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TMI Blog2004 (3) TMI 403X X X X Extracts X X X X X X X X Extracts X X X X ..... y limits on the sales tax deferral allegedly earlier granted to the petitioner. In Writ Petition No. 11933 of 1997 the reliefs claimed in the earlier writ petition are also claimed and mainly the orders of Tribunals, i.e., Board for Industrial and Financial Reconstruction (for short "BIFR ") and Appellate Authority for Industrial and Financial Reconstruction (for short "AAIFR") have been challenged. For the facts reference would be made to W.P. No. 11933 of 1997 which is more comprehensive and in which the orders of the Government as well as the orders of BIFR and AAIFR have been challenged. 3.. The Hyderabad Allwyn Limited (hereinafter referred to as "HAL") was a company with its registered office at Hyderabad engaged in various industrial pursuits. Government of A.P. was a major share holder in the company. The company suffered huge losses and became a sick industrial company within the meaning of section 3(o) of the Sick Industrial Companies (Special Provisions) Act, 1985. The matter was taken up by BIFR. In order to make efforts to rehabilitate this company the Government of Andhra Pradesh negotiated with the petitioner-company and an agreement was arrived at for the take ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of Finance and Plg. (E.I) Dept., vide their U.O. No. 46711/A/974/E1/93, dated 10-1-1994. By order and in the name of Governor of Andhra Pradesh J. HARINARAYAN Ex-officio Secretary to Government" 4.. A memorandum of understanding was also signed between the petitioner and Government of Andhra Pradesh. Besides other stipulations the parties in the memorandum agreed that the provisions in the memorandum would be subject to the orders and directions of the BIFR in the case pending before it. Thereafter, BIFR approved the scheme by its order dated April 4, 1994. According to the petitioner the approval of BIFR was based on projections of profitability prepared by IDBI and in preparing the projections IDBI had assumed that no interest was payable on deferred sales tax. Now, it is the case of the petitioners that, going by G.Os. and the scheme prepared by BIFR the deferment of sales tax was not only deferment of payment but deferment of liability. It was stated that normally liability to pay tax would incur the moment the taxable transaction takes place, since deferment was there for a period of 7 years so the liability itself did not incur or would not incur for 7 years. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y was merged under the Rehabilitation-cum-Amalgamation scheme sanctioned by us vide order dated April 4, 1994 have preferred an application dated November 9, 1995 seeking direction to the State Government of Andhra Pradesh to waive levy of interest on the amount of sales tax deferral granted by it vide G.O. Rt. No. 66 dated 20-1-1994 read with G.O. Ms. No. 119 dated 18-8-1995. After having considered the grounds for the prayer we are of the view that the State Government has granted the sales tax deferral based on its policy guidelines and if those policy guidelines does not provide for interest-free deferral then the benefit cannot be granted to the company. We, therefore, find no reason to interfere with the State Government policy guidelines and reject the prayer made by the applicant-company." 6.. Aggrieved by the order of BIFR the petitioner preferred an appeal to Appellate Authority for Industrial and Financial Reconstruction (AAIFR). The appeal was rejected on July 25, 1996. Thereafter the writ petitions were filed. 7.. Counter has been filed by Industries and Commerce Department. Material facts relating to the sickness of the HAL and its takeover by the petitioner-com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pacity by 25 per cent of products of same productive line. Such projects would be eligible for sales tax deferral for a period of 10 years from the date of deferment of the original unit. HAL was considered to be beyond the purview of the policy guidelines issued through G.O. Ms. No. 117. The Government keeping in view the provisions of memorandum of understanding and in the best interest and future prospects of HAL and also of its intention to revive a large public sector undertaking allowed sales tax deferral as a special case and issued G.O. Rt. No. 66, dated January 20, 1994 which has been reproduced hereinabove. It is submitted that after some time of issuance of order dated January 20, 1994 it was noticed that said order was silent in regard to the schedule of payment on deferred sales tax and also the interest part, therefore, the Government examined the matter in further details keeping in view the sanctioned scheme of BIFR dated April 4, 1994 and also the provisions of the A.P. General Sales Tax Act, 1957 and issued G.O. Ms. No. 119 dated August 18, 1995. 