2018 (3) TMI 545 - HC - VAT and Sales Tax

Discontinuance of benefit of exemption under CST - Sick Industrial Companies (Special Provisions) Act - the case of the petitioner M/s. Rajshree Plastiwood Private Limited did not fall under the Policy of the State Government, and therefore, notification dated 21.04.2003 issued pursuant to the directions of the Board has not been continued - Held that - After coming into force of SICA Repeal Act, 2003, as per notification dated 25.11.2016 (Annexure R/1), the proceedings pending before BIFR stands abated and interim order passed in favour of the petitioner stands automatically vacated by operation of law - The order dated 05.11.2007 passed by the BIFR was set aside by the AAIFR on 16.08.2010. The petitioner is not entitled to get any relief as well as interim relief - petition dismissed.

Summary

Issues Involved:
1. Validity and binding effect of the Sanctioned Scheme dated 20.05.2002 under Section 19 of the Sick Industrial Companies (Special Provisions) Act (SICA).
2. Legality of the letter dated 04.08.2007 issued by the Commissioner of Commercial Tax, Madhya Pradesh.
3. Quashing of demands raised under the Central Sales Tax Act, 1956 for the periods 2007-08, 2008-09, and 2010-11.
4. Application of the Madhya Pradesh Value Added Tax Act, 2002 (VAT Act) and its impact on the previously granted exemptions.
5. Jurisdiction and authority of the BIFR and subsequent appellate bodies.
6. Effect of the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 on pending proceedings and interim orders.

Detailed Analysis:

1. Validity and Binding Effect of the Sanctioned Scheme:
The petitioner argued that the Sanctioned Scheme dated 20.05.2002, approved by the BIFR, should remain binding under Section 19 of SICA and be saved by Section 5 of the SICA (Appeal) Act. The scheme included the merger of M/s. Rajshree Plastiwood Limited with the petitioner and granted sales tax and purchase tax exemptions for nine years. The Court noted that the scheme was initially complied with by all relevant authorities, including the Government of Madhya Pradesh, which issued a notification on 21.04.2003 granting the exemptions.

2. Legality of the Letter Dated 04.08.2007:
The petitioner contended that the letter dated 04.08.2007, which sought to discontinue the tax exemption, was illegal and void. The BIFR had earlier noted compliance with the scheme's provisions, but the introduction of the VAT Act on 01.04.2006 led the State Government to argue that the exemptions ceased to be effective. The BIFR's subsequent order on 25.03.2008 directed the State to continue the exemptions under the VAT Act, but this was contested by the Commercial Tax Department.

3. Quashing of Demands Raised Under Central Sales Tax Act:
The petitioner sought to quash the tax demands raised for the periods 2007-08, 2008-09, and 2010-11. The BIFR had issued a stay on these demands, but the Sick Industrial Companies (Special Provisions) Repeal Act, 2003, which came into effect on 01.12.2016, led to the abatement of all pending proceedings before the BIFR, thereby vacating any interim orders.

4. Application of the VAT Act:
The introduction of the VAT Act in 2006 was a pivotal point. The State Government argued that the exemptions granted under the previous tax regime could not continue under the VAT Act. This was supported by the AAIFR, which noted that the company had already availed exemptions up to the monetary limit of ?4.10 crores, as per the notification dated 06.10.1994.

5. Jurisdiction and Authority of BIFR and Appellate Bodies:
The AAIFR and the High Court both emphasized the importance of following principles of natural justice. The AAIFR set aside the BIFR's order dated 05.11.2007 due to the lack of notice and opportunity for the Commercial Tax Department to present its case. This decision was upheld by the High Court, which dismissed the petitioner's challenge to the AAIFR's order.

6. Effect of the SICA Repeal Act:
The repeal of SICA and the introduction of the Sick Industrial Companies (Special Provisions) Repeal Act, 2003, led to the abatement of all pending proceedings before the BIFR. The Court noted that any interim orders in favor of the petitioner stood vacated by operation of law. The petitioner was advised to seek remedy under the Companies Act, 2013, before the National Company Law Tribunal (NCLT).

Conclusion:
The Court dismissed the writ petition, holding that the petitioner was not entitled to any relief. The Sanctioned Scheme's exemptions were deemed non-applicable post-implementation of the VAT Act, and the proceedings before the BIFR were abated due to the repeal of SICA. The petitioner was directed to seek alternative remedies before the NCLT under the Companies Act, 2013.