High court of madras

Neycer India Ltd.

v.

Commercial Tax Officer, Cuddalore

K. CHANDRU, J.

W.P. NO. 33107 OF 2006

AND M.P. NOS. 1 AND 2 OF 2006

November 14, 2006

Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 - Suspension of legal proceedings, etc. - Whether embargo envisaged in section 22 can apply only to dues, which are included in sanctioned scheme and amounts like sales tax, etc., which a sick company is enabled to collect after date of sanctioned scheme, are not covered within section 22 - Held, yes

FACTS

The petitioner filed writ petition for restraining the first respondent from resorting to any proceedings for recovery of amount of sales tax dues, unless a fresh scheme was sanctioned or implemented under the Act.

HELD

The prayer as sought for by the petitioner could not be countenanced for two reasons. Firstly the provisions for recovery is very much present in the Tamil Nadu General Sales Tax Act and secondly, the embargo placed upon any further proceedings based upon the provisions of the Act was not available to the petitioner. The provisions of the Act has been interpreted by the apex court in the decision reported in Dy. CTO v. Corrmandal Pharmaceuticals [1997] 89 Comp Cas 1/14 SCL 154. While dealing with the collection of sales tax vis-à-vis the provisions of section 22 of the SICA, the Supreme court held that the bar or embargo envisaged in section 22(1) can apply only to such of those dues reckoned or included in the sanctioned scheme and amounts like sales tax, etc., which the sick industrial company is enabled to collect after the date of the sanctioned scheme legitimately belonging to the Revenue, cannot be and could not have been intended to be covered within section 22. In the instant case, there was no claim pending and all proceedings had come to a close. Therefore, the protest under section 22 was not available.