Sri Ambal Mills Ltd. vs The Commercial Tax Officer (FAC), Central - II

K. Mohan Ram, J.—Ms. Saraswathi Sivarama Iyer (Taxes) takes notice on behalf of the respondent.

By consent of both, the main writ petition itself is taken up for final disposal.

Writ Petition is to call for the records on the files of the respondent herein in his Form No. I Distraint Order TNGST No. 2460012/1993-94 to

1996 - 97 dated 12/1/2006 and to quash the same.

The facts of the case are as follows:-

The petitioner is a registered dealer on the files of the respondent herein. The petitioner was manufacturing Staple Fibre Yarn. They were

complying with the provisions of the Tamil Nadu General Sales Tax Act, 1959 and the Central Sales Tax Act, 1956. Due to certain problems in

their financial status, the petitioner Company became sick and they have filed an application before the Board for Industrial and Financial Re-

Construction (BIFR) u/s 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. They have been declared as Sick Unit in Case

No. 242/98 by an order dated 15/9/1998. The Rehabilitation Scheme to revive the petitioner Company was taken up and Punjab National Bank

was appointed as the operating agency to examine the viability of the Company and to formulate rehabilitation scheme for its revival.

The liability determined by the respondent relating to the assessment years CST 1995 - 96, CST 1996 - 97, TNGST 1996 -97 and TNGST

1993 - 94 were included and it was pointed out that challenging the liability, appeals were pending before the statutory authorities. Thereafter, the

Commercial Tax Officer of the respondent herein also participated in the enquiry by the BIFR representing Sales Tax Department of the

Government of Tamil Nadu as per the minutes of the Joint Meeting held on 16/10/2002 at Coimbatore by the operating agency. But it so

happened that the BIFR by its order in Case No. 242/98 dated 30/6/2004, after considering the report of the operating agency has took the view

that the petitioners are not in a position to revive the Company and there was no rehabilitation proposal by the operating agency and thereby

directed winding up of the Company u/s 20(1) of SICA. The petitioners filed an appeal before the Appellate Authority for Industrial and Financial

Reconstruction, New Delhi u/s 25 of SICA Act. The said appeal was admitted in AAIFR Appeal No. 200/2004 and in the proceedings dated

5/9/2005 operation of the order of the BIFR dated 30/6/2004 in Case No. 242/98 was stayed and the said Appeal before the AAIFR is still

pending.

In the meantime, the respondent has served a notice in Form No. I Distraint order by which a proposal has been taken for auction of properties

of the petitioner Company. The petitioner''s counsel submits that such recovery proceedings are totally arbitrary and illegal and the respondent

herein has no jurisdiction to resort to recovery proceedings as per Section 22 of the SICA Act. In the above said circumstances, this writ petition

has been filed to quash the proceedings of the respondent herein issued in his Form No. I Distraint Order TNGST No. 2460012/1993-94 to

1996 - 97 dated 12/1/2006 for execution, distress or the like against any of the properties of the petitioners'' herein, pending disposal of the writ

petition.

Ms. Saraswathi Sivarama Iyer (Taxes) appearing on behalf of the respondents submits that though the proceedings of the first respondent is

against the provisions contained in Section 22 of SICA Act, it is open to the respondent to approach the AAIFR seeking permission to recover the

amounts due from the petitioner.

The Honourable Supreme Court of India in a judgment reported in 111 STC 462 Tata Davy Ltd. v. State of Orissa and Ors. has held that

arrears of taxes and the like due from sick industrial companies that satisfy the conditions set out in Section 22(1) of 1985 Act, cannot be

recovered by coercive process unless the Board gives its consent thereto.

The said judgment of the Apex Court squarely applies to the facts of this case. Though AAIFR has passed an order for winding up of the

petitioner Company u/s 20(1) of SICA Act, an appeal has been filed before the Appellate Authority for Industrial and Financial Reconstruction,

New Delhi u/s 25 of SICA Act, as stated above and stay orders were passed by the BIFR. Therefore, the respondent ought not to have taken

coercive steps to recover the tax arrears from the petitioner Company. The respondent should have approached AAIFR and obtained its consent

for initiating proceedings to recover the tax arrears. Admittedly, the respondent has not obtained any such consent. Therefore, the impugned

proceedings are liable to be quashed and accordingly, it is quashed.

In the result, the above writ petition is allowed. No costs. Consequently, the connected W.P.M.P. No. 5525 of 2006 is closed. But however,

it is open to the respondent to approach the AAIFR and get consent from the AAIFR and proceed further in the matter.