Nagarjuna Fertilizers Chemicals Ltd vs Government Of Andhra Pradesh And Others

R. Raghunandan Ra, J

The petitioner which was involved in manufacture and sale of urea had been given a deferral of payment of sales tax, under the Target 2000 New Industries Policy of the Government of Andhra Pradesh for the financial years 1998-1999 to 2011- 2012. This incentive, given under an agreement, dated 15.11.2006, provided for the petitioner to utilize the sale tax that would otherwise be payable to the State and to repay the same with a gap of 14 years for each assessment year.

One of the conditions set out in the said agreement was that the State would be entitled to recover the entire amount of deferred tax, if the assets of the petitioner, were sold by the petitioner.

It appears that the petitioner has paid all the deferred taxes up to the year 2009-2010 with interest wherever there was delay in payment.

For the assessment year 2010-2011, there was some delay in making payment. According to the petitioner, the deferred tax payable for the assessing year 2010-2011 has also been paid off, albeit with some delay.

On account of the inability of the petitioner to clear its financial dues, the assets of the petitioner were sold under proceedings initiated, under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 [for short “the SARFAESI Act”], by the reconstruction company that had taken over all the loans of the petitioner.

The tax authorities, thereupon, are said to have taken the view that the petitioner had sold away its assets, in violation of the condition of non-alienation, set out in the 2006 agreement and sought repayment of the entire amount still due, to the tune of Rs.13,43,48,913/-. A show-cause notice, dated 25.10.2024, bearing DIN3725102442981, was issued by the 7th respondent, setting out the clauses, which entitled the State to recover the remaining deferred tax and seeking a explanation from the petitioner as to why the deferred tax should not be recovered, on the ground that the petitioner had sold its assets.

The petitioner upon receipt of this show-cause notice is said to have filed its objections and had also participated in a personal hearing on 07.11.2024.

The petitioner, on the apprehension, that the 7th respondent has already made up his mind and would be demanding payment of the deferred tax for the assessment year 2011-2012, has approached this Court with the contention that the 7th respondent cannot seek recovery of the deferred tax, immediately and even before the due date for such payment.

Sri Avinash Desai, learned Senior Counsel appearing for Sri D.S. Sivadarshan, learned counsel for the petitioner, would submit that the petitioner has not violated the terms of the agreement, in any manner, as the sale of the assets of the petitioner was an involuntary and forced sale, by auction, under the provisions of the SARFAESI Act. He would further submit that no violation can be made out against the petitioner.

It is settled law that a show-cause notice can be challenged, even at the inception, when a notice is issued without jurisdiction. However, in the present case such a issue does not arise. Further, the petitioner has answered the show-cause notice and filed a reply. The representatives of the petitioner were also given a personal hearing.

In such a case, it would only be appropriate to await a decision of the 7th respondent and accordingly, the Writ Petition is dismissed leaving it open to the petitioner to avail of its remedies as and when an order has been passed by the 7th respondent. There shall be no order as to costs.

As a sequel, interlocutory applications pending, if any shall stand closed.