A FORTNIGHTLY VAT/GST LAW REPORTER 2011 NTN 47)-272 [ALLAHABAD HIGH COURT]

Transcription

1 2011 (Vol. 47)-272 [ALLAHABAD HIGH COURT] WRIT TAX No of 2010 Hon'ble Sunil Ambwani, and Hon'ble Kashi Nath Pandey,JJ. Hemkund Duplex & Board (Pvt.) Ltd. vs. Avasthapana Evam Audyogic Vikas Ayuqut/Adhyaksh & Others Date of Decision : 4 th of November 2011 For the Petitioner : Sh. Ravi Kant, Senior Advocate Sh. Rakesh Ranjan Agrawal, Sh. Suyash Agarwal, Advocates For the Respondent : C. S. C. [A] General Principles Estoppel - Doctrine of Estoppel High Court in Writ - Any concessions made on representations, by Authorities against the provisions of statute, conferring benefits against public interest, will not attract the principles of estoppels It is well established that estoppel does not apply against statute, and public interest. [B] Sick Industrial Company - Rehabilitation scheme - Facility for Sick Industrial Units - U. P. Trade Tax Act, 1948 Sections 38, 4A-Deferment - A rehabilitation scheme is prepared under Section 18 of the Act of 1985, for rehabilitation of the company, which has become sick industrial company - The provisions of Section 18 are applicable to the sick industrial company and not to the company which has purchased the assets of such sick industrial company - In this case the Board for Industrial and Financial Reconstruction has acted beyond its jurisdiction in persuading the State Government and granting tax exemptions for the future dues, to the petitioner -Company, which had purchased the assets of the sick company - The entire provisions of the Sick Industrial Company (Special Provisions) Act, 1995 are applicable to the sick industrial company and not the company, which has purchased the assets of such company The petitioner as the owner of the assets after paying its price is not entitled to any reliefs to be given for the deferment of the tax liability for production from such assets in future. Cases referred: Tata Motors Ltd. vs. Pharmaceuticals Pvt. Ltd. (2008)7 SCC Vadi Lal Dairy International Ltd. vs. State of Maharashtra in R.A. No. 129 of 2008 decided on July 24, CIT vs. J.K. Corporation Ltd (2011) Company Cases 101 and Indian Shaving Products Ltd. vs. B.I.F.R. 218 I.T.R JUDGMENT

2 1. We have heard Shri Ravi Kant, Senior Advocate assisted by Shri Rakesh Ranjan Agrawal for the petitioner. Shri U.K. Pandey appears for the respondents. 2. By this writ petition, the petitioner is claiming following reliefs:- "(a) issue a writ, order or direction in the nature of certiorari quashing the orders of the Avasthapana Evam Audyogic Vikas Ayqut, Adhyakash Samiti dated as communicated by the order of the Sanyukta Sachiv, Uttar Pradesh Shasan dated (b) issue a writ, order or direction in the nature of prohibition restraining the respondents from giving the effect of the orders of the Avasthapana Evam Audyogic Vikas Ayqut, Adhyakash Samiti, dated as communicated by the order of the Sanyukta Sachiv, Uttar Pradesh Shasan dated " 3. M/s Mansarovar Duplex & Board Private Ltd. was declared as a sick industrial undertaking with huge liabilities towards the trade tax, electricity and other departments. A Case No. 71 of 1997 was registered before the Board for Industrial and Financial Reconstruction (BIFR) under the provisions of Sick Industrial Company (Special Provisions) Act, A Rehabilitation Scheme was prepared by Operating Agency in pursuance to which the petitioner purchased the entire assets including the land & building, plant and machinery of the sick industrial company subject to certain conditions and modifications under SS-04. The relevant conditions in the order of BIFR dated , are quoted as below:- "(i) The UPPCL would restore the power supply to the company M/s HDBPL within a period of 60 days, failing which the Board would consider issuing further directions according to law. The company would follow up with UPPCL in this regard and submit the information/document(s) etc as may be required by UPPCL in this regard. (ii) The Commercial Tax Deptt. and the Deptt. of Industries, Govt. of UP would also ensure granting reliefs to the company, as spelled out in para 0.1, page-8 of the SS-04, within the same period of 60 days, under intimation to the Board/MA (BOB). The company M/s HDBPL would provide the necessary information/document(s), as may be required by these authorities for granting the envisaged reliefs. (iii) The Govt. of UP (GoUP) would exempt the company M/s HDBPL from payment of stamp duty for registration/transfer of the assets of the company M/s MPIL in favour of them or at least permit the company M/s HDBPL for payment of stamp duty at the reduced rate for transfer of the said asset from M/s MPIL in favour of them, as already decided by GoUP for such transfer of the assets of the sick companies in the State for their revival. The company M/s MPIL and the buyer M/s HDBL would proceed with the registration/transfer of the assets accordingly. (iv) The DIT (R) would recover the outstanding income tax dues towards capital gain tax, as referred by them in their letter dt to the Board,

