1998 (8) TMI 544 - HC - VAT and Sales Tax

Issues Involved:
1. Entitlement of the petitioner-company to claim immunity under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985.
2. Validity of the respondent's action to recover deferred sales tax dues.
3. Applicability of prior judgments and Supreme Court decisions.

Issue-wise Detailed Analysis:

1. Entitlement to Claim Immunity Under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985:

The primary issue is whether the petitioner-company, declared a sick industrial company in 1987 and under the purview of the Board of Industrial and Financial Reconstruction (BIFR), is entitled to immunity from recovery actions under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. The petitioner argued that since the rehabilitation scheme was under implementation, the respondent could not initiate recovery actions without the express permission of the BIFR. The petitioner relied on a previous decision by the High Court in Corromandal Pharmaceuticals Limited v. Deputy Commercial Tax Officer, which supported their claim for immunity.

However, the court referred to the Supreme Court's decision in Deputy Commercial Tax Officer v. Corromandal Pharmaceuticals, which clarified that Section 22(1) does not provide an absolute bar but requires the previous consent of the BIFR for proceedings against a sick company. The court emphasized that the petitioner-company had defaulted on its obligations under the rehabilitation scheme, and thus, the immunity under Section 22(1) could not be claimed indefinitely.

2. Validity of the Respondent's Action to Recover Deferred Sales Tax Dues:

The petitioner-company faced financial and labor issues, leading to a lock-out and cessation of production. The Government of Andhra Pradesh had deferred the payment of sales tax for three years (1992-93 to 1994-95) and granted a one-year moratorium. Despite these concessions, the petitioner failed to commence repayment from April 1, 1996, as stipulated. The respondent issued notices demanding payment and threatened coercive steps, including property attachment.

The court noted that the respondent's actions were justified as the petitioner-company had defaulted on its repayment obligations. The Supreme Court's decisions in Tata Davy Ltd. v. State of Orissa and Deputy Commercial Tax Officer v. Corromandal Pharmaceuticals underscored that obtaining BIFR's permission is not an absolute bar for recovery actions against defaulting companies. The court concluded that the respondent's actions were in accordance with the law and the petitioner-company could not claim immunity from these actions.

3. Applicability of Prior Judgments and Supreme Court Decisions:

The petitioner-company cited the High Court's decision in Corromandal Pharmaceuticals Limited v. Deputy Commercial Tax Officer to support its claim for immunity. However, the court highlighted that this decision had been reversed by the Supreme Court in Deputy Commercial Tax Officer v. Corromandal Pharmaceuticals. The Supreme Court's ruling made it clear that the requirement for BIFR's consent under Section 22(1) is not an absolute bar to recovery actions.

The court also referred to the Supreme Court's decision in Tata Davy Ltd. v. State of Orissa, which reiterated the principles established in Deputy Commercial Tax Officer v. Corromandal Pharmaceuticals. These decisions collectively established that the petitioner-company could not indefinitely claim immunity from recovery actions under the guise of a rehabilitation scheme.

Conclusion:

The court dismissed the writ petition, concluding that the petitioner-company was not entitled to claim immunity under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, given its default in repaying deferred sales tax dues. The respondent's actions to recover the dues were deemed valid and in accordance with the law. The court's decision was influenced by the Supreme Court's rulings, which clarified that BIFR's consent is not an absolute bar to recovery actions against defaulting companies. The writ petition was dismissed without costs.

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