TaxTMI 
TaxTMI 
2002 (3) TMI 905
X X X X Extracts X X X X
X X X X Extracts X X X X
....communications dated November 11, 1996 and February 13, 1997. W.P. No. 12464 of 1998 pertains to the order passed in O.P. No. 1327 of 1997 which was against the proceedings dated March 27, 1997 rejecting the request of the petitioner for waiver of interest. W.P. No.12465 of 1998 pertains to the order passed in O.P. No.1727 of 1997 wherein a declaration was claimed that G.O. Ms. No.18 dated January 18, 1995 and G.O. Ms. No. 31 dated February 3, 1995 were bad in law and as such ineffective. Lastly, W.P. No. 12466 of 1998 pertains to O.P. No. 3999 of 1997 and seeks to quash the order dated July 31, 1998 in that original petition and further seeks the relief of confirmation of G.O. Ms. No. 417 dated October 7, 1997. 3.. Following facts which emerged during the debate before us would be essential to comprehend the controversy involved in these matters: 3.1. The petitioner, M/s. Southern Agrifurane Industries Limited (hereinafter referred to as "the petitionercompany") is a registered company under the Companies Act, 1957. It became a sick industrial undertaking due to heavy losses in terms of section 3(o) of the Sick Industrial Companies (Special Provisions) Act, 1985 (in short "t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ule, if the cash flow projections and other conditions of the company so warrant. It is also mentioned therein that such rights would be exercised with the prior approval of BIFR. There is nothing on record that the State Government was directly heard but there is enough evidence on record that it had agreed for the deferral mentioned above. 3.5. However, even before this order could be implemented, the period of deferral between January 1, 1993 and June 30, 1993 had already expired and it is the claim of the petitionercompany that it had already paid the taxes for that period. It seems that thereafter it was felt that the scope of the capital expenditure had widened on account of the additional outlay of Rs. 468 lakhs which had arisen on account of the necessity to comply with the excise regulations for handling and distillation of molasses/spirit in the petitionercompany's distillery and IMFS division and bonded warehouse for IMFS and improvement of furfural quality for export purpose. There was a liability of past excise duty on account of sale of furfural of Rs. 155 lakhs pertaining to the period from September, 1991 to December, 1992 had to be met and, therefore, the petiti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itionercompany having already paid its dues of sales tax between January 1, 1993 and June 30, 1993 and being dissatisfied by the ceiling fixed by the BIFR to the extent of Rs. 623 lakhs had wanted to take the advantage of extended period of one year instead of six months as also had sought the extension to five years from three years of the repayment schedule. 3.7. It seems that in pursuance of this letter, BIFR amended the scheme on December 8, 1993. The amendment is as follows: "On page 4 at para B(i) of the abovementioned sanctioned scheme, sales tax deferment during the six months' period from January, 1993 to June, 1993 (Rs. 623 lakhs approximately) has been mentioned to be repayable during the three years period from July 1, 1994 to June 30, 1997. It is now amended as deferment for one year from October 1, 1993 to September 30, 1994 to be repayable during the period from October 1, 1993 to September 30, 2000." Unfortunately for us the amended minutes of the meeting dated December 8, 1993 are not made available by the petitionercompany or the State Government. 3.8. After this amendment dated December 8, 1993, the State Government proceeded to pass a Government Order (....