3 from the old promoter's of the sick company M/s MPIL, as already explained in para. 11 (ii) above, for which no modification in the SS-04 would be needed. (v). The DIT (R) would consider granting reliefs to the company M/s HDBPL as per their policy for revival of the sick units for their long term revival and the company M/s HDBPL would provide the requisite information/details, as may be required by them. (vi) The promoter (s) of the company MOs MPIL would provide the list of the employees/workers, contract labours etc and other creditors, whose dues were covered in the SS-04, whose dues are payable out of the sale proceeds received against sale of the assets of the sick company M/s MPIL to the MA (BOB), within a period of 30 days, for settlement/payment of such dues and a copy thereof would also be sent to the new/incoming promoter(s) i.e. M/s HDBPL and also to the board. (vii) As the dues of BOB has already been settled/paid, the company M/s HDBPL would pay Rs. 50, 000/- w.e.f to the BOB, towards providing their services as the MA to the Board." 4. The petitioner availed all the reliefs and concessions and thereafter claimed deferment of the tax liability in term of the conditions on page 8 of SS- 04, for 7 years contained in the Sanctioned Rehabilitation Scheme, and the sale of the assets to it. Initially recommendations were made by the trade tax authorities for deferment to the State Government. 5. By an order dated the State Government has rejected the recommendation for deferment of the tax liability for seven years, on the ground that under the Sanctioned Rehabilitation Scheme dated , the petitioner had purchased the assets of the sick industrial company under Section 18 (11) without purchasing the liability. The entire sale consideration of Rs lacs was to be utilised for the purposes of rehabilitation. The petitioner did not purchase the management nor it has any control over the management of the sick industrial company. It had only purchased the assets and that under the policy of the State Government, there is no provision for giving exemptions from the trade tax to the company, which has purchased the assets of the sick industrial company. 6. Section 38 of the U.P. Trade Tax Act, 1940 is quoted:- "38. Facility for Sick Industrial Units- (1) Notwithstanding anything contained in sub-sections (1), (1-A), (1-B), (1-C) or (2) of Section 8 and Section 36, but subject to such conditions, as may be deemed fit to be imposed, the State Government may allow the deferment of payment of any existing or future dues payable by an industrial units under the provisions of this Act or allow payment of such dues in such number of instalments as may be specified, if such industrial unit is declared a sick unit in accordance with the guidelines specified in this behalf by an authorised body constituted by the Central Government or the State Government in connection with the

4 rehabilitation of sick industrial units, and is approved for rehabilitation by an approved agency, appointed by the Central Government or the State Government. (2) Notwithstanding anything contained in Section 30, the State Government may set aside an order of assessment or penalty passed ex parte against a sick unit and direct fresh disposal of the case in accordance with law." 7. The statutory scheme of the U.P. Trade Tax Act provides that the relief and concession under the Act including the graded deferment towards tax liability is provided to such industrial unit which is declared as sick unit. The facility of deferment of payment of any existing and future dues, after it has become as sick industrial industry is permitted under Section 38 of the Act. The petitioner does not qualify for any deferment as it is not the sick industrial company. 8. Shri Ravi Kant, learned counsel for the petitioner has relied upon provisions of Section 17 (3) of the Act providing for measures to be taken under Section 18 and the consequences of the Sanctioned Rehabilitation Scheme under Section 19 (2) (3) and Section 32 (1) of the Act for rehabilitation of sick industrial company. He submits that the Sanctioned Rehabilitation Scheme is a statutory scheme and overrides other provisions of the Act. He submits that once the Rehabilitation Scheme has been framed, in view of Tata Motors Ltd. vs. Pharmaceuticals Pvt. Ltd. (2008) 7 SCC 619; Vadi Lal Dairy International Ltd. vs. State of Maharashtra in R.A. No. 129 of 2008 decided on July 24, 2009; CIT vs. J.K. Corporation Ltd (2011) 165 Company Cases 101 and Indian Shaving Products Ltd. vs. B.I.F.R. 218 I.T.R. 140, it is operative against all concerned, and overrides the provisions of other statutes. Shri Ravi Kant has also pleaded estoppel as he submits that a clear and unequivocal representation was made by the State Government before the BIFR for giving tax exemptions for seven years. 9. A rehabilitation scheme is prepared under Section 18 of the Act of 1985, for rehabilitation of the company, which has become sick industrial company. The provisions of Section 18 are applicable to the sick industrial company and not to the company, which has purchased the assets of such sick industrial company. It is not a case where the entire management was taken over by the petitioner or the sick industrial company merged/amalgamated with the petitioner. The sick industrial company virtually became an empty shell after sale of the entire assets. The scheme has to operate for benefit of the company which requires rehabilitation, and not the company, which had purchased the assets. 10 Where the scheme is not applicable to the purchaser of the assets, it is difficult to accept the argument that Section 38 of the Act will apply giving such company special rights for deferment of the tax liability. 11. We may further observe here that in this case the Board for Industrial and Financial Reconstruction has acted beyond its jurisdiction in persuading the State Government and granting tax exemptions for the future dues, to the

5 petitioner-company, which had purchased the assets of the sick company. The entire provisions of the Sick Industrial Company (Special Provisions) Act, 1995 are applicable to the sick industrial company and not the company, which has purchased the assets of such company. The petitioner as the owner of the assets after paying its price is not entitled to any reliefs to be given for the deferment of the tax liability for production from such assets in future. We may also observe here that any concessions made on representations, by authorities against the provisions of statute, conferring benefits against public interest, will not attract the principles of estoppel. It is well established that estoppel does not apply against statute, and public interest. 12. The writ petition is dismissed