AAR KAY CONCAST LTD Vs. UOI

JUDGEMENT

(1.) Challenge in this petition filed under Article 226 of the Constitution is to the notices dated 30. 6. 1998, 3. 11. 1998, 18. 11. 1998 and 1. 12. 1998 issued by the Assistant Commissioner, Central Excise Division, Ludhiana for the recovery of different sums of money from the petitioner on account of arrears of central excise duty.

(2.) Petitioner is a public limited company with its registered office at Ludhiana and is engaged in the manufacture of M. S. Ingots on which excise duty is leviable. The Board of Directors of the Company resolved that it has become a sick industrial company and accordingly made a reference to the Board for Industrial and Financial Reconstruction (for short the Board) under section 15 (1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter called the Act) for determination of the measures to be adopted in respect of the company. The reference has been registered by the Board as case no. 17 of 1999.

(3.) The contention of the learned counsel for the petitioner is that since the reference made to the Board has been registered, it is bound to make an inquiry under Section 16 (1) of the Act and till such time the Board takes a final decision in the inquiry, excise duty cannot be recovered from the company in view of the provisions of Section 22 of the Act. We find considerable merit in this submission. A reading of Sections 15 to 18 of the Act makes it clear that on receipt of a reference from the company under Section 15 (1) of the Act the Board may make such inquiry as it may deem fit for determining whether the company has become a sick industrial company. The use of word 'may' leaves it to the option of the Board to register the reference or reject the same summarily. If it registers the reference it has to make an inquiry under Section 16 of the Act. Section 22 of the Act mandates that where in respect of an industrial company an inquiry is pending under Section 16 then notwithstanding anything to the contrary contained in the Companies Act or in any other law for the time being in force, no proceedings for the winding up of the company or for execution, distress or the like against any of the properties of the company shall lie or be proceeded with further except with the consent of the Board. In the case before us, the reference has been registered obviously for the purpose of holding an inquiry and till such time that inquiry is concluded amounts payable by the company including the excise duty cannot be recovered without the consent of the Board. Admittedly, consent of the Board has not been obtained. In this view of the matter, the department cannot recover the arrears of excise duty at this stage and, therefore, the impugned notices cannot be sustained. The view that we have taken finds support from the observations made by the Apex Court in Real Value Appliances Ltd. v. Canara Bank and others J. T. 1998 (3) S. C. 715.