2011 (2) TMI 1327 - HC - VAT and Sales Tax

Court rules demands post-rehab scheme cut-off date as outstanding, not current liabilities.

The court ruled in favor of the petitioner in a writ petition challenging recovery and attachment orders for dues under a rehabilitation scheme. It held ... Rehabilitation scheme - outstanding dues - Held that:- The words 'outstanding dues' and 'current dues' have to be understood in the context in which rehabilitation scheme is prepared, and the object and purpose of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). The object of preparing rehabilitation scheme, and to give a protective umbrella to the sick units for rehabilitation is to provide for deferment or for a different treatment of the payment of dues, prior to the cut-off date, which may be termed as outstanding dues. The current dues for the purpose of rehabilitation scheme are those dues, which fall due after the cut-off date. The liabilities created, taxes falling due, assessed and demand raised after the cut-off date, do not fall within the protection of section 22 of the SICA Act. Any demand in pursuance of the assessment orders, prior to the cut-off date has to be classified as outstanding dues, to be protected by the rehabilitation scheme. In the case of reassessment, after remand of a period prior to cut-off date, the dues do not partake the character of current dues. The writ petition is allowed with declaration that demand for the years 1983-84 and 1986-87, on the orders passed by Assistant Collector, Grade I, Commercial Taxes, Modi Nagar, Ghaziabad shall be included, and be treated as covered by the rehabilitation scheme, as it was framed, or may be modified subsequently. If any amount has been recovered by way of attachment, the same will be subject to adjustment by the BIFR, or provision may be made for its adjustment, in the rehabilitation scheme. Issues:Recovery of current dues under a rehabilitation scheme; Classification of dues as outstanding or current; Treatment of enhanced demands post-rehabilitation scheme cut-off date; Legality of recovery and attachment orders; Interpretation of outstanding and current dues under the Sick Industrial Companies (Special Provisions) Act, 1985.Analysis:The judgment pertains to a writ petition challenging recovery and attachment orders for dues under a rehabilitation scheme. The rehabilitation of a company was pending with the Board of Industrial Finance and Reconstruction (BIFR), with a scheme prepared by a specified date. The Commercial Tax Department sought recovery of current dues post the scheme's cut-off date, which was permitted by the BIFR. The dispute arose regarding the classification of dues as outstanding or current under the scheme.The petitioner contended that demands raised after a remand order should be treated as outstanding dues, not current liabilities. The respondent argued that post-remand demands are current dues under the law. The court analyzed the provisions of the Commercial Trade Tax Act and the Sick Industrial Companies Act to determine the nature of dues in the context of the rehabilitation scheme. It emphasized distinguishing between outstanding and current dues for scheme protection.The court referenced legal precedents to support its interpretation, emphasizing that liabilities assessed and demands raised post the cut-off date do not fall under the protection of the rehabilitation scheme. It clarified that any demand pre-cut-off date should be classified as outstanding dues for scheme coverage. The judgment highlighted the objective of the rehabilitation scheme to defer or treat pre-cut-off date dues differently, safeguarding them as outstanding dues.Regarding a fresh rehabilitation scheme, the court clarified that the present writ petition did not concern pending schemes. The judgment allowed the petition, declaring demands for specific years to be covered by the rehabilitation scheme. It directed adjustment of recovered amounts by the BIFR and inclusion of such recoveries in the scheme. The court's decision aimed to ensure compliance with the rehabilitation scheme's provisions and protect the company's interests within the legal framework.