X X X X Extracts X X X X
X X X X Extracts X X X X
....th the require ments of State Excise Regulations for handling and distillation of molasses/spirit and storage of IMFS, etc. It was also represented by the said representative that some tasks like setting up of effluent treatment plant (ETP) and erection of FBC boilers were progressing as per schedule while a new tank had already been completed and the ETP was expected to be commissioned by September, 1994. The said representative then pleaded that the total cost of rehabilitation would now be about Rs. 2,114 lakhs as against Rs. 1,491 lakhs under the scheme sanctioned on July 28, 1993. When a query was put to the representative of the company it seems to have been submitted by him that the additional expenditure of Rs. 623 lakhs (difference between Rs. 2,114 lakhs and Rs. 1,491 lakhs)explanatory bracket added by uswould be met out of the deferment of sales tax agreed to by the State Government. The representative of the company had also added that the State of Tamil Nadu had already sanctioned deferment of the sales tax vide G.O. Ms. No. 5 dated January 7, 1994. The Board then ultimately passed the following order: "After hearing the parties, the Bench sanctioned the enhanced co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he petitionercompany had made a request in terms of the order passed by BIFR. The said letter has been placed on record by the peti tionercompany. From that letter it seems that the petitioner company had received a notice dated July 29, 1994 from Deputy Commercial Tax Officer, Villupuram, asking the petitionercompany to pay a sum of Rs. 374 lakhs. In the notice it was found that the deferral of sales tax on the sale of IMFS and furfural had thus been restricted to Rs. 1,216 lakhs only and since the company had already availed the deferral of sales tax of Rs. 1,590 lakhs up to June, 1994, the excess amount of Rs. 374 lakhs should be refunded to the depart ment immediately. The petitionercompany in this letter then pleaded that as per the revised order dated December 8, 1993 while revising the period for deferral from six months to one year the BIFR had not fixed any monetary ceiling on the deferral of sales tax. It was further pleaded that even in the order dated September 23, 1993, the peti tionercompany was allowed to have the deferral for a period of one year and that the funds made available by the deferral were fully utilised for the revival of the company as approved by the B....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y 29, 1994, had thereafter swollen for which the notices were sent on July 31, 1996, August 21, 1996 and September 10, 1996. It seems, the petitioner company ignored those notices. Therefore, a notice dated November 11, 1996 came to be issued clearly making a reference to the earlier said notices and further making a demand of the excess tax to the tune of Rs. 5,51,91,688 along with the interest under section 24(3) of the Tamil Nadu General Sales Tax Act to the tune of Rs. 4,36,48,594, totalling to Rs. 9,88,40,282. It was clearly suggested in the notice that if the above arrears is not paid, coercive steps will be taken as provided under the Tamil Nadu General Sales Tax Act. There is no clear history available as to what the petitionercompany had done as regards G.O. Ms. No. 18. It only seems from the papers that the petitionercompany wrote two letters dated February 21, 1995 and another letter dated March 27, 1995 pleading their old case. The third letter appears to have been sent only in July 18, 1996 and all the while it seems that the Government was only sending notices or had kept quiet. 6.. A letter seems to have been sent on October 3, 1996 with regard to the letter of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ards the first instalment in compliance with the conditions of the G.O. Ms. No. 539 dated December 31, 1996. Thus, on January 18, 1997 whereas by one stance the petitionercompany was complying with the order dated December 31, 1996 and had paid the first instalment out of the two instalments granted, it still wrote another letter in which it showed its readiness to pay the balance of the deferred taxes amounting to approximately Rs. 5.52 crores in lumpsum and it has also made an offer to pay the remaining amount of Rs. 57,71,547. These two letters were clearly inconsistent with each other but that aspect would be considered later on. 7.. On March 11, 1997, the petitionercompany wrote another letter pointing out that it had agreed to pay Rs. 5.52 crores in two instalments and again requested to waive the interest of Rs. 4.37 crores. A reference to G.O. Ms. No. 539 was again made and the earlier inconsistent offer made on January 18, 1997 of paying the entire amount of Rs. 5.52 crores was repeated. On March 14, 1997, however, the company paid the remaining instalment of Rs. 5,89,000 approximately which was nothing but the second instalment from out of the total amount of Rs. 