TaxTMI 
TaxTMI 
TaxTMI 
2008 (3) TMI 631
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....ayments in respect of taxes strictly in accordance with the final orders to be passed by the fourth respondent in exercise of its powers under SIC (SP) Act. Brief facts leading to the writ petition are as follows: The petitioner-company is engaged in the manufacture of Indianmade Foreign Spirites (IMFS) and beer products in their industrial units located at By-pass Road, Poonamallee, Chennai 600 056 and Mount Thiruvallur High Road, Aranvoyal Village, Thiruvallur District, respectively. Initially, they have started their business with an authorised capital of Rs. 90 lacs and it was increased from time to time over the years. The authorised capital of the company as on March 31, 2006 was Rs. 225 crores. The petitioner's issued, subscribed and paid-up share capital as on March 31, 2006 was Rs. 1,12,63,84,600 comprising the following: Equity capital . . . Rs. 5,31,75,600 Preference capital The petitioner has further submitted that as they were earning substantial profits on the distillery units, they decided to expand their business by setting up a brewery unit and accordingly, they obtained a licence from the . . . Rs. 59,62,09,000 State Government of Tamil Nadu in the y....
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....006 and no fresh reference was given, as the previous references were pending before the Bench and the same was informed to the petitioner by letter dated November 2, 2006. The petitioner has further submitted that on July 13, 2006, as directed by the BIFR, they have filed their written submissions on July 28, 2006 and on the next hearing date, i.e., on December 20, 2006, the BIFR, after examination of facts, declared the company as sick industrial unit and formulated a scheme for rehabilitation, vide its communication dated December 28, 2006. IDBI was appointed as an operating agency and after conducting a detailed study, the Board has fixed the cut-off date as March 31, 2007, for the purpose of formulating a scheme of rehabilitation under the Sick Industrial Companies (Special Provisions) Act, 1985. The petitioner has further submitted that as per section 18 of the SIC (SP) Act, the operating agency has to prepare a scheme with respect to the sick company, provide for one or more of the measures set out in the said section. As per section 18(1)(e), the operating agency has to include preventive, ameliorative and such other remedial measures, as may be appropriate in respect the....
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....d that their liability, as on the cut-off date, includes sales tax amount pertaining to January 2004 and February 2004 and value added tax pertaining to March 2007 and the same are required to be included as part of the rehabilitation scheme, in accordance with the direction of the BIFR order and therefore they submitted the VAT returns for the month of March 2007 without payment of tax, as the dues prior to March 31, 2007 would now have to be included and paid in accordance with the Schedule that would finally be sanctioned by the BIFR and make payments in terms of the consequential notification that would, if required, be passed by the Government. Therefore a request was made to the second respondent to take the above facts into account and not to initiate any recovery steps in view of the orders of the BIFR, in terms of the Sick Industrial Companies (Special Provisions) Act, 1985. The Assistant Commissioner (CT), Fast Track Assessment Circle II, Chennai - 600 006, second respondent herein, vide its letter dated April 10, 2007, has rejected the petitioner's request and therefore it has now become certain that the second respondent would initiate coercive steps to recover the....
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....2-03. Rs. 356.60 Total . . . Rs. 4,905.33 The petitioner-company, by preparing balance sheet for the year ending June 30, 2003, filed reference and the same was received by the BIFR on February 4, 2004 and got registered as case No. 103 of 2004. The company in case No. 103 of 2004, had included the arrears of Rs. 356.60 lakhs. Again, by preparing another balance sheet for the year ending March 31, 2004, the petitioner has filed reference under section 15(1) and got registered on October 12, 2004 as case No. 315 of 2004. In the form A filed for reference in case No. 315 of 2004, the arrears (i) to (iii) above, totalling Rs. 49.05 crores were included. The company is a viable and running unit. The company refrained themselves from paying taxes collected by them at Rs. 16 crores and Rs. 29. 49 crores and interest levied for belated payment of tax at Rs. 356.60 lakhs under the cover of BIFR in case Nos. 103 of 2004 and 315 of 2004. The respondent has further submitted that the company is a running unit engaged in the manufacture of IMFL and beer, a flourishing trade and has been paying taxes regularly from April 2004 to March 2007. The company had paid Rs. 411 crores from ....
