9911796707
TMI Blog1998 (4) TMI 518X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Board for Industrial and Financial Reconstruction (in short, the BIFR ) under section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 (in short, the SICA Act ). By a letter dated September 19, 1995, the BIFR informed the Chairman of the applicant-company that the reference made by the company had been registered as Case No. 69 of 1995. By an order dated November 10, 1995 BIFR appointed Industrial Reconstruction Bank of India (in short, IRBI ) as an operating agency for feasibility study and to examine the viability and submit a study report of the company. The BIFR declared, by the same order, the applicant-company as a sick company under the provisions of section 3(1)(o) of the SICA Act. In August, 1996, Government of West Bengal in the Industrial Reconstruction Department expressed their views regarding the reliefs/concessions to be given to the applicant-company on behalf of the State Government on the draft rehabilitation scheme. One of the proposals expressed by the Government of West Bengal, in the Industrial Reconstruction Department, was that only arrear sales tax dues were considerable to be converted into a loan carrying interest at 8.75 per c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and documents of the applicant and seized twenty-eight files and prepared a seizure receipt but refused to hand over the same to the applicants and asked the applicant to visit the office of respondent No. 2 on March 8. A representative of the applicant visited the office of respondent No. 2 accordingly and was informed by respondent No. 2 that in the event of the applicant depositing an amount of Rs. 5 lakhs, respondents would withdraw and/or cancel the said seizure and would also return the files and documents of the applicants. On applicant s refusal to deposit the sum of Rs. 5 lakhs, respondent No. 2 granted a seizure receipt dated as on 7th of March, 1997. 5.. The applicants have approached the Tribunal being aggrieved by the seizure of the books of accounts and documents in spite of the fact that it has been declared as a sick industrial company by the BIFR which is entitled to get protection under section 22(1) of the SICA Act. 6.. The case of the respondents, as available from their affidavit-inopposition, is that applicant No. 1 changed its address from 6A, Middleton Street, Calcutta-1 to Village and Post: Kamdevpur, 24-Parganas (North) in the year 1991. No head off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to the contrary is denied. It is further submitted that the respondent never informed the applicant that in the event the applicant made a deposit of Rs. 5 lakhs, the seizure receipt would be cancelled and books of accounts would be released. From the report drawn by the Inspector prior to the said seizure, it would be clear that the respondents had sufficient reason to believe that the applicant had been attempting to evade payment of tax. The reasons in the form of a report in writing were recorded prior to the seizure and the said report was duly signed by the authorised representative. The seizure receipt was drawn in accordance with law and bore the signature of two witnesses who were stated to be employees of the applicant and were present during the seizure. It is further submitted that the West Bengal Sales Tax Act, 1994 is an independent Act and so the provisions of section 22 of the SICA Act are not applicable in the instant case and also has no bearing on the actions of respondent No. 2. It is further averred that issuance of the Memo. No. 10486 dated December 30, 1996 and the seizure of books of accounts dated March 7, 1997 are as per provisions of the West Bengal S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iry under section 16 is pending in respect of an industrial company or when any scheme referred to under section 17 is under preparation or consideration, no proceedings for execution, distress or the like against any of the properties of the industrial company lies or can be proceeded with further except with the consent of the Board. In this connection, he referred to the judgments in the case of Gram Panchayat v. Shree Vallabh Glass Works Ltd. [1992] 86 STC 41 (SC); [1991] 71 Comp Cas 169 (SC), Reliance Ispat Industries Ltd. v. Commissioner of Sales Tax [1993] 91 STC 521 (MP); [1993] 77 Comp Cas 381 (MP) and Himalaya Rubber Products Limited v. Board for Industrial and Financial Reconstruction [1993] 88 STC 47 (Cal); [1993] 76 Comp Cas 281 (Cal). Mr. Bhattacharjee argued that the Memo. No. 10486 dated December 30, 1996 issued by the respondent No. 2 could not be issued under the provisions of section 22 of the SICA Act. He also submitted that the seizure of files and documents made by respondent No. 2 at the applicant s factory premises on 7th of March, 1997 was also in the nature of a proceeding for execution, distress or the like against the books of accounts and files of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 22 of the SICA Act. He also argued that properties of sick industrial companies cannot be seized and there is no doubt that books of accounts of a company are properties of the company. He further argued that the gate passes referred to in the seizure report were not documents of sale at all. The applicants obtained the services of local firms for the purpose of printing the stationery manufactured by the applicant. These gate passes merely show that the applicant had sent their products to outside firms for job work relating to numbering, etc., and they were despatched not by way of sales. He handed over, in the