KANORIA JUTE AND INDUSTRIES LIMITED Vs. CERTIFICATE OFFICER

JUDGEMENT

(1.) The question involved in this application is whether in the given facts 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 "the Act of 1941"). The application is filed under Section 8 of the West Bengal Taxation Tribunal Act, 1987, enacted under Article 323B of the Constitution of India, being one in the nature of a writ application under Article 226 of the Constitution.

(2.) 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 the Act of 1985. The Board for Industrial and Financial Reconstruction (hereinafter referred to as "the 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 the 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 the 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 October 1, 1994, after protracted negotiations. On and from October 18, 1994, the 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, the BIFR gave certain directions which are at annexure "C". A writ petition was filed by the applicants in the High Court at Calcutta, inter alia, challenging the said directions. By an interim order passed on September 28, 1994, operation of the BIFR's directions dated September 21, 1994, and proceedings of Case No. 11 of 1987, before the BIFR were stayed. Assessment cases for the four quarters ending March 31, 1988, under the Act of 1941, and the West Bengal Sales Tax Act, 1954, were taken up for hearing by the Commercial Tax Officer. The representative of the 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. The 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 the 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, the 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, the 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 the 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 "G-1". In or about December, 1992, the applicants received a letter dated December 1, 1992, annexure "H", from the 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 the applicants preferred three revision cases before the West Bengal Commercial Taxes Tribunal (since re-designated as the 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 the BIFR under the 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, the 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 the Act of 1941. The applicants informed respondent No. 1 of the fact that it is a sick company under the Act of 1985 and the certificate cases should be stayed. On or about December 7, 1996, the 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 Cases Nos. 9 and 10 ST/AW/1996-97. As a result of the notice, the applicants are unable to operate the said bank account. Under Section 22(1) of the 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 the applicants' right to carry on trade and business guaranteed under Article 19(l)(g) of the Constitution has been seriously affected.

(3.) The applicants had moved a writ application against certificate cases being Nos. 9 and 10 ST/AW/1996-97 and the letter dated November 28, 1996, in the High Court at Calcutta, on December 16, 1996. The High Court refused to pass any order with regard to Certificate Case No. 9 ST/ AW/1996-97, relating to tax under'the Act of 1941. That court also dealt with the notice dated November 28, 1996, in so far as it related to tax under the Central Sales Tax Act, 1956. The High Court gave liberty to the applicants to move an application before this Tribunal in respect of tax under the Act of 1941, The applicants preferred an appeal before a Division Bench of the High Court against the said order dated December 16, 1996, passed by the learned single judge, but the Division Bench refused to interfere with that order.