2008 (11) TMI 622 - HC - VAT and Sales Tax

Whether the impugned Scheme is arbitrary for altogether ignoring objections put forward by the petitioner-State and is hit by section 19(3) of the SICA? Whether dismissal of appeal of the petitioner by the AAIFR calls for interference? Held that - The operation of non obstante clause will be limited to making provision of the SICA operative in case of conflict. The Act itself contemplates an order stipulating financial assistance to be passed with consent or to prepare a scheme adopting measures as are specified in section 18 or other measures contemplated under section 19(1) which may include winding up. Thus, there is no conflict in the sales tax statute and the SICA and such a construction which results in harmonious construction of the two provisions, has to be accepted. The State filed an appeal which was barred by limitation but the State was taking other steps and proceedings before the BIFR for implementation of the Scheme continued. The observations of the AAIFR that in no situation, there could be condonation of delay beyond 60 days under section 25 of the SICA, is not a correct interpretation of law. The said provision cannot be read as mandatory, as has been held in several decisions (see Kailash v. Nanhku - 2005 (4) TMI 542 - SUPREME COURT). In any case, even if the said view is correct, this court is not debarred from setting aside order of the BIFR. We also take note of the conduct of respondent No. 3 of having not paid the amount of ₹ 796.11 lacs as per direction of the AAIFR in order dated February 12, 2008 reproduced in para 6 above and the statement made on behalf of the State that the unit has not been revived. Thus the impugned order passed by the BIFR is not sustainable. W.P allowed.

Issues Involved:
1. Validity of the BIFR order dated July 5, 2001, and the AAIFR order dated February 12, 2008.
2. Jurisdiction of BIFR to frame a scheme under section 18(4) of SICA without consent under section 19(3).
3. Consideration of objections raised by the petitioner-State.
4. Arbitrary nature of the BIFR order.
5. Dismissal of appeal by AAIFR on grounds of limitation and non-prosecution.
6. Implementation of the Scheme and compliance by respondent No. 3.

Detailed Analysis:

1. Validity of the BIFR and AAIFR Orders:
The State of Haryana petitioned to quash the BIFR order dated July 5, 2001, and the AAIFR order dated February 12, 2008. The BIFR had sanctioned a Draft Rehabilitation Scheme for respondent No. 3-company, which included various concessions from the State. The State's appeal against the BIFR order was dismissed by the AAIFR due to being barred by limitation and non-prosecution.

2. Jurisdiction of BIFR Under Section 18(4) of SICA:
The petitioner-State argued that the BIFR could not frame a scheme under section 18(4) of SICA that required financial assistance from the State without its consent as mandated by section 19(3). The court agreed, stating that the BIFR's power is not plenary and must be circumscribed by statutory provisions. The BIFR's scheme, which included financial assistance without the State's consent, was deemed ultra vires.

3. Consideration of Objections by the Petitioner-State:
The State had raised objections to the Draft Rehabilitation Scheme via letters dated June 21, 2001, and August 31, 2003, which were not considered by the BIFR. The court held that ignoring these objections was arbitrary and not in line with proper judicial or quasi-judicial procedure.

4. Arbitrary Nature of the BIFR Order:
The court found the BIFR's order arbitrary for not considering the State's objections. It emphasized that no authority could act arbitrarily and must consider the viewpoints of affected parties. The BIFR's failure to do so rendered its order unsustainable.

5. Dismissal of Appeal by AAIFR:
The AAIFR dismissed the State's appeal as barred by limitation, interpreting section 25 of SICA as not allowing condonation of delay beyond 60 days. The court disagreed, stating that the provision should not be read as mandatory and that the court could still set aside the BIFR's order.

6. Implementation of the Scheme and Compliance by Respondent No. 3:
The court noted that respondent No. 3 had not complied with the AAIFR's direction to repay Rs. 796.11 lacs collected as sales tax. Additionally, the unit had not been revived, further justifying the setting aside of the BIFR's order.

Conclusion:
The petition was allowed, and the impugned orders of the BIFR and AAIFR were set aside. The court held that the BIFR's scheme was ultra vires, arbitrary, and not sustainable, primarily due to the lack of consideration of the State's objections and the requirement of consent under section 19(3) of SICA.

← Previous Next →