8.. In the light of these pleadings now the only question to be decided by this Court is, whether the petitioner wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have to be charged in accordance with the provisions of the APGST Act. Further contending that the scheme was mandatory and the respondent-State Government was bound to follow the scheme the learned counsel relied on section 18(3) of the Sick Industrial Companies (Special provisions) Act. It is contended that under section 32 of the Sick Industrial Companies Act, 1985 schemes prepared under the Act shall have effect notwithstanding anything contained in any other law except the provisions of the Foreign Exchange Regulation Act, 1973 and the Urban Land (Ceiling and Regulation) Act, 1976 for the time being in force. We do not want to go into that question because in the scheme which we have noted hereinabove we do not find that the scheme envisaged that the petitioner would not be liable to pay interest for the deferred tax. Now, let us see whether there was any such stipulation in the memorandum of understanding which flows from the scheme. In the memorandum of understanding clause (5) only states that the State Government would after amalgamation of HAL with Voltas extend to HAL division of Voltas all reliefs and concessions as are available to sick industrial undertakings in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sser price than the products of an established concern. In such a situation the customer does not pay the sales tax. Therefore the Sales Tax Act gives power to the State Government to exempt products from sales tax. We have not been shown any power of the State Government by which deferment of tax can be ordered which in effect mean that the petitioner collected the tax for 7 years from the customers but did not pay it to the Government. It necessarily unduly enriched the petitioner. Therefore, in our view he cannot now claim that his tax becomes due only after 7 years and after 7 years he had already paid the tax and he is not supposed to pay the interest. There is a full scheme given under the A.P. General Sales Tax Act. Returns have to be filed regularly by allowing the deferment. The petitioners were not given an exemption from registration or from filing the returns or the officers of the sales tax were not exempted from making the assessment of tax. Therefore, it is not correct that the tax became due only after 7 years after 1993. If the contentions of the petitioner are accepted then it would mean that the State had advanced a loan of Rs. 18.50 crores to the petitioner with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the law normally permits it to be passed on and the ultimate burden is borne by the consumer. But 'the fact that the burden of a tax may have been passed on to the consumer does not alter the legal nature of the tax' (Halsbury's Laws of England, Volume 52, paragraph 20.04). Therefore even a Legislature, much less a Government, cannot enact a law or issue an order or agree to refund the tax realised by it from the people in exercise of its sovereign powers, except when the levy or realisation is contrary to a law validly enacted. A promise or agreement to refund tax which is due under the Act and realised in accordance with law would be a fraud on the Constitution and breach of faith of the people. Taxes like sales tax are paid even by a poor man irrespective of his savings with a sense of participation in growth of national economy and development of the State. Its utilisation by way of refund not to the payer but to a private person, a manufacturer, as an inducement to set up its unit in the State would be breach of trust of the people amounting to deception under law." Again in paras 10 and 11 (page Nos. 505 and 506 of STC) of the judgment the Supreme Court stated: "10. Exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract Act. The constitutional requirements of levy of tax being for the welfare of the society and not for a specific individual the agreement or promise made by the Government was in contravention of public purpose thus violative of public policy. No legal relationship could have arisen by operation of promissory estoppel as it was contrary both to the Constitution and the law. Realisation of tax through State mechanism for sake of paying it to private person directly or indirectly is impermissible under constitutional scheme. The law does not permit it nor equity can countenance it. The scheme of refund of sales tax was thus incapable of being enforced in a court of law." 11.. Going by the spirit of the judgment of the Supreme Court, if the tax levied from the consumers has to be paid to the Government the interest has also to be paid if the payment is not made after collection of the tax in accordance with the Act. We have serious doubt as to whether the State Government at the first instance could have permitted deferment of tax for a period of 7 years even after collection from consumers but we keep this question open as it was not directly before us in these proceedings. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e drain on the State's exchequer and consequential denial of use of State's finances for other State and public purposes and objectives and obviating allocations of the State budget to HAL, as contrasted with the consequences of continued retention of the shareholding and management of HAL as a Government company. (b) To avoid bankruptcy of HAL and consequential loss of employment in the State of Andhra Pradesh and loss of capital of the State of Andhra Pradesh by initiating measures of privatisation; (c) To ensure the commitment on the part of the new owner to maintain and fully utilise the existing production capacities at reasonable level and to ensure the growth and stability of HAL in the long run;" 4.. By this MOU, it was agreed that all the business interests and undertaking of refrigeration department would be transferred to and taken over by the appellants by virtue of an amalgamation on the terms and conditions set out in the MOU. The MOU clarified that it would take effect from March 29, 1993 provided the scheme of amalgamation was approved by the BIFR. 5.. Thereafter, a draft scheme was prepared and circulated to all the parties. The draft scheme, inter alia, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated December 5, 1995, refused to interfere on the ground that the sales tax deferral was granted by the Government based on its policy and if the policy guidelines did not provide for waiver of interest then that benefit could not be granted to the appellants. 