Customs demand under BIFR-sanctioned Modified Rehabilitation Scheme held covered; omission immaterial, consolidation not an impediment

Whether the BIFR-sanctioned Modified Rehabilitation Scheme waived Customs demand: HC held the scheme's language ("to consider" for Income Tax and Central Excise) and the scheme's express reference to the identical Rs. 81.60 lakhs demand show the Customs demand fell within the BIFR relief; HC rejected the respondent's contention that no positive direction was issued - outcome: the Customs demand is covered by the scheme and the challenge to its inclusion is rejected. Whether omission of explicit reference to the Customs Commissioner excludes the demand: HC found the Customs Act's enforcement mechanism (DRI investigation, show-cause, Commissioner adjudication) brings such demands within the DGFT-related scheme provisions; outcome: omission is immaterial and demand remains included. Whether licence consolidation affects relief: HC treated consolidation as a factual step to implement waiver; outcome: consolidation is not a legal impediment.

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Issues: (i) Whether the Modified Rehabilitation Scheme sanctioned by the BIFR (dated 28.08.2008) constitutes a positive direction to waive the demand of Rs. 81.60 lakh relating to DRI/Customs/DGFT; (ii) Whether a mandamus should be issued directing the concerned revenue authorities and the CESTAT to give effect to the directions in the Modified Rehabilitation Scheme and consequentially set aside the pre-deposit/impugned order.

Issue (i): Whether the Modified Rehabilitation Scheme constitutes a positive direction to waive the demand of Rs. 81.60 lakh relating to DRI/Customs/DGFT.

Analysis: The Court examined the language of the Modified Rehabilitation Scheme, noting the specific use of the phrase "to consider" in some departmental paragraphs and the absence of that phrase in paragraphs dealing with DRI and DGFT (paragraphs 8.6 and 8.7). The Court also considered the substance of the scheme which expressly refers to the demand of Rs. 81.60 lakh in paragraphs 8.6 and 8.7, the role of DRI in issuing show-cause notices and the Customs Commissioner in adjudication, and the opportunity the Customs authorities had to participate (including an impleadment and communications recorded in the record).

Conclusion: The Court concluded that the Modified Rehabilitation Scheme constitutes a positive direction in respect of the demand of Rs. 81.60 lakh under paragraphs 8.6 and 8.7 and that the argument that the demand was left untouched is rejected. The conclusion is in favour of the assessee.

Issue (ii): Whether a mandamus should be issued directing the revenue authorities and the CESTAT to give effect to the BIFR directions and whether the impugned pre-deposit/CESTAT order must be set aside.

Analysis: Having found that the BIFR order gives a positive direction in relation to the specified demand, the Court considered the appropriate relief to enforce that direction. The Court noted that Customs had notice and opportunity to challenge the scheme, and that the directions in paragraphs 8.6 and 8.7(1) require action by the revenue authorities. The effect of allowing WP.No.11404 of 2011 on the pending appeal before CESTAT was considered, rendering the pre-deposit/impugned CESTAT order superfluous.

Conclusion: The Court issued the mandamus directing respondents to give effect to paragraphs 8.6 and 8.7(1) of the Modified Rehabilitation Scheme, allowed WP.No.11404 of 2011, and declared the appeal before the CESTAT superfluous, resulting in the impugned CESTAT order being set aside. The conclusion is in favour of the assessee.

Final Conclusion: The BIFR Modified Rehabilitation Scheme's specific directions in paragraphs 8.6 and 8.7(1) operate as a positive administrative directive in favour of the petitioner and warrant judicial enforcement by way of mandamus; consequentially, the administrative/appeal proceedings kept in place by the CESTAT are rendered superfluous and the writ petition is allowed.

Ratio Decidendi: Where a statutory rehabilitation authority issues a scheme containing an unequivocal directive in respect of specified revenue demands, that directive, when addressed to revenue authorities and when they have had notice and opportunity to object, may be enforced by mandamus and will prevail over intermediate pre-deposit/appeal conditions that would otherwise obstruct the scheme's effect.

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