Sanctioned revival scheme and section 22 override can bar interest, penalty, and contrary duty payment requirements.

A sanctioned BIFR revival scheme for a sick industrial company, read with the overriding effect of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, was treated as controlling the covered excise liabilities. Where the scheme expressly waived penal interest, interest and penalties, those demands were unsustainable. The note also records that duty already debited through available Cenvat credit could constitute valid discharge of the duty liability, and a direction requiring first payment through PLA followed by re-credit could not be enforced for the covered amount. The stated result was relief to the assessee on interest, penalty, and the disputed payment mode.

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Issues: Whether, in view of the BIFR-approved revival scheme and the overriding effect of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, the assessee was liable to pay interest and penalty, and whether the duty debited through Cenvat credit could be treated as valid discharge of duty liability notwithstanding the direction to pay through PLA.

Analysis: The assessee had been declared a sick industrial company and a rehabilitation scheme had been sanctioned. The scheme expressly contemplated waiver of penal interest, interest and penalties and also provided relief in respect of excise-related statutory dues. Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 gives overriding effect to a sanctioned scheme and suspends enforcement of liabilities to the extent covered by the scheme. In that backdrop, the amount already debited through available Cenvat credit was held to be sufficient discharge of the duty liability, and the direction to first pay through PLA and thereafter re-credit the amount could not stand. Since the scheme waived interest and penalty, those demands were also unsustainable.

Conclusion: The interest and penalty were set aside, and the duty demand to the extent it required payment through PLA followed by re-credit was also set aside, in favour of the assessee.

Final Conclusion: The appeals succeeded, and the impugned orders were interfered with to the extent they imposed interest, penalty, and the disputed mode of duty payment.

Ratio Decidendi: Where a sanctioned rehabilitation scheme for a sick industrial company expressly waives interest and penalty and operates with overriding effect under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, the authorities cannot enforce those liabilities or insist on a contrary mode of discharge for the covered duty liability.

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