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....itted a tax liability at Rs. 53,06,97,604, refrained from making payment of taxes under the pretext date, March 31, 2007 mentioned in the summary record of the proceedings of the hearing held on December 20, 2006 by the BIFR, as cut-off date with reference to registration of reference of a sick industrial unit under section 15(1) of the Act, even though the cut-off date March 31, 2007 mentioned in the summary record of the proceedings of the hearing held on December 20, 2006 refers only to the date prescribed for the operating agency to prepare and submit a viability study report if feasible within an overall period of 16 weeks, i.e., before March 31, 2007. The company was requested to make the payment for which they assured that they shall pay the current taxes. However, to their shock and surprise, the company had moved this court and by order dated April 12, 2007, the company obtained an interim stay and injunction. The order was received on April 16, 2007. The BIFR in the summary record of the proceeding dated December 20, 2007 has observed as follows: "Accordingly, in terms of powers available under section 17(3) of the Act, the bench appointed IDBI as the operating agency (....
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....important points with reference to cut-off date and answered them as a source of jurisprudence of great value. According to the respondents 1 and 2 the decision rendered in the above reported case is applicable to the facts of the present case. The respondents 1 and 2 have further submitted that the cut-off date did not refer to the period, i.e., (i) the period up to the date of registration of the company as a sick industrial company under section 15 of the Act, which is also the date of commencement of the inquiry, (ii) the period commencing from the date of registration of the sick industrial company by the BIFR, till sanction of the rehabilitation scheme by the BIFR, enabling the Government to recover Rs. 53.07 crores without any sacrifice whatsoever. The company has misconstrued the cut-off date and obtained interim order. Therefore, the claim made by the company is unwarranted, unjustified and arbitrary. The second respondent in his counter-affidavit has further submitted that the High Court of Andhra Pradesh in the case of Sol Pharmaceuticals Limited v. Mandal Revenue Officer reported in [2007] 5 VST 580, under similar set of facts and issue, held that when the company did....
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....in case Nos. 103 of 2004 and 315 of 2004. May be under such circumstances, it is not even possible for IDBI to prepare viability study report and it is rather not feasible for IDBI without eliminating ICICI from seizing the control of the company as a fully secured creditor, in whose position, the affairs of the company is under control. The petitionercompany has conveniently omitted the above facts from the grounds of the present writ petition. It is further submitted that from the conjoint reading of sections 15 and 16 of SICA, the date of registration is also the date of commencement of the inquiry under section 16 of the Act. The current taxes collected by the company in March 2007 payable in April 2007 refer to the period between registration of reference (commencement of inquiry) and pre-sanction of rehabilitation scheme and the State by legal fiction under the provisions of SICA and in the light of decisions reported in Core Healthcare Limited v. State of Gujarat [2005] 139 STC 116 (Guj), Sol Pharmaceuticals Limited v. Mandal Revenue Officer [2007] 5 VST 580 (AP), Deputy Commercial Tax Officer v. Corromandal Pharmaceuticals [1997] 105 STC 327 (SC) and Tata Davy Ltd. v. State....
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.... therefore, the State Government, has no jurisdiction to resort to recovery by way of attaching the amounts due to the petitioner from the Tamil Nadu State Marketing Corporation, Chennai, the third respondent and that it would be amounting to infringement of the statutory protection granted under section 22 of the SIC (SP) Act, 1985. In this context, he placed reliance on the decisions reported in Kiran Overseas Exports Ltd. v. Commercial Tax Officer reported in [2002] 1 CTC 26, Dunlop India Limited v. Tahsildar reported in [2006] 4 MLJ 662, Sol Pharmaceuticals Limited v. Mandal Revenue Officer reported in [2007] 5 VST 580 (AP), Sri Ambal Mills Ltd. v. Commercial Tax Officer (FAC) Central II, Tiruppur reported in [2007] 6 VST 45 (Mad); [2006] 131 Comp. Cas 573 (Mad), Kanoria Dyechem Ltd. v. Sales Tax Officer reported in [2002] 125 STC 210 (Guj); [2002] 108 Comp Cas 620 (Guj) and Bharat Heavy Plate and Vessels Ltd. v. Assistant Commissioner of Central Excise, Division-II reported in [2006] 133 Comp. Cas. 41 (AP). Learned counsel for the petitioner further submitted that the impugned action of the Assistant Commissioner (CT), Chennai, second respondent, in rejecting the request of th....
