9911796707
TMI Blog2007 (4) TMI 640X X X X Extracts X X X X X X X X Extracts X X X X ..... ys Limited, formerly known as Ispat Alloys Limited, is a registered company under the Companies Act, 1956. Its name has been registered as a dealer under the Orissa Sales Tax Act, 1947 (in short, the OST Act ) and also under the Central Sales Tax Act, 1956 (in short, the CST Act ). The said company was assessed under the CST Act for the assessment year 1997-98 and tax payable was assessed at Rs. 1,02,73,034. The payment of the same was deferred for a period of five years in view of the provisions of the Industrial Policy Resolution, 1992 and it became payable on and from March 1, 2003. The petitioner's case is that its auditors while finalising its audited accounts for the period ending September 30, 2002 reported that it has become a sick industrial company. In view of such report, the petitionercompany filed a reference application to the Board for Industrial and Financial Reconstruction (hereinafter referred to as, the BIFR ) for registration of its case under section 15(1) of the SICA. Thereafter on May 9, 2003, the Registrar, BIFR intimated the petitioner-company that the reference received from the petitioner-company stands registered as Case No. 217 of 2003. The pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the current taxes. The petitioner-company had become sick and made a reference to the BIFR and this honourable court by its order dated August 29, 2003 stayed recovery of the dues from the petitioner. The petitioner's case is that despite the same, the Sales Tax Officer, Balasore Circle, passed the impugned order directing the petitioner to pay a penalty of Rs. 51,36,517. On November 10, 2003 this writ petition was filed and on December 8, 2003 a Division Bench of this court stayed the proceedings for recovery of the tax dues and stayed the impugned order dated September 30, 2003. Thereafter between June 30, 2004 and January 29, 2005 the sales tax dues which were sought to be recovered have been paid in instalments by the petitioner-company. On February 8, 2006 BIFR disposed of the proceedings pending before it in case No. 217 of 2003 with the observation that the net worth of the petitioner-company has become positive on and from September 30, 2005. On these facts, the submission of the petitioner-company is that its application dated April 21, 2003 for reference under section 15(1) of the SICA was registered on May 9, 2003 and the said fact was communicated to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t having any protection. In answer to the plea of the petitioner that recovery proceedings cannot be initiated, the learned counsel for the Revenue submitted that the effect of section 22 of the SICA is to suspend the recovery proceeding, but the liability of the petitioner-company is not wiped out in view of such suspension. It was also urged that in view of rule 16(2) of the CST (Orissa) Rules, if on the date fixed under sub-rule (1), the dealer has not paid the amount due or has failed to make the advance payment, the Commissioner may impose a penalty not exceeding 1 times the total dues. Learned counsel further contended that in view of the aforesaid provision, liability arises from the moment the dues are not paid. On such liability, section 22 of the SICA does not have any effect. Section 22 merely suspends the period of recovery. The learned counsel further relied on proviso to rule 16(3) of the aforesaid Rules in order to say that even when an appeal or revision or reference is preferred, the interest on tax together with penalty would become payable, if ultimately tax and penalty is found due from the dealer. It was submitted that in view of the aforesaid statutory provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd it moved the Bombay High Court and the High Court restrained the Gram Panchayat from recovering the amount without the consent of the Board. When the appeal came to the honourable Supreme Court, considering section 22 of the SICA, the apex court held that when enquiry under section 16 of the SICA is pending or any scheme under section 17 thereof is under preparation or consideration by the Board or any appeal under section 25 is pending, certain proceedings against the company are automatically suspended. In paragraph 10(1) of the judgment, the learned Judges held that there would be an automatic suspension of the proceedings against the property of the company and it was made clear that as soon as the enquiry under section 16 is ordered by the Board, various proceedings set out under sub-section (1) of section 22 would be deemed to have been suspended. The court accepted that even though such suspension may be against the principles of equity and the creditors are not allowed to recover their dues, but such creditors may approach the Board for permission to proceed against the company for recovery of the dues and the Board at its discretion may accord approval. If the approval ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TC 462 (SC); [1997] 6 SCC 669, the ratio of the decision in Shree Vallabh Glass Works Ltd. [1992] 86 STC 41 (SC); [1990] 2 SCC 440 was reiterated. Learned Judges in Tata Davy Ltd. [1998] 111 STC 462 (SC); [1997] 6 SCC 669 distinguished the decision in Deputy Commercial Tax Officer v. Corromandal Pharmaceuticals [1997] 105 STC 327 (SC); [1997] 10 SCC 649; [1997] 89 Comp Cas 1 (SC). Learned Judges found that in Corromandal Pharmaceuticals [1997] 105 STC 327 (SC); [1997] 10 SCC 649 the sick industrial company was permitted to collect the amount of sales tax even after the date of the sanctioned