DEPUTY COMMERCIAL TAX OFFICER AND ORS. versus CORROMANDAL PHARMACEUTICALS AND ORS.

Citation: [1997] 2 S.C.R. 1026 · Decided: 12-03-1997 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
DEPUTY COMMERCIAL TAX OFFICER AND ORS. 
B 
v. 
CORROMANDAL PHARMACEUTICALS AND ORS. 
MARCH 12. 1997 
(B.P. JEEVAN REDDY AND KS. PARIPOORNAN, JJ.) 
Sick Industrial Companies (Special Provisions) Act, 1985-Sections 
22( I) & 22(5)-Board of Indust1ial and Financial Reconstmct1ion Regula-
C tions, 1987-Regulation Nos. 29 & 3(}-Suspension of legal proceedings, con-
tracts, etc.-Liability of sick company-Bar or embargo envisaged in Sec. 22 
(1) can apply only to dues reckoned or included in sanctioned schem~Sales 
tax arrears relating to period after scheme was brought under implementa-
tion-Recove1y proceedings-Sustainability-Wliether legal bar or embargo u/s 
22 can apply-Held, No. 
D 
The respondent Company was declared as a sick industrial company 
under the Sick Industrial Companies (Special Provisions) Act, 1985, by 
the Board for Industrial and F'inancial Reconstruction. The Board sanc-
tioned a scheme in 1990 for the rehabilitation of the company which was 
under implementation. The respondent company was assessed to sales tax 
E for the assessment years 1992-93 and 1993-94 by orders passed in the years 
1994 and 1995, long after the scheme was sanctioned. The Sales tax 
authorities initiated recovery proceedings which were challenged. The 
company pleaded that the sanctioned scheme by BIFR for rehabilitation 
of the company being under implementation, no Jlroceedings for execution, 
F 
destrees or the like against the company, shall lie except with the consent 
of the Board, while according to the Revenue, for the arrears of sales tax, 
relating to the period after the sanctioned scheme was brought under 
imJJlementation, the legal embargo u/s 22 of the Act was inapplicable as 
only those dues which were included in 'the package' in the sanctioned 
scheme will be governed by the said bar. Allowing the writ petition, the 
G High Court held that no coercive steps for the purJJoSe of recovery of tax 
dues could be taken by the Revenue without obtaining the consent of BIFR. 
The present appeal had been filed by the Revenue against the judgment of 
the High Court. 
H 
According to the Revenue the legal bar or embargo u/s 22 of the Act 
1026 
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l 
DY. COMMERCIAL TAX OFFICER v. CORROMANDAL PHARMACEUTICAL~ 1027 
can apply only in respect of the sales tax dues included in the sanctioned A 
scheme. In the present case when the scheme was sanctioned in 1990, there 
was no assessment for the sales tax for the years 1992-93 and 1993-94, the 
tax so collected by the petitioner assessee belonged to the State hut the 
amount was not remitted to the State and if the bar or embargo u/s 22 (1) 
of the Act is held to cover such amount collected by the assessee, which B 
really belonged to the State, and enables such an assessee to retain the 
same, till the implementation is over or the appeal u/s 25 of the Act is 
disposed of, it will result in a state of affairs enabling the assessee to retain 
the amounts due to the State for no reason and indefinitely, resulting into 
an undesirable state of affairs; therefore, the section should be understood 
or read down to act as a bar or embargo only for such of those pre-package C 
dues reckoned or included in the scheme sanctioned. 
ThP. respondent company asserted that the embargo u/s 22 (1) is 
absolute and cannot be diluted or whittled down and all that is required 
by the provision is that in the cases where an enquiry. is pending or scheme 
is under preparation or consideration or a sanctioned scheme is under D 
implementation or an appeal is pending, no proceedings, as stated in Sec. 
22. of the Act for execution, distress or the like, shall be proceeded with 
except with the consent of the Board or the Appellate Authority and the 
re11uirement of a previous consent is not an absolute bar and that the facts 
of the instant case did not call for reading down the wide huport of Section E 
22(1) of the Act. 
Allowing the appeal, this Court 
HELD : (Per K.S. Pwipooma11, J.) 
1.1. Though the language of Section 22 of the Sick Industrial Com· 
pank~ (Special Pr1wisions) Act, 1935 is of wide import regarding suspen· 
sion of legal proceedings from the moment an im111iry is started, till after 
F 
the implementation of the :.;:heme or the disposal of an appeal undier 
Section 25 nf the Act, it will be reason~ble to hold that the bar or embai-go 
evisaged in Section 22 (1) of the Act can apply only to such of those dues G 
reckoned or included in the sanctioned scheme. Such amounts

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