^wS-^^^-^^^S--^^^ 39 ^ ^ c IN THE HIGH COURT OFJUDICATURE AT BILASPUR W.P. No 35 Jf of 2004. PETITIONERS: ^.i\^M^ ^^•^ -^s^ ^ RESPONDENTS: /^ ^3^ 4-r ^\^^^ 1 M/s Annapurna Malleables Pvt. Ltd. A company duty incorporated under the provisions of the Companies Act, 1956 having its registered office and works at 19, New Industrial Area, Sarona Ring RoadNo.2,RAIPUR 2 Shri Kapiraj Singhania, aged 43 years Son of Shri Maloo Ram Singhania, Shareholder and Managing Director of Annapurna Malleables Pvt. Ltd. 19, New Industrial Area, Sarora, Ring Road N0.2, RAIPUR Versus l State of Chhattisgarh through the Principal Secretary, Commercial Tax, RAIPUR 2 The Commissioner, Commercial Tax, RAIPUR 3 Commercial Tax Officer, Circle -2 RAIPUR PETITION UNDERARTICLES 226 AND 227 OF THE CONSTITVTION OF INDIA. r r"\ HISH COURT OF JU&ICATU^E AT BILASPUR, CHHATTIS^BH Writ Petition No.3511 of 2004 G J M/s. Ahnapuma Malleables Pvt. Ltd., and another - Versus- State of Chhaftisgarh and two others POST FOR ORDEft ON 5Th OCTOBER, 2004 ;th Sd/- L.C. Bhadoo Judge 5.10:2004 ^..,,; p[ ^•-T : € J •^' ^- HI©HCOURT OF JUDICATU^E ^T BZLASPUR, CHH^TTIS&ARH Writ Pgtition No.3511 of 2004 M/s, Annapurna Malieabies Pvt* Ltd., and another - Versus " State of Chhattisgarh and two others Present:- Mr. R.S< Jha, Senior Advocate with Mr. SGnJay K. Agrawai, Advocate: For the petitioners. Mr* N.K< Agrawai, Deputy Advocate ©enerai: For the State/respondents^ O R D E R (Passed on 5th October, 2004) • LC.BHADOO, J. 1. By this writ petition under Articles 226 & 227 of the Constitution of India, thepetitioner^ ^eek the quGshment of recovery notices doted 27.8*2004 (Annexure P-6), GJSO tweive notice^ (Annexure P-7) and notice of attachment (Annexure P-5). 2* Brief facts lead'mg to filing of this writpetltion are that petitioner NoJ i^ a Company reglstered under the provisions pf the Conipanies Act, 1956, and petitioner No*2 is the Managjng director of petitioner NoJ Company. The Cdmpany is sltuated at Raipur and engaged in the business of manufacture of iron casting, A^ the petitioner CompGny ^uffered heavy iosses, therefore, it Gpproached the Board for Industriai Finance and Reconstruction (BIFR), estabii^hed under the provisions of Sick Industria! Componies (Specia! Provisions) Act, 1985 (SICA), and WGS declared as sick industry vide order dated 10.6.1991. The BIFR sanctioned a rehabilitation package vide order dated 27th September, 1996 (Annexure P-1) in exercise of its powers under Section 18 (4) read with Section 19 (3) of the SICA. The case of the petitioner is that this faciiity was granted in the package by the BIFR for a period of ten yea.rs commencing from 27 September ..4,,^,...^ , Page2of7 .-^. 1996 to 26 September/2006. The benefit and concession as granted by the BIFR in the rehabiiitGtion package has the overriding affect over Gii laws in view of the proyisions of Section 22 ofthe SICA. The controversy in the present case, which centers around is that first notices were issued by the respondenfs for recovery of the saies tax arreGrs (Annexures PM3 <& P-4) for the period 1987-88;thereafter, second notice for the period 1A1993 to 3U.1994 were issued and ultimateiy, the same was inciuded in notice dated 7,5*2004 (Annexure P"5), and a consolidated notice propo^ing the recovery of dues from 1984 onwards tii! December, 2003 wa^ issued to the petitioner, In repiy to that the petitioner Company expidned that the Company is deciared as a sick industria! unit and its rehabilitation pdckage has been ^anctioned and is underimplementation since 1996 in which it ha^ been spedfically directed that the petitioner Company be deciared reiief undertaking for ten years Gnd aii its 51a!es tax dues be deferred for ten years i,e* up to 2006. The sanctioned scheme has specificaily dealt with all the tax dues which haye accrued and would be