course of the hearing, a few of such gate passes and also some forms where the job numbers and description of job covered by such gate passes were referred to. It would be seen, he argued, that in these despatch documents there was no reference to any sale price; only the quantity of the material sent out and the description of the jobs (e.g. for numbering of Overnites Air Way bill numbering from 7800001-7900000) was mentioned. If these two are taken together, there would be no doubt that these despatches were for the purpose of job works like printing, etc., on sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that basis a reasonable person could not have formed any suspicion whatsoever. In the instant case that was not the situation. Regarding the absence of witnesses, Mr. Mukhopadhyay stated that the submission of the applicant is totally baseless. The applicant has alleged that there was no witnesses to the seizure. It would be evident from the seizure receipt that the said seizure was made in the presence of two witnesses and the two witnesses were employees of the applicant. Even if the copy of the seizure receipt handed over to the applicant s representative did not contain the signature of the witnesses, the applicant must have been aware of the presence of the two witnesses because the applicant has signed on the seizure list which bears the signature of the two witnesses to acknowledge receipt of a copy of the same. Secondly, the applicant could not have been unaware of the fact that two of its employees were present during the seizure and had signed on the seizure receipt. The allegation of the applicant, therefore, was totally baseless. 14.. The applicant has urged that the applicant-company is a sick industrial company under the SICA Act and is, therefore, entitled to the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s tax, the sales tax authorities refused, in terms of the rule 27AA of the Bengal Sales Tax Rules, 1941 to issue to it declaration form C under the Central Sales Tax Act. In that case, the High Court held that sales tax declaration forms had become a necessary adjunct without which a trader could not carry on competitive business. The object of the refusal of the authority to issue the forms was clearly a coercive measure to cover the sales tax arrears due from the applicant-company. Moreover, withholding of declaration forms under rule 27AA(2)(c) of the 1941 Rules is an alternative mode of recovery of tax and hence, it was held, for the purposes of section 22(1) of the 1985 Act withholding of the sales tax declaration form for failure to pay arrears of sales tax was a process similar to execution and distress and the sales tax authorities were not entitled to withhold the forms without the consent of the BIFR. It would be seen that in all these cases the actions initiated were coercive actions to recover dues from the sick companies. The instant case is quite different in that the action is not an action to recover monies due. The learned advocate for the applicant has argued th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zure of the books of accounts of the company, cannot come into this category. If monies due to a company are seized or withheld or productive assets of the company are sought to be seized, there is no doubt that the operational functioning of the industrial company is likely to be affected jeopardising the recovery of the sick industrial company, but such is not the case when books of accounts of the company are seized. It would be difficult to hold that seizure of the books of accounts of the company will result in obstructing the revival of the sick industrial company. It is seen from the correspondence annexed with the application that in the different proposals which were under examination by the BIFR for the revival of the company there was a suggestion by Government of West Bengal in the Industrial Reconstruction Department that arrear sales tax dues could be converted into a loan carrying interest at 8.75 per cent per annum with a rebate at 2 per cent per annum for timely repayment. It would be seen that the company itself wanted the assessment order for the year ending 31st March, 1994. It would, therefore, be clear that the quantum of arrear sales tax dues of the company w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppropriate to hold that they did not have any suspicion merely because it has not been mentioned categorically in the same language as occurs in section 66. On a perusal of the recorded reasons it will be seen that the seizing officers had recorded as follows: from the books of accounts produced, it appears that the dealer has failed to pay taxes from November 1, 1995. A bunch of gate passes in plain paper is produced which indicates that the dealer is selling goods....... The non-explanation of the said gate passes leads us to search and seize some documents from the custody of the above representative. Seizure under section 66 of the West Bengal Sales Tax Act, 1994 is made separately. 19.. From the record quoted above, it will be seen that the seizing officers had seen during their examination a bunch of gate passes in plain paper which indicated that the dealer was selling goods. Apparently, there was no explanation of the said gate passes and this led them to search and seize some documents from the custody of the authorised representative. It is also mentioned in the report that seizure under section 66 of the 1994 Act is made separately. This clearly indicates, although ..... X X X X Extracts X X X X X X X X Extracts X X X X
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