Case: Southern Agrifurane Industries Ltd Vs. Commercial Tax Officer

the period subsequent to such release, it should have cleared all outstanding tax liability immediately. 21. Section 17(A) of the Tamil Nadu General Sales Tax Act confers power on the State Government to notify deferred payment of tax for certain industries including sick units. The relevant extract of section reads thus: 17A. Power of Government to notify deferred payment of tax for new industries, etc.— (1) The Government may, in such circumstances and subject to such conditions as may be prescribed, by notification issued whether prospectively or retrospectively defer the payment by any new industrial unit or sick unit or sick textile mill of the whole or any part of the tax payable in respect of any period: Provided that such retrospective effect shall not be earlier than the 9th May, 1998. (1A) xxxxxxxxxxxxxxxxxxxxxxxxxxxxx (2) Notwithstanding anything contained in this Act, the deferred payment of tax under Sub-section (1) or Sub-section (1A) shall not attract interest under Sub-section (3) of Section 24 provided the conditions laid down for payment of the tax deferred are satisfied. 22. Therefore, under Sub-section (2) interest is not payable on the deferred payment of tax provided the conditions laid down in Sub-section (1) are satisfied. The purpose of the section is to grant the benefit to new industrial units to help them tide over the initial teething troubles and to sick industries to assist them to get over their sickness. To this end, the Government is empowered to defer the payment of the whole or any part of the tax payable in respect of any period. If on the other hand, the conditions are not satisfied, then too the State Government may allow the tax due to be repaid in instalments under Section 24(1) but in such a case the assessee would be liable to pay interest under Section 24(3) which provides: On any amount remaining unpaid after the date specified for its payment as referred to in Sub-section (1) or in the order permitting payment in instalments, the dealer or person shall pay, in addition to the amount due, interest at one and half per cent per month of such amount for the first three months of default and at two per cent per month of such amount for the subsequent period of default. 23. Both the Tribunal and the High Court have found as a fact that the scheme which was sanctioned by the BIFR initially on 28.7.1993 provided for a limit on the quantum of Sales Tax deferral namely Rs. 623 lacs. We see no reason to interfere with this concurrent finding fact. The sales tax deferral was part of the scheme and was granted as a measure of financial assistance to meet a projected need for the purposes of the appellant being rehabilitated. Both the figures were firm. It has been conceded by the learned Counsel for the appellant that a scheme for rehabilitation under the SICA must necessarily contain firm figures. Unless the figure had been fixed by the scheme when framed in 1993, it would in our opinion be illogical to ask for an enhanced limit of need to be sanctioned and for a consequent enhancement of the financial assistance on 18.8.1994. It is true that the first notification only mentioned the period of deferral and did not specify the amount, but the background in which the notification was issued clearly showed that the State Government had been required by BIFR to render assistance of Rs. 623 lakhs by way of sales tax deferral. The object and purpose of the notification was to fulfil that obligation cast on the State Government under Section 19(3) of SICA. It is improbable that the State Government, not being required to do so, would in an act of unprecedented generosity deprive its exchequer of funds to which it was otherwise entitled. 24. The States understanding was that the original limit of Rs. 623 lakhs needed revision upwards pursuant to the revision in the scheme. The increase in the outer limit could be justified as far as the State was concerned to double the original figure sanctioned, since the period of deferral was doubled from 6 months to a year. This was apparently how the appellant also understood the position. It did not protest initially against the amendment notification when it was published in February, 1995. Again its response to the demand in 1996 of the Sales Tax Authorities was not that the claim was in violation of the scheme or the notifications but was a plea for grant of instalments which plea was acceded to by the State Government on 31.12.1996 in exercise of its powers under Section 24(1). In compliance with the order dated 31.12.1996, the payment was in fact made by the appellant. As such the amended notification was indeed an amendment of the first notification dated 28.7.1993 consequent upon the revised sanction of the BIFR on 18.8.1994 enhancing the need and assistance limits and it was not seeking to retrospectively deny any benefit already conferred on the appellant. We, therefore, do not need to go into the