accruing tiil the period 2006 the same cannot be recovered without express permission of the BIFR by the respondents. The petitioners haye requested that noticcs Annexure^ P-5, P-6 i& Pa7 be quashed, and the respondents be directed to reiease and permit the petitioners to operate their bank account and further not to tGKe up any coercive recovery proceedings against the petitioners without obtdning prior permission or sanction from the BIFR, 3. Reply has been filed on behalf of the State/ respondents in which it has been admitted that the rehabilitation scheme wa^ sanctioned bythe Board vlde order dated 27.9*1996 and the erstwhiie State of Madhya Pradesh WGS directed by the Board to declare the petitioner Company as 'reiief undertaking unit' for a period of ten year^ and aiso to defer the ^ale^ tax dues during that period. The er^twhile State of Madhya Prade^h deciared the petitioner Company as reiief undertaking unit for a period of seven years commencing from 4.6.1993 to 30.9.2000. After the formation of the State of Chhattisgarh w.e.f. 1.11.2000, the petitioner Company was not Page3of7 ^ ^^ declared GS relief undertaking unit by the State of ChhGtti^gGrk But the bar/embargo enyisaged under Section 22 (1) of the SICAcGn applyoniyto such of those dues reckoned or included in the sanctioned scheme, such amounts like saies tax etc,, which the sick industria! companies Gre enabie to coiiect after the date of the sanctioned scheme legitimately belonging to the reyenue, cannot be and could not have been Intended to be recovered within Section 22 of the Act. Notice Annexure Pn7 reiates to recovery of Rs.3,68,92,883-00 for the period 1993-94 to 2003-2004 (Annexure R-l)* Therefore/there i^ no prima facie case in favour of the petitioner^ and the respondents are recovering the iegitimate tax due^. 4, A^ the facts are admitted and there is no.controver^y or dispute regarding the facts that the petitioners are coiiecting sales tax on the iron items which are being ^oid by the petitioners and it is GJSO admitted that the 8IFR sanctioned the rehabilitation scheme under Section 18 (4) of the SICA on 27,9*1996 for a period of ten years/therefore, the oniy question which remains for the decision of thls Court j^ that whethsr in view of Section 22 (1) of the SICA, the respondents are not entitied to recover the sales tax which has been collected by the petitioners through saie ever after the sanction of the rehabiiitation scheme under Section 18 (4) of the SICA. Since the fact^ are not disputed Gnd repiy has been filed by the respondents, and the order disposing of the appiication wiil be similar to granting final relief, therefore, this petition is being di^posed of at the admissjon stage itself. 5. I have heard !earned coun^e! forthe partie^. 6. LeGrned Senior Counsel appearing on behalf of the petitioners argued that as per the scheme at page 28, the Sovernment of AAadhya Pradesh was dlrected to wdve the minimum pena! and surchGrge ievied by the AAPEB; to declare the unit as Velief undertaking' for G period of ten years; to defer the SGies tax dues tiil the unit remains a^ 'relief undertaking'; and to grant reliefs and concessions as above within one month of the date of sanctiQn of the scheme. Therefore, for ten years, even the saies tax has been Page4of7 \^ -^•^W 1 ^ < ^ deferred and the respondents are not entitied to recover the SGles tax ti!i the scheme period is over by 26th September, 2006. In support of his argument, learned Senior Counse! reiied upon the decisions of the M.P. High Court reported in (2004) 3 STJ 137 (MP) (SteeJ Zngots Ltd. v. Stote of Madhya Pradesh and another); (2003) 2 STJ 351 (MP) (Rellanc®Zspat Zndustries Ltd. and anothsr v. Commissioner of Sales Tax, M.P. and others}; and (1997) 6 SCC 669 Cfata Davy Ltd. v. Statc of Ortesa and otheps}* He further argued that