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....onstrued the cut-off date, i.e., March 31, 2007 as equivalent to the reference date for registration of the company as a sick industrial unit under section 15(1) of the SIC (SP) Act, 1985. Learned Senior Counsel further submitted that the record of proceedings pertains to the balance sheet for the year ending June 30, 2003 and the reference made by the company was registered by the Board as case No. 103 of 2004. He further submitted that the company in form A has included the arrears of Rs. 356.60 lakhs only. He further submitted that the case No. 315 of 2004 pertains to a second reference filed on October 12, 2004 based on the audit accounts as on March 31, 2004 for arrears of Rs. 49.05 crores. He further submitted that the company is a viable and running unit, engaged in manufacture of IMFL and beer, a flourishing trade and has been paying taxes regularly from April 2004 to March 2007. According to him, when the Board proceedings are referable only to the references 103 of 2004 and 315 of 2004 for the period 2003-04, in the absence of the registration of the reference submitted for the later years, the viability report and the scheme directed to be prepared by IDBI, the operati....
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....f Gujarat [2005] 139 STC 116 (Guj), Sol Pharmaceuticals Limited v. Mandal Revenue Officer [2007] 5 VST 580 (AP), Deputy Commercial Tax Officer v. Corromandal Pharmaceuticals [1997] 105 STC 327 (SC) and Tata Davy Ltd. v. State of Orissa [1998] 111 STC 462 (SC), is entitled to recover Rs. 53.05 crores without any sacrifice whatsoever and the consent from the Board is not necessary. By way of reply, Mr. Sathish Parasaran, the learned counsel for the petitioner, submitted that the decision in Core Healthcare Limited v. State of Gujarat [2005] 139 STC 116 (Guj), is contrary to the established principles of statutory interpretation that where a statute has to be interpreted from the plain words and when section 22 of the SIC (SP) Act does not in any manner state that dues arising after the period of reference would not be protected, the decision of the Gujarat High Court amounts to supplying words to section 22 of the Act and therefore, the same is not applicable to the facts of this case. He further submitted that the judgment in Deputy Commercial Tax Officer v. Corromandal Pharmaceuticals [1997] 105 STC 327 (SC); [1997] 10 SCC 649, has already been distinguished by the Supreme Court i....
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....become a sick industrial company, the Board of the Directors of the company, shall, within sixty days from the date of finalisation of the duly audited accounts of the company for the financial year as at the end of which the company has become a sick industrial company, make a reference to the board for determination of the measures which shall be adopted with respect to the company: Provided that if the Board of Directors had sufficient reasons even before such finalisation to form the opinion that the company had become a sick industrial company, the Board of Directors shall, within sixty days after it has formed such opinion, make a reference to the Board for the determination of the measures which shall be adopted with respect to the company: Provided further that no reference shall be made to the Board for Industrial and Financial Reconstruction after the commencement of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, where financial assets have been acquired by any securitisation company or reconstruction company under sub-section (1) of section 5 of that Act: Provided also that on or after the commencement of the ....
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....he purposes of this sub-section, an inquiry shall be deemed to have commenced upon the receipt by the Board of any reference or information or upon its own knowledge reduced to writing by the Board. (4) . . ." Under section 17, after completion of the inquiry whether it is practicable for the company to make its net worth exceed the accumulated losses within a reasonable time, the Board shall give such company time to make its net worth exceed the accumulated losses subject to appropriate restrictions and conditions. If the Board decides that it is not practicable for the company to do so within a reasonable time and that it is necessary or expedient in the public interest to adopt all or any of the measures specified in section 18, the Board may direct any operating agency to prepare a scheme providing for revival and rehabilitation of the company. Section 18 provides for preparation and sanction of the scheme for revival and rehabilitation of the sick company as expeditiously as possible and ordinarily within a period of ninety days providing for various measures including the financial reconstruction of the sick industrial company, as may be appropriate. Section 19, d....
