2026 (1) TMI 670 - HC - Customs

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 ... Waiver of demand under Modified Rehabilitation Scheme sanctioned by the BIFR - Grant of Advance Licences (Duty Entitlement Export Certificate - DEEC) for the import of antibiotic chemicals - requirement of fulfilment of export obligations - HELD THAT:- The Customs has been fully cognizant of the matter from the start and have had adequate opportunity to put forth their objections in relation to the Modified Rehabilitation Scheme. The BIFR has consciously used the phrase ‘to consider’ only in regard to Income tax and Central Excise dues, leaving no avenue open for any other interpretation - the High Court is unable to accept the argument of the learned counsel for the respondents to the effect that no positive direction has been issued in respect of the demand of Rs. 81.60 lakhs raised under Order-in- Original dated 28.03.2000. This argument is rejected. No reference to the customs case anywhere - HELD THAT:- The High Court is unable to accept this argument as well as we believe it is hyper-technical and would go against both the letter and spirit of the rehabilitation ordered by the BIFR. It is true that the demand arises out of an order in original passed by the Customs Commissioner. However, the scheme of the Customs Act provides for investigation to be conducted, and issuance of show cause notice, by the DRI in respect of violations that relate to the DGFT. In the present case, the violation relates to non-fulfilment of export obligations which comes under the ambit of the DGFT, specifically referred to under paragraph 8.7 of Modified Rehabilitation Scheme. Then again, once show cause notice for the violations are issued by DRI, the adjudication is to be completed by the Customs Commissioner who would then pass the Order-in- Original, as in this case - the High Court is unable to accept the position that merely because the Commissioner (Customs), as an authority, has not been mentioned in paragraphs 8.6 and 8.7 of the BIFR order, that demand is any different from the demand raised under the order in original dated 23.08.2000. In fact, both in paragraphs 8.6 and 8.7 there is reference to the demand of Rs. 81.60 lakhs which matches identically with, and is the same as the demand under Order-in- Original dated 28.03.2000. Directions for consolidation of licences of the Modified Rehabilitation Scheme - HELD THAT:- This would constitute a question of fact with which do not require concern, as the consolidation of licences would only be necessary to fulfil the direction relating to the waiver of demand. The appeal filed by the petitioner before the CESTAT becomes superfluous, and as a sequitur, the impugned order would have to go - Petition allowed. 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.