KANORIA JUTE AND INDUSTRIES LIMITED Vs. CERTIFICATE OFFICER

JUDGEMENT

(1.) THE question involved in this application is whether in the given facts the applicant No. 1 company is entitled to the protection of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (in short, "Act of 1985") against proceedings for realisation of sales tax and interest thereon under the Bengal Finance (Sales Tax) Act, 1941, (henceforth referred to as "Act of 1941"). The application is filed under Section 8 of the West Bengal Taxation Tribunal Act, 1987 enacted under Article 423B of the Constitution of India, being one in the nature of a writ application under Article 226 of the Constitution.

(2.) THE applicant No. 1 is a company incorporated under the Companies Act, 1956 having a jute mill at Sijberia in the district of Howrah. Applicant No. 2 is the Managing Director and a shareholder of the company. The case of applicant No. 1 is that on September 15, 1987 it was declared a sick company within the meaning of Act of 1985. The Board for Industrial and Financial Reconstruction (hereinafter referred to as "BIFR") appointed the Industrial and Financial Corporation of India as the operating agency (O.A.) to formulate a scheme for revival of the company. As no scheme was forthcoming, applicant No. 2 submitted a scheme, which was accepted and approved by BIFR in or about February, 1991. However, applicant No. 2 was allowed to reopen the jute mill on January 16, 1991 after thorough renovation, overhaul and capital outlay with an investment of rupees one crore. But the financial institutions failed or neglected to provide finance as per the sanctioned scheme. Hence, the directors of applicant No. 1 faced financial difficulties. The order dated March 17, 1993 of BIFR will show that the sanctioned scheme could not be implemented for failure of the Bank of India and other financial institutions to release funds or credit facilities. In the meantime, a section of workers started taking various disruptive steps, as a result of which production at the mill remained suspended for the period from November, 1993 to September, 1994. The mill could be reopened on the October 1, 1994 after protracted negotiations. On and from 18th October, 1994 activities of the mill again stopped, as a section of workers resorted to an allegedly illegal strike. The mill was reopened on and from December 11, 1994 after a bipartite settlement was arrived at. On September 21, 1994 BIFR gave certain directions which are at annexure "C". A writ petition was filed by applicants in the High Court at Calcutta, inter alia, challenging the said directions. By an interim order passed on September 28, 1994, operation of BIFR's directions dated September 21, 1994 and proceedings of case No. 11 of 1987 before BIFR were stayed. Assessment cases for four quarters ending March 31, 1988 under Act of 1941 and the West Bengal Sales Tax Act, 1954 were taken up for hearing by the Commercial Tax Officer. Representative of applicants appeared before him on several dates and prayed for adjournments on the ground of closure of the mill since 1987 till January, 1991. But the Commercial Tax Officer refused to grant adjournment and passed ex parte orders of assessment under the said two Acts as well as under the Central Sales Tax Act, 1956. He also passed ex parte orders for payment of interest on assessed taxes. The assessment orders were passed allegedly on the basis of mere surmises and conjectures. Applicants were not given opportunity to produce necessary documents. Several appeals have been preferred by the applicants before the Assistant Commissioner, Commercial Taxes, against the said assessments. The case of the applicants is that under the scheme sanctioned by BIFR a substantial amount is payable by the Government of West Bengal on account of sales tax loan. By a letter dated June 15, 1992 applicants wrote to the Assistant Secretary to the Government of West Bengal requesting disbursement of that loan in order to tide over the problems they were facing in relation to the sales tax authorities. A request was also made to the State Government to keep the sales tax cases in abeyance till sanction of the said loan. By letter dated July 9, 1992 Deputy Secretary to the Government of West Bengal informed the Additional Commissioner, Commercial Taxes, that sanction of the sales tax loan for payment of arrears of sales tax, raw jute tax and interest up to December 31, 1990 was under consideration under the scheme approved by BIFR and it would be disbursed to the company after completion of necessary formalities. He also requested the Additional Commissioner to keep in abeyance the proceedings initiated against the company, if possible. That letter dated July 8, 1992 is annexure "G1". In or about December, 1992 applicants received a letter dated December 1, 1992, annexure "H", from State Government wanting to know particulars of financial assistance, if any, released by financial institutions/banks under the BIFR scheme. Meanwhile, appeals being Nos. A1002, 1003 and 1004 filed by the applicants before the Assistant Commissioner relating to the ex parte orders of assessment of interest were dismissed on June 23, 1993 on the ground that the applicants did not pay the admitted amount of interest. Then applicants preferred three revision cases before the West Bengal Commercial Taxes Tribunal (since re -designated as West Bengal Commercial Taxes Appellate and Revisional Board). Those revision cases are still pending. The appeals preferred against assessment of tax are also pending. Respondent No. 4, Commissioner of Commercial Taxes was informed of the fact that applicant No. 1 is a sick company and as per the scheme sanctioned by BIFR under Act of 1985 a substantial sum is payable by the State Government on account of sales tax loan which had not been disbursed. In or about May, 1996 applicants received a certificate of demand from the office of respondent No. 1. It appears therefrom that certificate case No. 9ST/AW/ 1996 -97 has been initiated for non -payment of tax and interest for the period of four quarters ending March 31, 1988 under Act of 1941. Applicants informed respondent No. 1 of the fact that it is a sick company under Act of 1985 and the certificate cases should be stayed. On or about December 7, 1996 applicants came to know that a notice had been issued by respondent No. 1 prohibiting operation of bank account with UCO Bank, Hastings Branch, Calcutta under certificate case Nos. 9 and 10 ST/AW/1996 -97. As a result of the notice, applicants are unable to operate the said bank account. Under Section 22(1) of Act of 1985 no such action can be taken against the applicants. They apprehend that similar certificate case will be initiated for recovery of tax under the West Bengal Sales Tax Act, 1954. Because of certificate case No. 9 ST/AW/1996 -97 and attachment of the bank account, allegedly applicants' right to carry on trade and business guaranteed under Article 19(1)(g) of the Constitution has been seriously affected.

(3.) APPLICANTS have prayed for a declaration that certificate case No. 9 ST/ AW/96 -97 and the impugned notice dated November 28, 1996, issued by respondent No. 1 prohibiting operation of bank account with UCO Bank, Hastings Branch, may be declared to be invalid and void and for a direction to forthwith rescind the said certificate case and the said notice. A prohibitory order in the same term is also prayed for.