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....l assistance, the Board may adopt such other measures, including the winding up of the sick industrial company, as it may deem fit." Section 20 provides that where the Board after making inquiry under section 16 and after considering all the relevant facts and circumstances and after giving an opportunity of hearing to all concerned parties, is of opinion that the sick industrial company is not likely to recover from sickness within a reasonable time and that the company is not likely to become viable in future and that it is just and equitable that the company should be wound up, it may record and forward its opinion to the concerned High Court which may proceed with the winding up of the sick industrial company in accordance with the provisions of the Companies Act. The important section which has a bearing on the controversy dealing with the suspension of steps taken for recovery is as follows: "22. Suspension of legal proceedings, contracts, etc.-(1) Where in respect of an industrial company, an inquiry under section 16 is pending or any scheme referred to under section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an....
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....on February 4, 2004 shows that the statutory liability to the Sales Tax Department as at February 2004, is Rs. 4,875.12 lakhs, which is the subject-matter of reference No. 103 of 2004. Form A submitted by the company in relation to reference dated October 11, 2004 includes the sales tax outstanding amount of Rs. 4,875.12 lakhs as at February 2004 and sales tax for the month of March 2004, payable in April, 2004 (since paid) and an equivalent amount for subsequent month to be deferred. The reference made by the company on October 11, 2004 was registered as case No. 315 of 2004. Perusal of the forms, submitted by the petitioner-company along with reference Nos. 103 and 314 of 2004 covers sales tax amount up to March 2004 and for the subsequent months. The company in their letter, March 1, 2004, has requested the Board to reckon the said amount and consider the same for the purpose of scheme to be framed by the Board in exercise of its statutory functions. Now let me consider the decisions cited by the learned counsel for the parties and then applicability to the facts of the case. In Gram Panchayat v. Shree Vallabh Glass Works Ltd. reported in [1992] 86 STC 41 (SC), the company was ....
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....ny for the aforesaid period of two years 1992-93 and 1993-94 was Rs. 9,53,833. There was tax arrears of sales tax for the assessment years 1986-87 to 1992-93. The company was declared a sick industrial company under the SICA. Industrial Reconstruction Bank of India (IRBI) was appointed as an operating agency. The BIFR sanctioned a scheme for rehabilitation of the petitioner-company in case No. 160 of 1988 in exercise of its powers under section 18(4) read with section 19(3) of the Act, after obtaining permission from the financial institutions on November 19, 1990. The sanctioned scheme was brought into immediate effect and it was modified later, on December 29, 1993. The petitioner challenged the recovery proceedings for the sales tax dues for the assessment years 1992-93 and 1993-94 and sought for a mandamus, directing the commercial tax authorities not to proceed with the collection of balance of sales tax amount without the permission of the BIFR as required under section 22 of the Act. The plea of the company was that the sanctioned scheme by BIFR for rehabilitation of the company was under implementation, and so, no proceedings for execution, distress or the like against the....
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....s, are contemplated. In other words, the scheme is implemented or given effect to, by affording financial assistance by way of loans, advances or guarantees or reliefs or concessions or sacrifices by Government, banks, public financial institutions and other authorities. In order to see that the scheme is successfully implemented and no impediment is caused for the successful carrying out of the scheme, the Board is enabled to have a say when the steps for recovery of the amounts or other coercive proceedings are taken against sick industrial company which, during the relevant time, acts under the guidance/control or supervision of the Board (BIFR). Any step for execution, distress or the like against the properties of the industrial company or other similar steps should not be pursued which will cause delay or impediment in the implementation of the sanctioned scheme. In order to safeguard such state of affairs, an embargo or bar is placed under section 22 of the Act against any step for execution, distress or the like or other similar proceedings against the company without the consent of the Board or, as the case may be, the appellate authority. The language of section 22 of th....
