Kiran Overseas Exports Ltd. vs The Commercial Tax Officer, Vepery Assessment Circle, Chennai

The petitioner-company challenges the notice issued by the Commercial Tax Officer, Vepery Assessment Circle, dated 4.9.2001 insofar as it

relates to the demand of Central Sales Tax for the year 1997-98, of a sum of Rs. 2,96,577.

In the said notice, it is stated that if the said amount is not paid within 48 hours, action would be taken to realise the arrears by attaching bank

account, distraining movable and immovable properties, and filing an application before the Magistrate.

The learned counsel appearing for the petitioner has submitted that the petitioner-company had been declared as a Sick Industry by the Board

of Industrial and Financial Reconstruction (hereinafter called the BIFR) and the reference had been registered as case No. 40 of 1999. According

to the learned counsel, when the enquiry is pending in the said reference made u/s 15(1) of the Sick Industrial Companies (Special Provisions) Act,

1985, the respondent cannot collect the amount and recover the amount from the petitioner without getting permission from the B.I.F.R. According

to the petitioner, immediately after receipt of the notice, earlier, the said fact had been informed to the respondent by a letter dated 26.6.2000, and

by another letter dated 21.2.2001. In spite of that, the impugned notice has been issued, which, according to the learned counsel, cannot be

sustained in law.

The learned Government Advocate appearing for the respondent has submitted that the arrears of Sales Tax can be recovered irrespective of

the pendency of the proceedings before the B.I.F.R. He relied on the decision in Deputy Commercial Tax Officer and Others Vs. Corromandal

Pharmaceuticals and Others, .

In the said decision, the Apex Court has found that the sales Tax was assessed for the Assessment Years 1992-93 and 1993- 94. i.e. long after

the scheme was sanctioned by the Board. When there was default in payment of the said tax, steps were taken to recover the same, and the Apex

Court has held that the embargo u/s 22 of the the Central Act did not apply to the recovery of the Sales Tax Assessed long after the date on which

the rehabilitation scheme was sanctioned. The said decision will not apply to the facts of the present case.

In the present case, the rehabilitation scheme is yet to be prepared and the proceedings are pending. In the decision in TATA Day Ltd. v. State

of Orissa, 1998 (111) STC 462, the Apex Court, while considering the similar fact has found that pending proceedings before the B.I.F.R., the

recovery of Sale tax can be done only as per Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985. In the said decision, the

Apex Court has referred to the decision reported in Deputy Commercial Tax Officer and Others Vs. Corromandal Pharmaceuticals and Others, ,

and distinguished the same saying that the said decision will not apply to the facts before the Apex Court, wherein steps were taken to recover

Sales Tax during pendency of the proceedings contemplated u/s 22 of the said Act.

In view of the above settled principles of law, the impugned proceedings taken by the respondent cannot be sustained, and the same are set

aside. But this will not preclude the respondent from approaching the B.I.F.R. to get the consent from the Board to recover the said amount.

For all the reasons stated above, the petitioner is entitled for the relief as sought for. Accordingly, this Writ Petition is allowed with the above

observations. No cost. W.M.P. No. 26859 of 2001 is closed.