11.. The appellants filed an appeal before the Appellate Board for Industrial and Financial Reconstruction, which by its order dated July 25, 1996 dismissed the appeal, inter alia, on the ground that the liability to pay interest was a statutory liability. It was held that in the absence of any provision in the scheme the statutory liability could not be waived. 12.. The appellants then filed a writ petition in the Andhra Pradesh High Court, which has been dismissed by the impugned judgment. The Andhra Pradesh High Court has held that there was no exemption from sales tax. It held that all that had been granted was a deferral for payment of sales tax. It held that there was no provision in the Sales Tax Act to grant deferral but it would not go into the question whether such deferral could have been granted as it did not arise before it. It held that there was a statutory liability to pay interest and so long as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion from a slightly different angle. Section 7(1) enjoins on every dealer that he shall furnish prescribed returns for the prescribed period within the prescribed time to the assessing authority. By the proviso the time can be extended by not more than fifteen days. The requirement of section 7(1) is undoubtedly a statutory requirement. The prescribed return must be accompanied by a receipt evidencing the deposit of full amount of 'tax due' in the State Government on the basis of the return. That is the requirement of section 7(2). Section 7(2A), no doubt, permits payment of tax at shorter intervals but the ultimate requirement is deposit of the full amount of 'tax due' shown in the return. When section 11B(a) uses the expression 'tax payable under sub-sections (2) and (2A) of section 7', that must be understood in the context of the aforesaid expressions employed in the two sub-sections. Therefore, the expression 'tax payable' under the said two sub-sections is the full amount of tax due and 'tax due' is that amount which becomes due ex hypothesi on the turnover and taxable turnover 'shown in or based on the return'. The word 'payable' is a descriptive word, which ordinarily me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same. 17. It was submitted that the amounts become due and payable only on March 29, 2000. In support of this contention reference was also made to a letter dated March 1, 2000 addressed by the Commercial Tax Officer to the appellants calling upon them to pay the amount by March 29, 2000. We are unable to accept this submission. As set out above the payment had become due on filing of the return. 18.. Reliance was also placed upon the case of Indian Shaving Products Ltd. v. Board of Industrial and Financial Reconstruction See [1996] 218 ITR 140 (SC). (1996) 1 SCC 683, wherein this Court has held that an amalgamated company is entitled to the benefit of section 72(a) of the Income-tax Act. In our view, this authority has no relevance at all, to the question before us. 19.. Undoubtedly, the clause also does not contain any provision for payment of interest. It also does not contain waiver from payment of interest. Under the provisions of the Andhra Pradesh General Sales Tax Act, the assessee has to obtain a licence, file returns and pay the tax at the time the returns are filed. However section 16(2)(b) of the Sales Tax Act permits extension of time for payment of tax. Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther clear from clause 13(b)(3) of the scheme. That clause specifies that interests shall only be at the rate of 6 per cent. Such a provision had to be made because otherwise the statutory liability would have been to pay interest at the rate of 18 per cent. In clause 13(b)(4) there is no express waiver of or reduction in the rate of interest and the payment thereof. 21.. On behalf of the respondents, reliance has been placed upon the case of Amrit Banaspati Co. Ltd. v. State of Punjab See [1992] 85 STC 493 (SC). (1992) 2 SCC 411. In this case the Chief Minister and the Government had promised refund of sales tax if the industry was set up in the State. After the industry was set up, the Government did not grant the refund of sales tax. This Court held that a promise of refund of sales tax is completely different from waiver of tax. This Court held that if there is a waiver of tax, that benefit ultimately goes to the consumer inasmuch as no tax is collected. This Court held that in case the tax is collected from the consumer it has to be paid to the Government. This Court held that to promise refund of tax, which is due and payable, would be a fraud on the Constitution. It wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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