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....and unsustainable. We set aside the judgment of the High Court and allow this appeal. There shall be no order as to costs." In the same judgment, honourable justice Jeevan Reddy, while agreeing with the ratio, expressed his opinion as follows: ". . . We have come across cases where unfair advantage is sought to be taken of the provisions of section 22 by certain industrial companies - and the wide language employed in the section is providing them a cover. We are sure section 22 was not meant to breed dishonesty nor can it be so operated as to encourage unfair practices. The ultimate prejudice to public monies should not be overlooked in the process of promoting industrial progress. We are quite sure that the Government is fully alive to the situation and are equally certain that they must be thinking of necessary modifications in the Act. These few observations are meant merely to record the need for changes in the Act." In Tata Davy Ltd. v. State of Orissa reported in [1998] 111 STC 462 (SC); [1997] 6 SCC 669, the State of Orissa initiated recovery against M/s. Aluminium Industries Ltd., under section 13A of the State Act. The High Court of Orissa was considering the question ....
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....avy's case [1998] 111 STC 462; [1997] 6 SCC 669, the apex court held that the arrears of tax and sales tax dues from the sick industrial companies, who satisfy the conditions set out in section 22(1) of SIC (SP) Act, cannot be recovered by coercive steps, if the consent is not secured from the Board. The apex court observed that the Corromandal's case [1997] 105 STC 327; [1997] 10 SCC 649 was inapposite to the facts of Tata Davy's case [1998] 111 STC 462; [1997] 6 SCC 669, but the said judgment has not been overruled. In Real Value Appliances Ltd. v. Canara Bank reported in [1998] 93 Comp Cas 26 (SC) at paragraph 23 held as follows: ". . . when section 16(1) says that the BIFR can conduct the inquiry 'in such manner as it may deem fit', the said words are intended only to convey that a wide discretion is vested in the BIFR in regard to the procedure it may follow for conducting an inquiry under section 16(1) and nothing more. In fact, once the reference is registered after scrutiny, it is, in our view mandatory for the BIFR to conduct an inquiry. If one looks at the format of the reference as prescribed in the Regulations, it will be clear that it conta....
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....he stage of registration under section 15, then section 22 is not attracted. This contention, in our opinion, has no merit. In our view, when section 16(1) says that the BIFR can conduct the inquiry 'in such manner as it may deem fit', the said words are intended only to convey that a wide discretion is vested in the BIFR in regard to the procedure it may follow for conducting an inquiry under section 16(1) and nothing more. In fact, once the reference is registered after scrutiny, it is in our view mandatory for the BIFR to conduct an inquiry. . . It is also the legislative intention to see that no proceed ngs against the assets are taken before any such decision is given by the BIFR for in case the company's assets are sold, or the company is wound up it may indeed become difficult later to restore the status quo ante. Therefore, in our view, the High Court of Allahabad in Industrial Finance Corporation v. Maharashtra Steels Ltd. [1990] 67 Comp Cas 412, the High Court of Andhra Pradesh in Sponge Iron India Ltd. v. Neelima Steels Ltd. [1990] 68 Comp Cas 201, the High Court of Himachal Pradesh in Orissa Sponge Iron Ltd. v. Rishab Ispat Ltd. [1993] 78 Comp Cas 264 are ri....
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.... case. In Industrial Cables (India) Limited, Rajpura v. State of Punjab reported in [2001] 122 STC 187 the Punjab and Haryana High Court considered a case, where the demand notices issued by the Assessing Authority-cumExcise and Taxation Officer was challenged on the ground that the authorities cannot resort to any coercive steps for recovery of dues, during the pendency of inquiry under section 16(1) of the Act, which if not completed within 60 days, automatically lapses on expiry of the said period and therefore, also the protection guaranteed under section 22(1) of the Act. Repelling the contentions, the court held that as long as the inquiry is pending before the BIFR, coercive steps cannot be taken by the State and further held that failure of the operating agency to complete the inquiry within 60 days will not result in abrogation thereof. The reported judgment can be a preposition or a precedent only for the abovesaid issue and does not apply to the facts of the present case. In Singhal Strips Limited v. Sales Tax Tribunal reported in [2003] 129 STC 343 (P&H); [2003] 113 Comp Cas 640, pursuant to the assessment, the sales tax authorities sought recovery of tax. The Haryana....
