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TMI Blog1998 (8) TMI 544X X X X Extracts X X X X X X X X Extracts X X X X ..... appointed as the operating agency. The Board has sanctioned the Rehabilitation Scheme, prepared by the operating agency, and it was put into force in August, 1994. Despite the said scheme, the petitionercompany could not make benefit out of the said scheme and incurred further losses and the accumulated loss as on March 31, 1995 was around Rs. 31 crores. 3.. Added to the financial problems, the petitioner-company also suffered labour problems in the year 1994-95. Due to the failure of the petitioner-company in payment of dues to Andhra Pradesh State Electricity Board and Water Works Department, the electricity and water connections were disconnected in March, 1995. Lock-out was also declared by the company in the month of June, 1995. In this background, the petitioner-company sought for deferment of payment of sales tax for three years. The Government of Andhra Pradesh accepted the request of the petitioner-company and issued G.O. Rt. No. 674, dated July 5, 1993 deferring the payment of sales tax from 1992-93 to 1994-95. After the sanction of the scheme pursuant to G.O. Rt. No. 674, at the request of the petitioner-company, the Government issued another G.O. Rt. No. 625, dated J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counter-affidavit filed by the respondent, it was categorically indicated about the tax liability of the petitioner-company for the years 1992-93, 1993-94 and 1994-95. It is stated in the counter that the tax due by the petitionercompany for the assessment year 1992-93 resulted from the final assessment and whereas for the years 1993-94 and 1994-95, it resulted as per the monthly returns filed by the petitioner-company. 10.. According to the respondent, in a draft rehabilitation scheme prepared by the Board, vide proceedings dated July 1, 1992, the Government of Andhra Pradesh was requested to consider deferment of sales tax for a period of three years with interest rate of 15 per cent per annum to be repaid after a moratorium of 2 years in 20 equal instalments. Pursuant to the said recommendation of the Board, the Government issued G.O. Rt. No. 674, dated July 5, 1993 granting deferment of sales tax payable by the petitioner-company for the period of three years, i.e., for 1992-93 to 1994-95. However, this deferment of sales tax shall carry interest at 18 per cent per annum as provided under section 16 of the Andhra Pradesh General Sales Tax Act, 1957 and shall be paid in 36 mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er-company is declared as a sick company and revival of the petitionercompany is still pending before the Board as the scheme earlier framed has failed and when the Board is considering the other proposals in respect of the petitionercompany, the petitioner-company is entitled to immunity under section 22(1) of the Sick Industrial Companies Act and as such the respondent cannot issue the impugned notices to the petitioner-company for recovery of the instalments due except with the express permission of the BIFR. Learned counsel stated that as per the scheme providing modalities to the payment of arrears of sales tax for the years 1992-93 to 1994-95, the petitioner-company was required to pay the deferred sales tax arrears from April 1, 1996 in 36 equal monthly instalments, the first instalment commencing from the month of April, 1996. However, on account of financial difficulties and as a result of subsequent closure of the factory, the petitioner-company could not discharge its obligation arising out of the scheme prepared under G.O. Rt. No. 625, dated July 24, 1995. Counsel further states that even if there is a default in payment of instalments, in terms of section 22(1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 669; [1998] 93 Comp Cas 1 and in Deputy Commercial Tax Officer v. Corromandal Pharmaceuticals [1997] 105 STC 327; [1997] 89 Comp Cas 1; [1997] 10 SCC 649. Learned Special Government Pleader for Taxes submitted that as the petitioner-company has committed default in payment of instalments even after the expiry of the moratorium period envisaged by the Government, the immunity under section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 is not available to the petitioner-company and therefore, pleaded for the dismissal of this writ petition. 17.. In Deputy Commercial Tax Officer v. Corromandal Pharmaceuticals [1997] 105 STC 327; [1997] 10 SCC 649; [1997] 89 Comp Cas 1, the Supreme Court while considering the embargo under section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, in para 10 (para 7 in STC) of its decision has held thus: All that is required by section 22(1) of the Act is that in cases where an inquiry is pending or scheme is under preparation or consideration or a sanctioned scheme is under implementation or an appeal is pending, no proceedings, as stated in section 22 of the Act for execution, distress or the like, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on September 10, 1996 and form I notice under the Revenue Recovery Act was also issued on June 30, 1996. 20.. In the guise of the rehabilitation scheme under implementation, notwithstanding the default committed by the petitioner-company in payment of the instalment amounts to the Government, can it be still held that the petitionercompany is entitled to claim immunity under section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 and the express permission of the BIFR has to be obtained by the respondent before initiating action against the petitionercompany? 21.. The Supreme Court in the decision in Deputy Commercial Tax Officer v. Corromandal Pharmaceuticals [1997] 105 STC 327; [1997] 10 SCC 649; [1997] 89 Comp Cas 1 has held in no uncertain terms that obtaining permission from the BIFR is not an absolute bar for initiating action against the defaulting companies. The dues of payment of sales tax by the petitioner-company pertain to the years 1992-93 to 1994-95. A rehabilitation scheme at the request of the petitioner-company and at the intervention of the Board was prepared for the petitioner-company and certain modalities were worked out for the paym ..... X X X X Extracts X X X X X X X X Extracts X X X X
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