as per the document furnished by the respondents (Annexure R-l), eyen the respondent^ are adopting cbercive methods for recovery of tax/ which has not been assessed so far by^-he respondents iSales TQX Department, 7. On the other hand, iearned Deputy Advocate Seneral argued that as per the dedsion of the Hon'ble Apex Courti in the motter of Dcpyty CommerciQi Tax Officer and othcrs v. Cprromandal PhQrmaceyticcib and ^thers reported in (1997) 10 SCC |649, in the present case, provisions of Sectlon 22 (1) of the SIC^j are not attracted as the respondents are entitled to recover the saies|tax which has been coilected by the petitioners after the sQnction of the scheme. 8< In this connection, it wi!i be useful to quote Sections 22 (1) and 22 (5) of the SICA which read thus: - "22. Suspension of Segal proce@dings,| contpacts, etc.-(l) Where in respect of an industrial comDany, an inquiry under section 16 is pendmg or any scheme referred to under ^ection 17 is under prcparation orl con^ideration or a SGnctioned scheme is under implementatjon or where an appeal under section 25 retating to an lindu^trial company is pending, then notwithstanding anythihg contained in the Compcnies Act/ 1956 (1 of 1956), or any other law or the memorandum and articies of assodation of the industrial company or any other instrument haying effect under the said Act or other law/no proceedings for the winding up of the industrial company or for execution/ distress ortheiike against any of the properties of the industrial company or for the appointment of G receiver in r^espect thereof [and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industria! company] ^hall lie or be proceeded with further, Page 5 of7 -^te j: ^ <^H 1 !!i ,> ^ except with the consent of the Board or, GS the case may be/ the Appeflate Authority. (5) In computing the period of limitGtion for the enforcement of any right, priviiege, obligation or Ijability, the period during which. it or the remedy for the ©nforcementthereof remains suspended under this section shall be excluded." 9* After interpreting the above provi^ions, the Hon'bie Apex Court in the matterof D^pyty Conimercial Tax Officcr (Supra) heldthat "the ianguage of Section 22 of the Act is certdnly wide. But, in the totaiity of th^ circumstGnces, the safeguGrd is only agQinst the impediment, that is iikely to be caused in the implementation of the scheme. If that be so, only the iiability or amounts covered by the ^cheme wili be taken in, by Section 22 of the Act. So/ we are of the yiew that though the language of Section 22 of the Act is of wide import regarding suspension of legd proceedings from the moment an inquiry is started, tiil after the implementation of the scheme or the disposai of an appealunder Section 25 of the Act, it wili be reasonable to hold thot the bar or embargo envisaged in Section 22 (1) of the Act can appiy only to ^uch of those dues reckoned or inciuded in the sanctioned scheme. Such amounts like ^ales tax, etc,/ which the ^ick industriai company is enabled |to colfect after the date of the sanctioned scheme legitimcrfely belonging to the Revenue, cannot be and could not have |been intended to be covered within Section 22 of thel Act, Any other construction wil! be unreasonable and uhfair and wiil leGd to a ^tote of affairs enabiing the sick industrial unit to collect amounts due to the Revenue and withhold it indefiniteiyand unreasonably, Such a con$truction which is unfair, unreasonable ahd against the ^pirit of the statute in a business sense, should be ayoided," 10. Therefore, in yiew of the above law laid down by the Hon'bie Apex Court, the sale^ tax coilected by the petitioner Company after the sanction of the scheme i*e* 27.9J996/the respondents are entitled to recover the saies tax fromthe petitioners and for recovery of that saies tax by the respondents/the provisions of Section 22 (1) of the SICA are not attrGcted. However, any tax collected before 27.9.199^ is covered under Section 22 (1) of the SICA. In the matter pf Tflta Davy Ltd. (Supra), the above case of Deputy Conimercial Tax Officer (Supra) was considered in para 13 and the Hon'ble Apex Court held that the facts of Page. 6 of7 :^.