2009 (7) TMI 1162 - HC - VAT and Sales Tax

Whether, on a true and proper construction of the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, read with the Approved Rehabilitation Scheme by BIFR, the Tribunal was justified in not following the said order? Whether, on the facts and under the circumstances of the case, the Tribunal was justified in retaining the quantum of interest at 25 per cent of the amount of the interest and penalty, though directed to be waived in entirety without any condition? Whether, on the facts and under the circumstances of the case, the Tribunal was justified in not exercising its discretionary power judiciously by remitting 100 per cent interest and penalty as per the direction of the BIFR through approved Rehabilitation Scheme ? Whether, on the facts and under the circumstances of the case, the Tribunal was justified in overlooking the legal position that the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, had an overriding effect on all State enactments? Held that - The second appellate authority having not considered the true import of section 32 of the SICA Act, the order to that extent in not granting the complete relief of interest and penalty as up to March 31, 2007 is liable to be set aside. Consequently questions (a) and (b) will have to be answered in the negative against the Revenue and in favour of the assessee. As the questions (a) and (b) are answered in the negative against the Revenue, in our opinion, question (c) is not required to be answered. In view of the answer to questions (a) and (b), question (d) is also answered in the negative against the Revenue and in favour of the assessee.

Summary

Issues involved:
1. Interpretation of provisions of Sick Industrial Companies (Special Provisions) Act, 1985 and Approved Rehabilitation Scheme by BIFR.
2. Justification of Tribunal's decision on interest and penalty waiver.
3. Exercise of discretionary power by Tribunal in remitting interest and penalty.
4. Legal position of Sick Industrial Companies (Special Provisions) Act, 1985 on State enactments.

Analysis:
1. The applicant sought reference from Sales Tax Tribunal regarding the interpretation of provisions of Sick Industrial Companies (Special Provisions) Act, 1985 and the Approved Rehabilitation Scheme by BIFR. The Tribunal declined the reference, leading to the present application before the High Court. The Tribunal had earlier reduced the interest and penalty but did not follow the BIFR-sanctioned scheme, prompting the applicant's contentions regarding the SICA Act's applicability.

2. The High Court analyzed Section 32 of the SICA Act, which states the Act's effect on other laws. It was observed that once a scheme is sanctioned under the SICA Act, its provisions prevail over any inconsistent laws. The Court held that the Tribunal erred in not considering the sanctioned scheme, thereby acting without jurisdiction. The appellate authority should have allowed the appeal in line with the sanctioned scheme, particularly concerning penalty and interest under the BST Act.

3. Addressing the Tribunal's justification for not following the BIFR-sanctioned scheme, the Court noted that the Sales Tax Department had notice and representation before the BIFR. Therefore, the contention that no notice was served on the Department was found contrary to the scheme and record. The Court emphasized that the appellate authority should have considered the effect of Section 32(1) of the SICA Act, indicating a failure to grant complete relief on interest and penalty up to March 31, 2007.

4. Lastly, the Court highlighted that any aggrieved party, if unheard, could seek recourse by applying before the BIFR for procedural review. Referring to established legal principles, the Court indicated that the power of procedural review includes setting aside orders passed without notice to the aggrieved party. Consequently, the Court answered the raised questions against the Revenue and in favor of the assessee, setting aside the order that did not grant complete relief on interest and penalty. The application was disposed of accordingly.