scheme. In that peculiar factual background, the court held that realisation of the said amount cannot be said to be suspended in view of the protection under section 22. Learned Judges made it clear that the issue which arose in Corromandal [1997] 105 STC 327 (SC); [1997] 10 SCC 649 did not arise in the case of Vallabh Glass Works Ltd. [1992] 86 STC 41 (SC); [1990] 2 SCC 440. This court is of the opinion that the decision in Corromandal Pharmaceuticals [1997] 105 STC 327 (SC); [1997] 10 SCC 649; [1997] 89 Comp Cas 1 (SC) on which reliance has been placed by the Revenue is not attracted h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... writing, extend the date of such payment or allow such dealer to pay the tax due and penalty, if any, by instalments. (2) If, on the date fixed under sub-rule (1) the dealer has not paid the amount due or has failed to produce evidence of payment by the date fixed in the notice in form VII the Commissioner may impose a penalty not exceeding one-half of the total amount due and serve a notice in form VIII directing the dealer to pay the penalty together with sums previously due by a date to be fixed in the notice and to produce the receipted challan in proof of payment of such amount by a date also to be specified in the said notice: Provided that in cases of continuing default the penalty may be levied in instalments from time to time so however as not to exceed one-half of the total amount of tax due: Provided further that if collection of the sum specified in the notice of demand in form VII or any part thereof has been stayed on appeal or revision, penalty may be levied if the sum is not paid and proof of such payment is not produced before the Sales Tax Officer within a fortnight after the expiry of the stay period. Explanation. Where stay of collection until dispo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat when discretion is vested on a statutory authority, the same has to be exercised according to law and justice and not according to caprice and whim of the statutory authority. Reference in this connection may be given to the decision of this court in the case of Patnaik Co. (P.) Ltd. v. State of Orissa reported in [1975] 36 STC 362. In that case this court was considering the expression may direct that the dealer . . . shall . . . pay by way of penalty occurring in section 13(5) of the OST Act. The said provision is almost identical with the wording of rule 16(2) of the CST (Orissa) Rules where the crucial words are that the Commissioner may impose a penalty . Construing the provision of section 13(5) of the OST Act, a Division Bench of this court held that the said expression takes within its sweep the power of the Commissioner of not directing payment of such penalty. The court also held that there may be cases where the authority may not impose any penalty . It depends upon the facts and circumstances of each case and there must be an objective determination. However, the onus is on the dealer to bring to the notice of the taxing authority the facts and circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted in [1973] 32 STC 496 (All). In that case, the court was considering the question of interest which is to be paid under the U.P. Sales Tax Act, 1948. Learned Judges held that the liability to pay interest under section 8(1A) is automatically arising by operation of law and there is nothing in the language of section 8(1A) which prevents the running of interest because of the operation of any stay order. The court further held that the liability to pay interest is statutory and the Sales Tax Officer has no discretion to grant any exemption from the payment of interest. Those provisions have no application to the fact-situation in this case. Here, the statutory dispensation is also totally different. In Haji Lal [1973] 32 STC 496 (All), the Sales Tax Officer has no discretion to grant any exemption from the payment of interest, but here the imposition of penalty is discretionary. Apart from that the statutory protection under section 22 of the SICA which is available to the petitioner is totally absent in Haji Lal Mohd. [1973] 32 STC 496 (All). The other decision which was cited by the learned counsel for the Revenue was rendered in the case of Calcutta Jute Manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he court held that the conduct of the petitioner disentitled it to any relief. That decision was on the facts of that case and therefore, it has no precedential value. In so far as section 22 of the SICA is concerned, the only observation was made in para 8 at page 127 to the extent that SICA does not permit a company to withhold payment of taxes on sales subsequent to the proceedings under the said Act. In the instant case, the claim of the Revenue for payment of taxes is not on a period which is subsequent to the proceedings under the SICA. Rather the demand on the petitioner-company to pay was made at a point of time when the protection under section 22 of the SICA was continuing. Therefore, the decision in Andhra Cement Company Ltd. [1993] 89 STC 124 (AP) has no bearing to the present case. Learned counsel for the Revenue also placed reliance on the decision in the case of Vijay Mills Co. Ltd. v. State of Gujarat reported in [1990] 78 STC 198 (Guj). In that case, learned Judges of the Gujarat High Court held that section 22 of the SICA does not bar initiation of any criminal prosecution against the company. This court is in agreement with the said view of the Gujarat High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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