Sanctioned rehabilitation scheme overrides excise recovery demands where interest and penalty are expressly waived under the scheme.

A sanctioned rehabilitation scheme under the Sick Industrial Companies (Special Provisions) Act, 1985 prevailed over inconsistent excise recovery demands where the scheme expressly exempted the company from interest and penalty and permitted payment of finally payable excise duty over two years. Section 22 barred coercive recovery during the pendency or implementation of the scheme, and section 32 gave the Act and the scheme overriding effect over contrary laws. An excise demand notice that ignored the express waiver for interest and penalty was therefore unenforceable and liable to be quashed.

---

---

Issues: Whether the demand notice for recovery of excise duty, interest and penalty was enforceable in view of the sanctioned rehabilitation scheme under the Sick Industrial Companies (Special Provisions) Act, 1985 and the overriding effect of that Act.

Analysis: A rehabilitation scheme had been sanctioned after inquiry under sections 16, 17 and 18 of the Sick Industrial Companies (Special Provisions) Act, 1985. Clause 8.04(d) of the scheme expressly exempted the company from payment of interest and penalty and provided for payment of the excise duty finally payable in pending cases over a period of two years from the year in which the amount became payable. Section 22 barred coercive recovery proceedings during the pendency or implementation of a scheme, and section 32 gave the Act and schemes made under it overriding effect over inconsistent provisions of other laws. The demand for interest and penalty was therefore inconsistent with the sanctioned scheme, and the excise authorities could not ignore that express waiver.

Conclusion: The demand notice was illegal and was quashed.

---