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Judgment
D.V. Shylendra Kumar, J.—Petitioner is a manufacturer of cement. Petitioner industry had fallen sick. Petitioner had approached the Board
for Industrial and Financial Reconstruction by making a reference to the Board u/s 15 of the Act. The Board on consideration of the same was of
the view that the petitioner-company should be declared as a sick unit within the meaning of Section 3(o) of the Act read with Section 18 for the
purpose of a scheme being prepared for the rehabilitation of the company.
The Board so declared the company as a sick unit on June 2, 2000 and thereafter, proceedings are pending before the Board within the
provisions of the Act from this day.
It is the assertion of the petitioner that the cut-off date for the purpose of granting moratorium, which had been fixed to be as December 31,
2000 has been shifted by the Board after hearing all the concerned and as of now it is March 31, 2003.
In so far as the present petition is concerned the petitioner has sought for issue of a writ in the nature of mandamus to direct the respondent-
State and its authorities to furnish the petitioner what is known as form 40, which are forms issued under the provisions of the Karnataka Tax on
Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1979.
Form 40 is issued in the context of the discharge of liability towards payment of entry tax u/s 3 of the Act read with Rules 9A and 9E of the
Rules. Under the Scheme of the Karnataka Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1979, in respect
of any goods entering a local area for use, concerned person causing such entry of goods is liable to pay the tax, in the sense a dealer who causes
the entry of goods has to remit the tax amount. Under certain enabling provisions a manufacturer, who supplies the goods to the various dealers in
a local area is also permitted to collect the entry tax from the dealer who is in fact liable and remit it to the Government, for the sake of
convenience and when the dealer pays the tax amount to such manufacturer, which is ultimately payable to the State, the manufacturer is furnished
with form 40 on payment of such amount to the State, which the manufacturer in turn can pass on to the dealer on whom there will be no insistence
for payment of tax though the dealer is liable.
The product of the petitioner, viz., cement was subjected to tax under the provisions of the Act for the first time, with effect from April 1, 2002.
It is not in dispute that for the period from April 1, 2002 to February 31, 2003 the entry tax payable by the various dealers, who have purchased
cement from the petitioner has been collected by the petitioner, but, has not been passed on to the State Government. The authorities of the State
Government functioning under the provisions of the Act, having declined to issue such form 40 to the petitioner, as the petitioner has not paid the
tax amount, which the petitioner has collected from its purchasers/dealers on and after April 1, 2002 and which amount has not been passed on to
the State for the purpose of receiving form 40, has now approached this Court praying for issue of directions to the respondents to furnish form 40
to the petitioner so that the dealers are exonerated of their liability, though the petitioner has not passed on the amount, which the petitioner has
collected from the dealers.
Sri Pramod Kathavi, learned Counsel for the petitioner, has submitted that the petitioner is a sick unit within the meaning of the provisions of the
Sick Industrial Companies (Special Provisions) Act, 1985 and proceedings are now pending before the Board, particularly for the preparation of a
scheme of rehabilitation. That the respondents are also parties to the proceedings before the Board. As the petitioner enjoys the benefit of
moratorium provided u/s 22(1) of this Act, during the pendency of the proceedings before the Board the petitioner enjoys immunity from
enforcement of any liability against the petitioner-company by any creditor and particularly as the petitioner enjoys the immunity from any coercive
proceedings the respondent-State and its officers cannot resort to any coercive action as against the petitioner in respect of any dues of the
petitioner up to March 31, 2003 and as such even in respect of the tax amount which the petitioner had collected from its dealers and which had to
be passed on to the State up to this date, it is an amount which the petitioner need not pay or pass on so long as the concession of moratorium is in
favour of the petitioner under the scheme and such insistence on the part of the respondent to pay the amount of entry tax which the petitioner had
collected from its dealers for issue of form 40 amounts to coercive steps taken against the petitioner in respect of certain liabilities incurred by the
petitioner prior to the cut-off date and as such the petitioner can seek for issue of a writ of mandamus from this Court to direct the respondent to
furnish the petitioner form 40 even without payment of such entry tax amount which the petitioner had collected from its dealers, which otherwise
should have been passed on to the State to furnish form 40.
