on the respondent authorities and had to be implemented.
Issue (ii): Whether recovery of water cess, penalty and interest could proceed against the company in view of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.
Analysis: Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 suspends proceedings for execution and recovery against the properties of a sick industrial company while a sanctioned scheme is under implementation, except with the consent of the Board or the Appellate Authority. The company was before the BIFR and the sanctioned scheme was in force. In that situation, the demand proceedings and coercive recovery for cess, penalty and interest could not be sustained in disregard of the statutory bar and the approved scheme. The legal position supported interference with the impugned demand.
Conclusion: Recovery proceedings for the impugned cess, penalty and interest were barred and could not continue.
Final Conclusion: The impugned demand was set aside and the respondent authorities were directed to give effect to the BIFR-approved rehabilitation scheme.
Ratio Decidendi: A sanctioned rehabilitation scheme under the sick company legislation binds parties before the Board, and once such scheme is under implementation, recovery proceedings against the sick industrial company cannot continue except in accordance with section 22 of the Act.
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