2022 (1) TMI 310 - HC - VAT and Sales Tax

Default in payment of tax dues - Constitutional Validity of action of the respondents in forfeiting an amount of ₹ 61,80,000-00 paid by the petitioner Gupta Metallics towards 15% of the price for purchase of the auctioned land pursuant to Gazette Notification dated 18.12.2002, if the balance amount was not paid within 30 days from the date of sale - seeking a direction to the first respondent not to forfeit the said amount of ₹ 61,80,000/- - HELD THAT - Commissioner of Commercial Taxes had written to the then Principal Secretary to the Government of Andhra Pradesh (Revenue Department) on 14.12.2011 seeking guidance from the Government whether to confirm the auction sale by collecting the balance 85% of sale price. The Principal Secretary, vide Memo dated 04.02.2012 informed the Commissioner of Commercial Taxes that as per Section 16 of the Andhra Pradesh General Clauses Act, 1957 and Section 22 of the Andhra Pradesh Value Added Tax Act, 2005, if any dealer fails to pay the tax due or fails to pay any tax assessed or penalty levied within the time prescribed, he shall pay, in addition to the amount of such tax or penalty that may be calculated at the rate of one percent per month for the period of default. Therefore, Commissioner of Commercial Taxes was requested to take necessary action and to confirm the sale by collecting the balance 85% of the tax dues and interest from 10.02.2003 till actual payment of the tax dues. Gupta Metallics had not paid the remaining 85% of the sale price within the prescribed period, in contravention of paragraph No.3 of Form No.7 Notice dated 07.12.2002 as well as in terms of Section 36 of the Revenue Recovery Act. That being the position, the auction sale had failed. The question as to whether the 15% deposit made by Gupta Metallics pursuant to the auction sale held on 10.01.2003 is liable to be forfeited or not and if not, whether it should be refunded to Gupta Metallics or to the secured creditor (Asset Reconstruction Company) since Gupta Metallics is facing proceedings under the Recovery of Debts and Bankruptcy Act, 1993 as well as under the SARFAESI Act, should be left to the Commissioner of Commercial Taxes to take a decision - since the auction has failed, there is no legal impediment for the Commercial Taxes Department in accepting the proposal of Vinedale Distilleries to clear the outstanding tax dues together with interest by taking a reasoned decision. This is because the right of Vinedale Distilleries to redeem the property by paying the outstanding dues would subsist till the property is auction sold. Commissioner of Commercial Taxes Department, Telangana, shall take a decision as to whether 15% of the sale price deposited by Gupta Metallics on 10.01.2003 is liable to be forfeited or not? - If the decision is in the negative, the Commissioner shall take a further decision as to whether the said amount should be refunded to Gupta Metallics or to the secured creditor represented by the Asset Reconstruction Company? - Let the above decisions be taken by the Commissioner of Commercial Taxes within a period of eight weeks from the date of receipt of a copy of this order after affording an opportunity of hearing to Gupta Metallics as well as to the Asset Reconstruction Company. Petition disposed off.

Issues Involved:
1. Legality of the auction sale held on 10.01.2003.
2. Forfeiture of the 15% deposit made by Gupta Metallics.
3. Confirmation of the auction sale.
4. Refund of the 15% deposit and its rightful claimant.
5. Payment of outstanding tax arrears by Vinedale Distilleries.

Detailed Analysis:

1. Legality of the Auction Sale Held on 10.01.2003:
The auction sale was conducted by the Collector of Ranga Reddy District on 10.01.2003 for recovery of arrears of sales tax and revenue default from Vinedale Distilleries. Gupta Metallics emerged as the highest bidder and deposited 15% of the sale price. However, BIFR passed an order on 16.01.2003 staying the auction sale, citing violation of Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. The State challenged this order, and the High Court clarified that any confirmation of sale would be subject to further orders. Despite this, Gupta Metallics did not deposit the remaining 85% within the stipulated 30 days. The court held that the auction sale had failed due to non-compliance with the mandatory requirement of depositing the full purchase price within the prescribed period, as per Section 36 of the Revenue Recovery Act.

2. Forfeiture of the 15% Deposit Made by Gupta Metallics:
The court noted that Gupta Metallics had not paid the remaining 85% of the sale price within 30 days, in contravention of the auction conditions and Section 36 of the Revenue Recovery Act. This non-compliance rendered the auction sale a nullity. The court directed the Commissioner of Commercial Taxes to decide whether the 15% deposit should be forfeited.

3. Confirmation of the Auction Sale:
The court observed that Gupta Metallics did not take any steps to confirm the sale by depositing the remaining 85% of the sale price, despite the High Court's order clarifying that confirmation of sale would be subject to further orders. The court held that Gupta Metallics could not insist on confirming the auction sale after 18 years and rejected the contention as untenable.

4. Refund of the 15% Deposit and Its Rightful Claimant:
The court directed the Commissioner of Commercial Taxes to decide whether the 15% deposit should be refunded to Gupta Metallics or the secured creditor represented by the Asset Reconstruction Company, considering Gupta Metallics is facing proceedings under the Recovery of Debts and Bankruptcy Act, 1993, and the SARFAESI Act.

5. Payment of Outstanding Tax Arrears by Vinedale Distilleries:
The court noted that Vinedale Distilleries had come forward to pay all the commercial tax arrears along with interest. The court directed the Commissioner of Commercial Taxes to consider this proposal and pass a reasoned order after hearing Vinedale Distilleries.

Decision:
The court issued the following directions:
i. The Commissioner of Commercial Taxes Department, Telangana, shall decide whether the 15% deposit by Gupta Metallics is liable to be forfeited.
ii. If not forfeited, the Commissioner shall decide whether the amount should be refunded to Gupta Metallics or the secured creditor.
iii. These decisions must be taken within eight weeks, after affording an opportunity of hearing to Gupta Metallics and the Asset Reconstruction Company.
iv. The Commissioner shall also consider the proposal of Vinedale Distilleries to pay the outstanding tax arrears with interest and pass a reasoned order within four weeks.

W.P.Nos.2353 of 2003 and 13206 of 2021 were dismissed, while W.P.No.5335 of 2012 was disposed of in the above terms. No order as to costs.

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