^^ !< II. i II s"i Tata Davy Ltd. case were different and on facts/Corromandai Pharmaceuticals case was not applicable. Therefore, the !aw iaid down by the Hon'bie Apex Court in the case of Corromandal PharmaceuticGls / (supra) stili hoids the field and that ha^ not been overruied or reviewed and the Corromanda! Pharmaceutical^ case fact^ are identical to that of the present case. In t'ne circumstances, Tata Davy Ltd* (Supra) is of no heip to the petitioners. Simiiariy, the other two cases cited by the iearned counsei for the petitioners are afeo of no help to them in view of the^above Hon'ble Apex Courts judgment in Corromcxndars case* 11. Therefore, I have no hesitation in coming to the conciusion that the rcspondents are entitied to recover theisales tax/which has been coiiected by the petitioner Company after 2|7.9,1996, However, any sales tax coiiected prior to that stands deferred as per the sanctioned scheme dated 27.9.1996. ; 12. Now, coming to the question as to how muchj amount i^ recoverQbie out of the total amount ^dd to be recoverabie as &er the respondents' ca^e l,e. R$\3,68,94,998A. The totai figures haye been shown by the re^pondents in Annexure R-l and as per their own admission/sjnce 2000-01, the return submitted by the petitioners Is pendlng for scrutlny and no asses^ment order has been pa^sed* Therefore, In the circumstances, It is he!d that tlll 1999 up to which period the assessment ha^ been made, the respondents are entitled to recover the assessed sdes tax amount with effect from 28.9.1996 up to the year 1999 as per the saies tax coiiected by the petitioners, However, from the year 20GO, in the first instance, the respondents ^haSI coliect the saie^ tax from the petitioner^ as per the admission of the petitioners, which has been shown in their sales tax return tliat how much sa!es tax amount ha^ been collected by them* The rest of the amount, if any remain^ to be realized after the assessment order i^ passed, then the respondents wiil be entitled to redize that amount after the asses^ment order is passed. 13, In the resuit, the writ petition i^ disposed of with the foiiowing directions: Page 7of7 li.^.^k : ^ / -< 1 Hl a* The notices issued by the respondents Annexures P-5/P-6 & P-7 are quashed to the extent indicated in paral2 of this order and the respondents are restrained from recovering any ^aies tax, which WGS coiiected by the petitioners up to 27,9,1996 i<e< the day of sanctioning of the scheme* b* From 28.9*1996 the respondents are entitted to recover the saies tax QS per the assessment order and frGm the year 2000 onwards, the respondents are ehtitled to recover the sale^ tax which has been admitted by the petitioners in their tax return to be paid by the petitioners and remaining amount, if any/remains due as per the assessment order passed laterl on, then the re^pondents wil! be aiiowed to reaiize that amount afte^ passing of the order, c* In view of the above orders, the respondents JTiay recove," the ainount from the petitioners to the extent ind-icated above and they should release the rest of the amountiwhich remains in the account of the petitioner^ and thereafter, they should ailow the petitioner^ to operate their bank account, d. The respondents shali complete this exercise within ssven doys fromthe date of pas^ing of this order dnd after reaiization of the saies tax amount as indicated above ^hould release the bank accounts of the petitioners. Sd/- L.C. Bhadoo Judge Soma \ ^ ^ ~"s