2017 (5) TMI 1545 - HC - VAT and Sales Tax

Demand of interest - Section 26 (4) (a) of the Chhattisgarh Vanijyik Kar Adhiniyam 1994 - appellate authority claimed that merely on the ground of registration in the Board for Industrial and Financial Reconstruction (BIFR) interest liability cannot be waived - whether merely on account of registration of the petitioners in BIFR the petitioners would be relieved of the interest liability which is statutory in nature under Section 26 (4) (a) of the Act of 1994 under the provisions of the BIFR? Held that - it is quite vivid that the petitioner industry has been registered with the BIFR on 29-5- 2002 whereas the liability is prior to that and it has not been demonstrated that any scheme has been sanctioned including waiving of such an amount of interest liability by the scheme approved by the BIFR and it has not been established that the said interest amount has been included in the scheme approved by the BIFR - the petitioners plea that merely because the petitioner industry has been declared as sick industry on 29-5- 2002 whereas the interest liability is prior to that the petitioners having failed to demonstrate that it has included in the sanctioned scheme (if any) by the BIFR are not entitled for the protection of Section 22 (1) of the SIC Act. Since the amount in dispute i.e. the interest liability has not been demonstrated to be covered under any scheme sanctioned by the BIFR in favour of the petitioners and that amount has been included in such scheme; merely on account of registration / declaration of the petitioners industry as sick industry with the BIFR it cannot be held that the petitioners are not liable to pay interest amount. Petition dismissed - decided against petitioner.

Summary

Issues:
1. Imposition of interest on petitioners under Section 26 (4) (a) of the Act of 1994.
2. Challenge to interest liability waiver based on registration with BIFR.
3. Interpretation of Section 22 (1) of the Sick Industrial Companies (Special Provisions) Act, 1985.
4. Applicability of Section 22 (1) of the SIC Act to interest liability.
5. Legal precedent on waiver of statutory liability.

Analysis:
1. The assessing authority imposed interest on the petitioners under Section 26 (4) (a) of the Act of 1994 for specific periods. The appellate authority and the Chhattisgarh Commercial Tax Tribunal upheld the interest liability, emphasizing that registration with BIFR does not automatically waive interest liability.

2. The petitioners argued that their tax liability was discharged, and registration with BIFR occurred later, citing relevant legal precedents like Tata Davy Ltd. v. State of Orissa and J.K. Cotton Spinning & Weaving Mills Co. Ltd. v Union of India. The State counsel opposed, referring to the decision in Voltas Ltd. v. State of A.P.

3. The court examined Section 22 (1) of the Sick Industrial Companies (Special Provisions) Act, 1985, which suspends legal proceedings against sick industrial companies under certain conditions. It outlined the scope of suspension, requiring consent for specific actions against the company.

4. Legal precedents such as Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association and Deputy Commercial Tax Officer v. Corromandal Pharmaceuticals clarified the application of Section 22 (1) to dues included in sanctioned schemes. The court highlighted the protection granted to sick companies and the need for inclusion in approved schemes.

5. Referring to cases like Ghanshyam Sarda v. Shiv Shankar Trading Company and Jay Engineering Works Ltd. v. Industry Facilitation Council, the court emphasized that the waiver of statutory liability must be expressly granted. It concluded that without evidence of inclusion in a BIFR-approved scheme, the petitioners were not exempt from interest payment under Section 26 (4) (a) of the Act of 1994. The judgment dismissed the writ petitions, upholding the interest liability based on legal principles and lack of demonstrated waiver.