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.... notices issued by the Sales Tax department for recovery of the sales tax dues and for initiating criminal proceedings against the company and/or its directors for recovery of sales tax. On facts, the petitioner contended that out of four project at village Sachana in Ahmedabad (Rural) District, the petitioner was granted sales tax exemption for three projects, and as the fourth project was completed on August, 1998, instead of February, 1998, the company was not granted sales tax exemption, although the company had made eligible investment. The State Government submitted that the application for sales tax exemption was already rejected on June 3, 2003. During the pendency of these petitions, the company submitted applications to the BIFR for registration as a sick industrial company even for the subsequent years 2001, 2002 and 2003, respectively and as per the communication dated January 19, 2004, the petitioner-company was registered as a sick industrial company in case Nos. 30, 31 and 32 of 2004. The Government in their reply affidavit submitted that as the BIFR had already rejected the reference on January 24, 2002, there was no pending reference and, therefore, the protecti....
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....ncement of enquiry under section 16(1) of the Act for the purpose of section 22 of the SICA. The Division Bench, examined powers of the State Government to recover sales tax dues vis-a-vis the protection available to a sick industrial company under section 22 of the SICA, with reference to three periods: (i) the period up to the date of registration of the company as a sick industrial company under section 15 of the Act, which is also the date of commencement of the inquiry; (ii) the period commencing from the date of registration of the sick industrial company by the BIFR till sanction of the rehabilitation scheme by the BIFR; and (iii) the period after the date of sanction of the rehabilitation scheme. In so far as the period up to the date of registration of the company as a sick industrial company under section 16 of the Act is concerned, issue No. 1, the court observed that even though the sick industrial company, a dealer registered under the Gujarat Sales Tax Act and the Central Sales Tax Act, collects sales tax as an agent of the State, as far as the arrears of sales tax till the date of registration of the reference are concerned, the amounts received by the co....
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....rnment without the consent of the State Government. Hence, it is open to the State Government to insist that although it will not make recovery of past sales tax dues without the consent of the BIFR, at least the industrial company is bound to pay over the sales tax amounts being collected by the company from the purchasers. We, therefore, find substance in the submission made by the learned Additional Government Pleader that even if the State Government may have to wait for recovery of the past sales tax dues, but the State Government is not bound to wait for saying 'we do not want to give any concessions or reliefs hereafter in respect of sales tax being collected by the company' till the rehabilitation scheme is considered, approved or rejected by the BIFR. 18.. In Corromandal case [1997] 105 STC 327; [1997] 89 Comp Cas 1, the apex court has held that the sales tax collected by the company after the date of sanction of the rehabilitation scheme legitimately belong to the State and, therefore, the State cannot be prevented from collecting such dues. The sales tax dues for the second period (i.e., till the date of sanction of the scheme) as such legitimately belong to t....
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....cluding sales tax as a component of the sale price, the company has no right to retain such current sales tax amounts. If the petitioner's contention is accepted, it would amount to the court directing the State Government to give the petitioner-company the benefit of sales tax deferment. It would be in the nature of relief or concession from the State Government. Section 22(1) grants protection in the nature of status quo regarding recovery of past dues, but the provision does not even purport to compel the State Government or any other creditor to grant such relief, concession or sacrifice for the current dues (i.e., dues for the current period) for which the consent of the creditor is absolutely necessary. Neither the court nor the BIFR has power to compel the Government to defer recovery of current sales tax amounts from the company which is collecting the sales tax from its own purchasers. . . . 21.. Having carefully considered the controversy, we are of the view that even though the industrial company which is a dealer registered under the Gujarat Sales Tax Act and the Central Sales Tax Act collects sales tax as an agent of the State, as far as the arrears of sales tax....
