1973 (10) TMI 50 - HC - VAT and Sales Tax

Summary

Issues:
1. Enforcement of mortgage by Industrial Finance Corporation of India against Panipat Woollen and General Mills Company Limited for non-payment.
2. Winding up proceedings initiated by unsecured creditors and depositors against the company.
3. Legal challenge by the corporation against excise and taxation authorities for attaching properties for sales tax arrears.

Analysis:
1. The Industrial Finance Corporation of India advanced a loan to the Panipat Woollen and General Mills Company Limited against an English mortgage. The company failed to repay, leading to a demand for payment. Subsequently, due to financial difficulties, winding up proceedings were initiated against the company. A scheme of arrangement was proposed but not accepted, resulting in the corporation taking possession of mortgaged assets and leasing them to another company.
2. During winding up proceedings, the excise and taxation authorities attached the properties for sales tax arrears. The corporation challenged this action in court, arguing that the authorities could only attach the equity of redemption. The single Judge found in favor of the corporation, stating that the authorities' action was illegal. The State of Punjab appealed this decision under the Letters Patent.
3. The corporation contended that the sales tax authorities could not attach and sell their rights in the mill, and the arrears of sales tax could only be recovered from the equity of redemption. The State argued that the corporation or the lessee could be considered transferees of the business, allowing recovery of sales tax. However, the court found that the ownership of the business had not been entirely transferred, making the provision cited by the State inapplicable. The court upheld the single Judge's decision, dismissing the appeal with costs.