9,88,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r those Government Orders the Government had put a ceiling to the tax deferral of one year which ceiling was not there earlier. The Special Tribunal took the view that in fact the Govern ment had not gone back on its promise nor had it in fact put a ceil ing as the Government had in fact agreed to give the benefit of the tax deferral only to the tune of Rs. 623 lakhs. The Tribunal took the view that in spite of this if the Government then granted the tax deferral of Rs. 1,246 lakhs it could not be said that the Government had gone back on their promise or had no power to do so. We have to now see whether the said G.O. Ms. Nos. 18 and 31 were within the powers of the Government or they are vitiated because of the illegality attached to it. 10.. Learned counsel for the petitioner Sriprakash came out with the following submissions: 10.1. Learned counsel firstly submits that the basis for G.O. Ms. No. 5 and the resultant G.O. Ms. No. 62 which is a notification issued under section 17A of the Tamil Nadu General Sales Tax Act is the order of BIFR dated December 8, 1993 by which the BIFR amended the scheme. We have already in the earlier part of this order quoted that order. Accordi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... on account of the past excise duty. It is obvious that the petitionercompany had approached IDBI which was the operating agency and it was only on account of the petitionercompany's approach and pointing out that its liability had increased that IDBI had written to the Principal Secretary by its letter dated August 19, 1993. Now IDBI could never have come to know about the extra liabilities unless the petitioner company had represented the same to it. 10.3. We perused the original files of the Government wherein, there is a letter dated September 6, 1993 written by IDBI to the BIFR, the copy of which has been given to the Principal Secretary of the Government. In the supplementary report, which accompanies that letter, there is a clear reference as under: "Subsequent to the operation of O.A. Report, circulation of draft scheme by BIFR, certain facts had come to the company's notice which were conveyed to BIFR/O.A. vide letters dated July 9, 1993 and August 21, 1993." From this it is clear that the petitionercompany had made the representations only about the aforementioned additional liability of Rs. 623 lakhs. It is strange that these letters should not be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ing to the period of deferment and the period of repayment. The third part of the order has not been amended. Therefore, even there the argument is incorrect. Whatever doubts left were then clarified in the order dated August 18, 1994 where undoubtedly the petitioner company was granted additional tax deferral of Rs. 623 lakhs. We are not prepared to accept the Tribunal's logic that the tax deferral was limited to only Rs. 623 lakhs. When we read the record of the proceedings held on August 18, 1994, there is no doubt left that besides Rs. 623 lakhs of deferral which was granted to the petitioner company, additional Rs. 623 lakhs were granted which was required on account of the liabilities which we have already explained. If on this background the argument of the learned counsel is to be tested then the scheme would be binding on all the concerned parties under the provisions of section 19(3) read with section 32 of the SICA but we do not want to be understood as having accepted the argument of the learned counsel on section 19(3) and section 32 of SICA for the simple reason that on facts itself the learned counsel is not correct. It is, therefore, not necessary for us to conside....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation undoubtedly on the basis of the representation made to it by the petitionercompany the mention of the amount of Rs. 1,246 lakhs was omitted erroneously and without realising the serious implication thereof. Therefore, it was certain that the petitionercompany also knew as to what was to be given to it under the package of the scheme and that it was only Rs. 1,246 lakhs of tax deferral. It is unthinkable that an unlimited tax deferral would be given particularly where the liabili ties of the petitionercompany and its viability were being meticu lously tested by the BIFR, the Government and the IDBI. Therefore, it did not lie in the mouth of the petitionercompany to say by G.O. Ms. No.5 and the resultant G.O. Ms. No. 62 unlimited tax deferral of one year was ordered. If seeing from this angle, it will be clear that the subsequent G.O. Ms. Nos. 18 and 31 were nothing but "clarifying orders" perhaps because in the earlier Government Orders exact sum of Rs. 1,240 lakhs was not mentioned. Once this factual backdrop is clear, the argument that the Government was cutting down the unlimited tax deferral earlier granted and that too by retrospective effect must fall down. What was bein....
