2000 (11) TMI 1140 - HC - Companies Law

Summary

Issues Involved:
1. Quashing of demand notices issued by the Assessing Authority-cum-Excise and Taxation Officer.
2. Legality of coercive measures for recovery of sales tax dues during the pendency of an enquiry under the Sick Industrial Companies (Special Provisions) Act, 1985 (the 1985 Act).
3. Interpretation of sections 16 and 22 of the 1985 Act regarding the suspension of legal proceedings.

Issue-wise Detailed Analysis:

1. Quashing of Demand Notices:
The petitioner sought to quash the demand notices dated 2-8-2000, 25-8-2000, 5-10-2000, and 2-11-2000, issued by the Assessing Authority-cum-Excise and Taxation Officer, requiring payment of sales tax dues under the Punjab General Sales Tax Act, 1948 (the 1948 Act). The petitioner argued that these notices were invalid due to the statutory bar under section 22 of the 1985 Act, which suspends recovery proceedings during the pendency of an enquiry by the Board for Industrial and Financial Reconstruction (BIFR).

2. Legality of Coercive Measures for Recovery of Sales Tax Dues:
The petitioner contended that, in light of the Supreme Court's ruling in Tata Davy Ltd. v. State of Orissa, the respondents could not adopt coercive measures to recover sales tax dues during the pendency of an enquiry under section 16 of the 1985 Act. The respondents, however, argued that the failure of BIFR to complete the enquiry within 60 days rendered the reference infructuous, thus allowing them to proceed with the recovery.

3. Interpretation of Sections 16 and 22 of the 1985 Act:
The court analyzed sections 15(1), 15(2), 16, and 22(1) of the 1985 Act. It referred to the Supreme Court's interpretation in Real Value Appliances Ltd. v. Canara Bank, which clarified that the enquiry under section 16 commences upon registration of the reference and must be completed expeditiously, ideally within 60 days. However, the court held that the 60-day period was not mandatory and failure to complete the enquiry within this timeframe did not result in its abrogation.

The court also discussed the Supreme Court's ruling in Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd., which emphasized that the statutory bar under section 22 remains operative during the pendency of an enquiry, regardless of the 60-day period. Additionally, the court distinguished the facts of the present case from Corromandal Pharmaceuticals, where the bar under section 22 was not applicable to taxes collected after the sanctioned scheme.

Conclusion:
The court concluded that the enquiry under section 16 of the 1985 Act did not lapse due to non-finalization within 60 days and that the statutory bar under section 22 prevented the respondents from using coercive methods to recover tax dues during the pendency of the enquiry. The demand notices were declared illegal, and the respondents were restrained from making recoveries based on these notices. However, the court granted the respondents liberty to seek permission from the BIFR to recover the dues.

Judgment:
The writ petition was allowed, and the impugned notices were declared illegal. Respondent Nos. 1 to 4 were restrained from making recovery in pursuance of the notices but were given liberty to apply to the BIFR for permission to recover the dues under the 1948 Act and the Central Sales Tax Act, 1956.