Dmt 1 wp7392-11 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO. 7392 OF 2011 Larsen & Toubro Ltd., & Anr. .. Petitioners. versus Union of India & Ors. .. Respondents. ..... Mr. Zal Andhyarujina with Mr. Samit Shukla i/by MDP & Partners for the Petitioners. Mr. Pradeep S. Jetly with Mr. Jitendra B. Mishra for Respondent Nos. 1 to 4. ...... CORAM : DR.D.Y.CHANDRACHUD & A. A. SAYED, JJ. 20 DECEMBER 2011. P.C. : The First Petitioner is the transferee under a Dmt 2 wp7392-11 Scheme sanctioned on 15 December 2006 by the Board for Industrial and Financial Reconstruction (BIFR) in respect of a sick company by the name of Datar Switchgear Limited (DSL). DSL was declared sick under the Sick Industrial Companies (Special Provisions) Act, 1985 on 31 July 2002. A scheme was submitted by the Operating Agency (OA) on 29 June 2006 before the BIFR. During the course of hearing before the BIFR, objections of all the creditors were heard including those of the Second and Third Respondents, namely, Commissioner, Central Excise and Deputy Commissioner, Central Excise. On 14 September 2006, the BIFR directed the OA to incorporate the change specified in its order and submit a modified scheme. The modified scheme which was submitted by the OA was sanctioned by the BIFR on 5 December 2006. Under the Scheme the Electrical Division of DSL was taken over by the First Petitioner while the residual business was taken over by a new resulting company, namely, the Sixth Respondent. According to the First Petitioner, the liabilities of DSL which it took over are provided in Schedule I of the Scheme. The Dmt 3 wp7392-11 Petitioners contend that Schedule VI provides that all the liabilities specified therein would stand transferred to the new company which includes claims on account of excise duty. 2. The Scheme has been challenged by the Excise Authorities before the Appellate Authority, namely, AAIFR. The appeal has been heard but no stay of the Scheme has been granted. On 15 December 2006, DSL Enterprises Pvt. Ltd. in pursuance of the Scheme surrendered the Excise Registration Certificate of the erstwhile DSL to the Third Respondent in respect of the Nashik property for cancellation. The First Petitioner on 15 May 2009 wrote a letter to the Superintendent of Central Excise expressing its intention to sell certain scrap material and discharge its liability for the payment of excise duty through a TR6 challan at Nashik. On 21 January 2010, the First Petitioner submitted an application for an Excise Registration Certificate. On 11 March 2010, the Third Respondent, the Deputy Commissioner of Central Excise, informed the Petitioners that the Excise Department has a Dmt 4 wp7392-11 claim of Rs. 5.33 crores and since the Scheme has not been accepted by the Department, an appeal has been filed before the AAIFR which is pending. Consequently the Petitioners have been informed that a Central Excise Registration cannot be issued to the First Petitioner as the Certificate of Registration of DSL is still alive. On 7 April 2010, the First Petitioner repeated its request for an Excise Registration Certificate since it is not in a position to pursue the proposed business operations. The First Petitioner stated that it has taken over 157 workmen of the Electrical Division of DSL under the Scheme. 3. The grievance in these proceedings under Article 226 of the Constitution arises out of a failure of the Excise Authorities to grant registration under the Central Excise Act, 1944. The submission of the Petitioners is that under the scheme which has been sanctioned by the BIFR, the excise liabilities are to be borne by the Sixth Respondent which is the resulting company. So long as the Scheme continues to hold Dmt 5 wp7392-11 the field and is not set aside in appeal, it is urged, the Excise Department cannot deny the benefit of a provisional registration certificate. On the other hand, it is urged on behalf of the Respondents that outstanding dues of Rs. 5.33 crores are payable by DSL and unless those dues are paid, there is no occasion to grant an Excise Registration Certificate. 4. Now, Clause 9.10 of the sanctioned scheme provides for the liabilities which are to be borne by the Petitioners as the transferee of the Electrical Division. Clause 3.3.2 provides for assets and liabilities relating to the residual business pertaining to the De-merged Company which shall stand transferred to and vested in the Transferee Company. This, inter alia, includes specific liabilities mentioned in Schedule I and none other. Schedule I does not contain any reference to the Central Excise dues. On the other hand, Schedule VI read with Clause 4.1 prima facie shows that the excise liabilities are to be borne by the resulting company. Para 1 of Schedule VI which lists out the liabilities which are transferred to the Dmt 6 wp7392-11 resulting company reads as under : 1. “ Any claim under the Central Excise Act 1944 whether converted into Show Cause Notice or otherwise at any stage of proceeding subject to the cause of action having arisen on or before 31.3.2005 pertaining to the Demerged Company and on or after 31.3.2005 upto the date of sanction of the Scheme pertaining to or associated with the business of the Demerged Undertaking.” At present while the sanctioned scheme holds the field, an appeal has been filed by the Excise Authorities which is pending before the AAIFR. There is no dispute about the fact that the sanctioned scheme has not been stayed in appeal. In that view of the matter, in our view, while the Revenue will be entitled to pursue its remedy before the AAIFR, it would be necessary in the interests of justice to direct the grant of a provisional certificate of registration to the First Petitioner. Dmt 7 wp7392-11 Without the grant of such a certificate, the First Petitioner, which has taken over the Electrical Division of the erstwhile sick company could not be entitled in law to carry on manufacturing activities which require the fulfilment of excise formalities. The grant of a provisional certificate of registration would be subject to the final result of the proceedings before the AAIFR. Moreover, it is only upon the grant of the provisional registration that the Petitioners can lawfully remove the scrap which is lying in the premises which, it is clarified, would be subject to the payment of excise duty which is payable in accordance with law to the Revenue. 5. Accordingly, the Petition is disposed of by directing that the Second and Third Respondents shall, without prejudice to their rights and contentions in the appeal, which is pending before the AAIFR, grant provisional registration to the First Petitioner in respect of its unit at Ambad, Nashik. The First Petitioner shall however comply with all the required formalities for grant of provisional registration. The provisional Dmt 8 wp7392-11 registration shall be subject to the final result of the appeal before the AAIFR. The hearing before the AAIFR is expedited on the request of the learned Counsel for the Revenue. The AAIFR may, subject to the exigencies of its work, set down an early time schedule for deciding the appeal. 6. The Petition is accordingly disposed of. There shall be no order as to costs. (Dr. D.Y. Chandrachud, J.) (A. A. Sayed, J.)