X X X X Extracts X X X X
X X X X Extracts X X X X
....86 cancelling the notification granting exemption and the said cancellation was effected with effect from March 17, 1986. The question was whether such a cancellation with retrospective effect was possible and permissible. Following the decision in Ananda Soap Factory [1978] 42 STC 356 (Kar), and relying on the other decisions reported in AIR 1970 SC 1950 (Cannanore Spinning and Weaving Mills Ltd. v. Collector of Customs and Central Excise), [1967] 64 ITR 117 (Ker); AIR 1966 Ker 5 (Incometax Officer v. M.C. Ponnoose), AIR 1963 SC 274 (Indramani Pyarelal Gupta v. W.R. Natu), AIR 1960 Mys. 326 (India Sugars and Refineries Ltd. v. State of Mysore), AIR 1953 SC 95 (Strawboard Manufacturing Co. Ltd. v. Gutta Mill Workers' Union), the division Bench held that in the absence of any specific provision permitting to do so such a retrospective withdrawal of the benefit or the exemp tion as the case may be was not possible. 11.3. In this behalf, it was further pointed out relying on another decision reported in [1999] 113 STC 26 (Honest Corporation v. State of Tamil Nadu) that a division Bench of this Court had held that a modification to any notification under section 17 of the Tamil Nadu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of section 17(3) regarding the Government's power to cancel, vary or modify any notification. Once there is such a provision available, there would be no question to fall back upon the General Clauses Act. But that is not the case with section 17A. Section 17A deals merely with the deferral. It does not in any manner wipe out or reduce the tax liability. The only result of the deferral would be that the taxpayer would be spared of the liability to pay the interest for which under the scheme of the Act there is a different provision in shape of section 24. Therefore, the decision, which deals essentially with section 17 and an entirely different kind of power, could not be made applicable to the facts of the present case. In case of section 17(3) there is a specific indication that power under section 17(3) shall not be used retrospectively, whereas there is no such specific section in case of section 17A and the advantage of section 15 of the Tamil Nadu General Clauses Act would always be available to the notification issued under section 17A. Therefore, the decision is of no consequence in so far as the present controversy is concerned. 12.. The question then remains about th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....etely lacks in bona fide at least in so far as these writ petitions are concerned or in so far as the petitionercompany's prayer regarding G.O. Ms. Nos. 18 and 31 concerned. Even at the cost of repetition, we may repeat that it was the petitionercompany who itself made overtures to the IDBI after it found that the first scheme issued by the BIFR was of no consequence on account of the elapse of time. The petitionercompany who had already paid the taxes which were deferred for the period from January 1, 1993 to June 30, 1993. The petitionercompany then in no uncertain terms approached the IDBI which was the "operating agency" appointed by the BIFR and highlighted its additional liabilities of Rs. 468 lakhs plus Rs. 155 lakhs on account of the explanation of the petitioner company's activities and the arrears of excise duty respectively. Their representative also went to the BIFR for the change in the language because the petitionercompany had then felt that the six months deferral would not be enough. The six months deferral was also estimated at Rs. 623 lakhs only which would be on the basis of the information supplied by the petitionercompany alone. Again on account of the additio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y wrote a completely misleading letter that it wanted to wipe out the main liability of the loan amounting to Rs. 5.52 lakhs and for that purpose offered to pay approximately Rs. 57 lakhs to complete the main tax liability. In fact, this letter was completely misleading because the petitionercompany had already committed and accepted the offer by the petitionercompany to pay the whole arrears, that is the tax arrears and the interest accrued thereupon in two instalments and it also paid the first instalment and had bought time thereby. It was really strange that this design on the part of the petitionercompany should not have been realised by the State Government which merely directed the petitionercompany later on to pay Rs. 57 lakhs. However, fortunately before us the petitionercompany had already paid the second instal ment obviously to avoid the penal or coercive action against it by the State Government. After having made the payment of the second instalment on March 14, 1997, the petitionercompany again changed its stand and says that the second instalment should be towards the arrears of tax for the month of February. All this suggests a clear cut attitude on the part of the....