Under the scheme of the Karnataka Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1979 form 40 will be
issued to a manufacturer only on payment of the tax; which the manufacturer like the petitioner has collected from its dealers and not otherwise.
However, learned Counsel for the petitioner in this regard relies upon the package of concession extended by the respondent-State during the
period of rehabilitation and submits that it includes the liability towards payment of tax under the provisions of this Act. Learned Counsel submits
that when once the respondent-State has agreed to extend concession even in respect of petitioner''s liability under this Act, insistence on payment
of tax amount which the petitioner had collected from its dealer for any period prior to the cut-off date amounts to taking coercive action against
the petitioner in respect of its liability and is contrary to the provisions of Section 22(1) of the Sick Industrial Companies (Special Provisions) Act,
1985. Learned Counsel for the petitioner in this regard has pointed out that the respondents have taken inconsistent stand that while the respondent
had agreed for issue of such form 40 earlier as per the affidavit dated December 15, 2003, they have changed this version in the subsequent
affidavit dated February 3, 2004 and have sought for dismissal of the writ petition.
Statement of objections has been filed on behalf of the respondents. It is asserted that the petitioner is not entitled for the mandamus as sought
for and the writ petition is liable to be dismissed.
Be that as it may. The question is as to whether a mandamus can be issued as prayed for by the petitioner to compel the respondent-State to
issue form 40, even when the petitioner has not remitted the tax that it has collected from the dealer and which should have been remitted to the
State.
The scheme for issue of form 40 is an enabling provision as noticed earlier, to enable a manufacturer from collecting tax and remitting it to the
Government. In fact it is not the liability of the manufacturer under the scheme of the Act, but the liability of the dealers, which liability the
manufacturer has voluntarily undertaken to discharge by collecting the tax amount from the dealer and passing it on to the Government. Form 40
issued is only an evidence of the discharge of this liability of the dealer as the amount payable by the dealer is now being paid by the manufacturer
having been routed through the manufacturer. In a sense it is a voluntary Act on the part of the manufacturer and not because of any liability,
statutory or otherwise. In a situation of this nature, petitioner though may be a sick industry, nevertheless undertakes a voluntary act, even while
being a sick unit. It is bound to discharge that responsibility.
In fact though the learned Counsel for the petitioner has submitted that the cut-off date having been shifted from December 31, 2000 fixed
initially to March 31, 2003, I am not in a position to accept the submission of the learned Counsel for the petitioner as mere shifting will have no
bearing on such voluntary acts on the part of the petitioner, particularly for passing on the amount collected by the petitioner from its dealer to the
State. Non-issue of form 40 by the respondent-State authorities for not paying the tax amount which the petitioner has collected from the dealers
and on payment of which form 40 is issued as a receipt or evidence for remitting the amount, cannot by any stretch of imagination be construed as
a coercive action for enforcing any liability of the petitioner. There is no occasion for the State to issue a receipt even when the amount is not
received. Such argument virtually amounts to calling upon the State to issue an acknowledgment or receipt as of now in anticipation of a payment
to be made in future, after the expiry of the moratorium period. A relief or prayer of this nature does not arise from any statutory provision nor is it
any right of the petitioner, which is sought to be enforced before this court. When the relief sought for is neither a statutory right nor any other type
of right and it is not even in the nature of a coercive measure as contemplated u/s 22(1) of the Act, there is no occasion for this Court to issue the
mandamus as prayed for.
In this view of the matter, there is no occasion for this Court to issue the writ as prayed for, particularly when the petitioner through a voluntary
act has collected certain amount that was due to the State, but has refrained from passing it on to the State.
There is no merit in the writ petition and it is accordingly dismissed, after hearing the learned Counsel for the petitioner and the learned High
Court Government Pleader appearing for the State. Learned High Court Government Pleader is permitted to file a memo of appearance within
four weeks.