2018 (3) TMI 1472 - HC - VAT and Sales Tax

Important ruling on tax dues recovery and rehabilitation scheme protection

The court ruled in favor of the petitioner, emphasizing the need for due consideration of the representation filed under Section 38 of the U.P. Trade Tax ... Recovery of sales tax dues of the period prior to the cut of date fixed by the Board for Industrial and Financial Reconstruction - Held that: - Section 22 of the SICA clearly provides that no proceedings for distress or like against any of the properties of the company and no suit for recovery of money shall lie or be proceeded with except with the consent of the Board or the appellate authority if in respect of that company an inquiry under Section 16 is pending or any scheme referred to under Section 17 is under preparation or a sanction scheme is under implementation. As the request of the petitioner company for waiver/deferment of tax dues in the wake of it being declared sick and the subsequent abandonment of it and the repeal of the SICA is under consideration, there appears to be no justification on part of the respondents to proceed and recover any past tax dues from the petitioner company at this stage. Petition disposed off. Issues:1. Recovery of sales tax dues prior to the cut-off date set by BIFR.2. Interpretation of the rehabilitation scheme and its amendments.3. Protection under Section 22 of SICA for recovery of dues.4. Impact of subsequent orders on the rights accrued under the scheme.5. Applicability of Section 38 of the U.P. Trade Tax Act.6. Status of pending representation for waiver/deferment of tax dues.Issue 1: Recovery of sales tax dues prior to the cut-off date set by BIFRThe petitioner sought a writ to prevent coercive action for recovering sales tax dues predating the cut-off date set by BIFR. The recovery citations were challenged, citing the rehabilitation scheme's provisions for waiver of interest and penalties for past dues, with payment in installments. The petitioner argued that recovery of such dues without BIFR's consent, even post-sickness declaration, was impermissible.Issue 2: Interpretation of the rehabilitation scheme and its amendmentsThe petitioner contended that the scheme's amendment did not grant discretion to deny the specified privileges, emphasizing that subsequent orders did not affect accrued rights. The respondent argued that the scheme modification allowed discretion akin to Section 38 of the Act. The court referred to a similar case to emphasize the mandatory nature of scheme benefits.Issue 3: Protection under Section 22 of SICA for recovery of duesThe court highlighted Section 22 of SICA, barring recovery without BIFR's consent during scheme implementation. It cited a precedent to reject the notion that state tax dues were exempt, emphasizing the need for BIFR's approval for recovery.Issue 4: Impact of subsequent orders on the rights accrued under the schemeDespite the company's post-sickness status, the court upheld the scheme's privileges for the unexpired period. The court clarified that the scheme's waiver and installment provisions remained valid, safeguarding the petitioner's rights.Issue 5: Applicability of Section 38 of the U.P. Trade Tax ActAlthough the petitioner filed a representation under Section 38 seeking waiver/deferment, its status was pending. The court dismissed claims of rejection, emphasizing that the representation remained unattended, awaiting a decision.Issue 6: Status of pending representation for waiver/deferment of tax duesThe court directed the Principal Secretary to consider the petitioner's representation under Section 38 in accordance with the law. Pending a decision, the recovery citations were quashed, prohibiting coercive action for recovering disputed amounts.In conclusion, the court disposed of the petition, emphasizing the need for due consideration of the representation and refraining from coercive recovery actions until a final decision was made by the competent authority.