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TMI Blog2009 (8) TMI 1101X X X X Extracts X X X X X X X X Extracts X X X X ..... - SATHEESACHANDRAN S.S. , J. S.S. SATHEESA CHANDRAN J. These two writ petitions are filed by two brothers separately, who were erstwhile partners of a firm by name Shabago Marketing , impeaching the correctness, propriety and legality of the judgments passed by the VI Additional District Judge, Ernakulam in the respective civil miscellaneous appeals preferred by them against the orders passed by the insolvency court in their respective applications declining protection order against proceeding for realisation of sales tax arrears due from them in respect of their business concern. Initially both the petitioners together had filed a petition as I.P. No. 1 of 2003 for declaring them as insolvents. But, later realising that a joint petition by them for the relief claimed is not entertainable, that petition was withdrawn with liberty to file fresh application. The petitioner in W.P. (C.) No. 6701 of 2008, thereafter, filed I.P. No. 1 of 2005 and the petitioner in W.P. (C.) No. 19710 of 2008 filed I.P. No. 2 of 2005, both before the SubCourt, Kochi to declare them as insolvent. The gist of the allegations raised in both petitions was common alleging that the Sales Tax Intel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that the appellants/ petitioners are not entitled to get protection under the Insolvency Act. Both the petitioners preferring separate writ petitions against the respective judgments rendered by the learned Additional District Judge in their civil miscellaneous appeal challenge the correctness of those judgments invoking the supervisory jurisdiction vested with this court under article 227 of the Constitution of India. I heard the learned counsel for the petitioners and also the learned Government Pleader. On the factual aspects involved in the petitions, there is no dispute at all. The petitioners are defaulters to sales tax and against them coercive steps are being proceeded with by the State under the provisions of the General Sales Tax Act and Revenue Recovery Act, for realisation of the sales tax arrears. The short question that emerges for consideration is whether the petitioners are entitled to protection under section 31 of the Insolvency Act as sought for by them in their respective insolvency petitions filed to declare them as insolvents. The learned counsel for the petitioners inviting my attention to the definition under section 2(1)(b) of the Insolvency Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tirely different from the right to a declaration as an insolvent, and a protection order from arrest and detention under the provisions of the Insolvency Act to escape from the proceedings arising from the debt due, whether it be from an individual creditor or the State. The view taken by the learned District Judge in the impugned judgment that sales tax is collected by the trader from the customers for the purpose of remittance to the Government and so much so, the trader collecting that amount as the trustee or agent of the Government and the amount due to the Government thereof will not have the character of a debt is not correct. The trader is collecting the tax prescribed by the statute for the sale transactions over the commodities from the customers. He is not collecting such amount from the customers as a trustee or as an agent of the Government. The amount collected by him is due to the Government by way of tax does not postulate that the trader is a trustee and the Government beneficiary. If the trader fails to pay the amount collected by way of tax he is liable to be proceeded against as covered by the Sales Tax Act which may give rise to penal consequences as well. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ales tax arrears due from a dealer or any other person is a State debt in respect of which a proceeding under the Insolvency Act is maintainable at the instance of a person who is proceeded against for the recovery of such debt. The larger question, however, remains whether the petitioners are entitled to get a protection order from their arrest and detention pursuant to proceedings initiated against them by the State for realisation of sales tax arrears. Sales tax arrears due from them is a State debt will not by itself enable the petitioners to claim any such protection under section 32 of the Insolvency Act. Admittedly, in an inspection conducted by the Intelligence Wing of the Sales Tax Department at the premises of the business concern, the firm in which these petitioners were partners, suppression of sale turnover and evading of large amount due as sales tax was detected and pursuant thereto recovery proceedings were launched to realise debts totalling a sum of Rs. 35,86,852. The counter-affidavit filed in the writ petitions by the second respondent discloses in the raid conducted over the premises suppression of sales were detected and hence the Intelligence Officer impos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion are also to be taken into account when a person liable for the debt seeks a protection order under section 32 of the Insolvency Act. In the present case, in examining the entitlement of the petitioners to claim protection orders under section 32 of the Insolvency Act to avoid arrest and detention arising from proceedings for recovery of a debt relating to sales tax arrears, the interdiction placed under section 49 of the Kerala General Sales Tax Act cannot also be lightly ignored. Section 49 of the KGST Act reads thus: Courts not to set aside or modify assessments except as provided in this Act. No suit or other proceeding shall except as expressly provided in this Act, be instituted in any court to set aside or modify any assessment made under this Act or any proceedings under this Act for the recovery of any tax or other amount due under this Act or to stay any such proceedings or recovery. (underlining Here italicised. supplied). Of course, in an insolvency proceedings setting aside or modifying any assessment under the General Sales Tax Act is not contemplated nor permissible. Still stay of any proceedings or recovery under the Act by invoking section 32 of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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