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....specified by the State Government, the BIFR will have to stipulate such cut-off date for the sales tax dues in the rehabilitation package to be prepared by the BIFR or the operating agency which may be appointed by the BIFR." In Dunlop India Limited v. Tahsildar reported in [2006] 4 MLJ 662, this court considered the case where the company was assessed to urban land tax in respect of Fasile 1407 and 1408. Distraint proceedings were initiated for recovery of certain amount in respect of Fasile 1405 to 1410 including the urban land tax arrears. The company was declared as a sick industry by BIFR on July 7, 1998 under the provisions of SIC (SP) Act, 1985. Following Tata Davy's case [1998] 111 STC 462 this court set aside the demand holding that the authority cannot proceed without obtaining prior permission of BIFR. In the reported case, whether the scheme to be prepared or under consideration relates to pre-reference or post-reference period has not been dealt with and therefore, with due respect, the same cannot be applied as a precedent. In Sri Ambal Mills Ltd. v. Commercial Tax Officer (FAC), Central II, Tiruppur reported in [2007] 6 VST 45; [2006] 131 Comp Cas 573, t....
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....red by the respondents on January 16, 2006 and January 27, 2006. The State Bank of India was appointed as operating agency under section 17(3) of the Act, with a direction to prepare a viability study report and revival scheme for the company. The question before the court was whether, after declaration of a company as a sick company and after appointment of an operating agency in terms of section 17(3) of the Act, the respondents could invoke coercive methods in order to recover the dues on account of excise duty. The contention of the company was that after the declaration that the petitioner-company was a sick company, and after appointment of State Bank of India as operating agency, the respondents could not enforce their claims against the company, whereas the respondents therein claimed that there is nothing in the Act, which would stop them from enforcing the claim of excise, which, in any case, become due at the time of production itself. It was further contended by the respondents that the petitioner has informed the Board in its reference that only the liability of excise arrears are payable as on July 31, 2004, whereas the petitioner has defaulted huge amounts even afte....
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....orromandal Pharmaceuticals [1997] 105 STC 327 and Maharashtra Tubes Limited v. State Industrial and Investment Corporation of Maharashtra Limited [1993] 78 Comp Cas 893 (SC) and the provisions of the Act, held as follows (at page 587 of 5 VST): "The analysis of all the sub-sections in section 22 of SICA would show that the Parliament consciously did not prohibit the recovery of arrears due to the sovereign nor the provision prohibits recovery of the money from a sick company, which in effect does not belong to it . . ." At paragraphs 17 and 18 of the said judgment, the Supreme Court held as follows: "17. The conspectus that results from a reference to various precedents is somewhat broadly as follows. If an industrial company after seeking reference under section 15 of SICA or during consideration by BIFR under sections 17 and 18 of SICA or implementation of the scheme formulated under section 18(5) of SICA is enabled to collect the provident fund, sales tax and other indirect taxes, which do not legitimately belong to it but belong legitimately and constitutionally to the State, the same are not covered within the ambit of section 22 of SICA. If an industrial company se....
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....en to the State to bring it to the notice of BIFR regarding the amounts of arrears due to the State, the idea being that BIFR, while deciding whether the industry should be rehabilitated or wound up, is required to take into consideration all relevant factors and the liabilities, to arrive at a proper conclusion whether it is possible to rehabilitate the industry or not. 8.. In view of the fact that the scheme itself is not yet framed and the enquiry is still pending before the BIFR, the decision relied upon by the learned Government Pleader for Commercial Taxes, in our view, does not support the submission made by him. On the other hand, from the further observations made in the same paragraph on the basis of the facts of the case, we see that the Supreme Court only held that the amounts of taxes collected by the sick industrial company after the sanctioned scheme are not covered by the embargo under section 22 of the SICA Act. The submission of the learned Government Pleader for Commercial Taxes is, therefore, liable to be rejected ." No doubt, the BIFR would vest its conclusions in framing the scheme on the basis of the information furnished by the sick industrial company and ....
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....enced. Section 22 and the prohibition contained in it shall immediately come into play. If the Board does not exercise its powers in respect of any reference registered on its file, the question of exercise of its powers of making an inquiry or passing any orders for preparation of a scheme does not arise. Section 22 contemplates three stages: (1) where in respect of any industrial unit, an enquiry under section 16 is pending, (2) any scheme referred to under section 17 is under preparation or consideration, and (3) a sanctioned scheme is under implementation or where an appeal under section 25 relating to an industrial company is pending. None of the exigencies, is pending consideration before the Board attracting section 22 of the Act, in respect of the liabilities of the petitioner's company, for the sales tax dues for the years April 2004-March 2005 and April 2005 to March 2006. "Pending inquiry" under sections 15 to 19 of 1985 Act, should be meant only if the reference is registered after scrutiny. A relief prayed for by the petitioner-company cannot be granted by BIFR, if the transactions of the financial accounts of the company are not considered in the reference. If t....