further question whether the High Court was right in importing Section 15 of the Tamil Nadu General Clauses Act into Section 17A. 25. Finally, the appellant was entitled to the relief of sales tax deferral only to the extent it was necessary to take it out of sickness i.e. on rehabilitation. That is so provided under Section 17A(2). Anything in excess of such rehabilitation would not be covered by Section 17A but would fall under Section 24(3) of the Tamil Nadu General Sales Tax Act, 1959. The BIFR had fixed the quantum for rehabilitation at Rs. 2,114 lakhs. The Rs. 1,246 lakhs of deferral of sales tax admittedly met this need. Any further tax deferral, therefore, would only be a benefit conferred on a non-sick company and be permissible under Section 24(1) in which event the appellant would be liable to pay interest under Section 24(3) as held by the High Court. 26.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]18. The High Court had rejected this submission of the appellant by holding that the first notification did not grant an unlimited tax deferral and that the amendment notification merely clarified that the deferral was not limited to Rs. 623 lakhs but was upto Rs. 1,246 lakhs. Therefore, there was no question of the amendment notification operating retrospectively. On the assumption that the amendment did operate retrospectively, the High Court held that by virtue of Section 15 of the Tamil Nadu General Sales Tax Act, the State Government had the power to deny the benefit of deferral granted retrospectivelySection 17(A) of the Tamil Nadu General Sales Tax Act23. Both the Tribunal and the High Court have found as a fact that the scheme which was sanctioned by the BIFR initially on 28.7.1993 provided for a limit on the quantum of Sales Tax deferral namely Rs. 623 lacs. We see no reason to interfere with this concurrent finding fact. The sales tax deferral was part of the scheme and was granted as a measure of financial assistance to meet a projected need for the purposes of the appellant being rehabilitated. Both the figures were firmUnless the figure had been fixed by the scheme when framed in 1993, it would in our opinion be illogical to ask for an enhanced limit of need to be sanctioned and for a consequent enhancement of the financial assistance on 18.8.1994. It is true that the first notification only mentioned the period of deferral and did not specify the amount, but the background in which the notification was issued clearly showed that the State Government had been required by BIFR to render assistance of Rs. 623 lakhs by way of sales tax deferral. The object and purpose of the notification was to fulfil that obligation cast on the State Government under Section 19(3) of SICA. It is improbable that the State Government, not being required to do so, would in an act of unprecedented generosity deprive its exchequer of funds to which it was otherwise entitled24. The States understanding was that the original limit of Rs. 623 lakhs needed revision upwards pursuant to the revision in the scheme. The increase in the outer limit could be justified as far as the State was concerned to double the original figure sanctioned, since the period of deferral was doubled from 6 months to a year. This was apparently how the appellant also understood the position. It did not protest initially against the amendment notification when it was published in February, 1995. Again its response to the demand in 1996 of the Sales Tax Authorities was not that the claim was in violation of the scheme or the notifications but was a plea for grant of instalments which plea was acceded to by the State Government on 31.12.1996 in exercise of its powers under Section 24(1). In compliance with the order dated 31.12.1996, the payment was in fact made by the appellant. As such the amended notification was indeed an amendment of the first notification dated 28.7.1993 consequent upon the revised sanction of the BIFR on 18.8.1994 enhancing the need and assistance limits and it was not seeking to retrospectively deny any benefit already conferred on the appellant. We, therefore, do not need to go into the further question whether the High Court was right in importing Section 15 of the Tamil Nadu General Clauses Act into Section 17A25. Finally, the appellant was entitled to the relief of sales tax deferral only to the extent it was necessary to take it out of sickness i.e. on rehabilitation. That is so provided under Section 17A(2). Anything in excess of such rehabilitation would not be covered by Section 17A but would fall under Section 24(3) of the Tamil Nadu General Sales Tax Act, 1959. The BIFR had fixed the quantum for rehabilitation at Rs. 2,114 lakhs. The Rs. 1,246 lakhs of deferral of sales tax admittedly met this need. Any further tax deferral, therefore, would only be a benefit conferred on a non-sick company and be permissible under Section 24(1) in which event the appellant would be liable to pay interest under Section 24(3) as held by the High Court.