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....ck industrial unit by the BIFR can revive from sickness depending upon the financial assistance, sale potentiality of the product, purchase by the dealers/ customers and for other reasons. After filing of the references, which were registered as case Nos. 103 and 314 of 2004, the company has not become defunct or non-productive or stopped its substratum activity on the date of filing of the writ petition. Pleadings and the materials on record further reveal that the petitioner-company having regard to the materials considered by the Board under Reference Nos. 103 and 314 of 2004, by his letter dated March 1, 2004, has categorically restricted the outstanding liability up to March 31, 2004 and has made payment towards sales tax from April 2004 to February 2007. For the month of February 2007, tax has to be paid in March 2007. The company has voluntarily paid Rs. 52.75 crores in March 2007 and as the company had delayed the payment of Rs. 14 crores up to March 20, 2007, for the taxes due for February 2007, B6 notice was issued to TASMAC and the banker of the company on March 21, 2007 and a sum of Rs. 5.1 crores has been collected from TASMAC on March 21, 2007. The petitioner has volu....
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.... to the date of registration of reference. In Real Value Appliance's case [1998] 93 Comp Cas 26, the apex court explained as to when "inquiry" is said to have been commenced under the Act. The judgment has only a limited application to the facts of the present case and does not deal with a situation, where the petitioner-company has collected sales tax in the post-reference period. Similarly Tata Davy's case [1998] 111 STC 462 (SC); [1997] 6 SCC 669 also deals with a situation where protection under section 22(1) of the Act was granted against the recovery of past sales tax dues for the period prior to the company's registration as a sick industrial unit. No doubt the Supreme Court has held that "section 22 of the Central Act requires all creditors seeking to recover their dues from the sick industrial companies in respect of whom an inquiry is under preparation or under consideration, or has been sanctioned, to obtain the consent of the Board, before initiating steps for recovery. With due respect, the Supreme Court was not posed with a specific question of the powers of the State Government to initiate recovery proceedings for collection of taxes by the sick industria....
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....t of Government/statutory/local bodies, only those reliefs and concessions would be included which have reasonable prospects of being granted. If any sacrifices are expected from the workers, the same shall be discussed with them and their consent obtained. The abovesaid clause, is in consonance with sub-section (2) of section 19 of the Act, where a creditor, on receipt of the scheme referred to in sub-section (1) of section 19 has a discretion to give its consent for tax relief or concessions or sacrifices in respect of the scheme which would cover the subject-matter of reference or "pending enquiry". A conjoint reading of sub-section (2) of section 19 of the Act and clause 5 of the guidelines makes it clear that the State Government is entitled to refuse tax relief or concessions or sacrifices for the period not covered under reference and therefore, the Government can insist on payment of sales tax dues for the post-reference period. Though the Board had directed the operating agency to prepare a viability study report and revival scheme for the company within an overall period of 16 weeks, having regard to the contentions raised in the counteraffidavit, filed on April 19, 2007....
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....urnished by the company under reference or inquiry. If the bar or embargo under section 22(1) of the Act is held to cover all amounts collected by way of sales tax dues to the Government, including the post-reference period and if the petitioner-company is permitted to retain the same, till the preparation or consideration or implementation of the scheme or the disposal of the appeal, it will result in a state of affairs enabling the assessee to retain the amounts due to the State for no reason, indefinitely and the Revenue will have to obtain the consent of the Board, even for realising the legitimate dues withheld by the company. As held by the Supreme Court, the immunity guaranteed under the Act is not absolute. The bar or embargo under section 22(1) of the Act should not lead to such an undesirable state of affairs and it should be confined only to such of those pre-package dues reckoned or included in the scheme to be prepared in relation to the reference under section 15(1) of the Act or the inquiry under sections 15 to 19 of the Act. The Supreme Court in paragraph 10 of the Corromandal's case [1997] 105 STC 327 (SC); [1997] 10 SCC 649, has been categorical in its judgme....