Appeal against single judge order dismissing writ petition seeking quashing of demand notice for electricity duty interest. Court held SICA 1985 suspension does not waive tax liabilities, especially for dues accrued post-revival or collected by company.
Appeal dismissed; interim stay on recovery of interest vacated.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
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AFR
HIGH COURT OF CHHATTISGARH, BILASPUR
WA No. 65 of 2022
---- Appellant
Versus
---- Respondents
| (Cause Title taken | from Case Information System) |
|---|---|
| For Appellant | : Mr. Ashish Shrivastava, Senior Advocate alongwith Mr. Aman Pandey, Advocate. |
| For Respondents No. 1 to 3/State | : Mr. Vikram Sharma, Deputy Government |
| Advocate. |
Hon'ble Shri Ramesh Sinha, Chief Justice Hon’ble Shri Naresh Kumar Chandravanshi, Judge
Judgment on Board
Per Ramesh Sinha, Chief Justice
16/10/2023
1. Challenge in this appeal is to the order dated 12.01.2022 passed by the learned Single Judge in WPC No. 2432 of 2007 whereby the writ petition seeking quashing of the memo dated 29.12.2003 which was further issued on 22.01.2007, was dismissed.
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2. The facts, in brief, as projected by the appellant/writ petitioner is that the petitioner is an establishment engaged in the manufacturing of steel and is a company registered under the Indian Companies Act in the year 1998. The appellant/writ petitioner establishment was declared as a sick industry under the provisions of the Sick Industries Companies (Special Provisions) Act, 1985 (for short, SICA 1985). The appellant at the time of establishment of its manufacturing unit was entitled for exemption for payment of electricity duty for the initial period of five years. Thereafter, the appellant establishment was liable to pay electricity duty. Accordingly, vide order dated 29.12.2003 (Annexure P-6) a demand was raised by the respondents for payment of electricity duty. Meanwhile, the appellant establishment was declared sick vide order dated 10.06.1998 by the Board for Industrial and Financial Reconstruction (for short, the BIFR). Thereafter, the proceedings for revival was pending before BIFR and finally the appellant establishment on its own request was discharged from the purview of SICA 1985. The appellant was discharged from the proceedings under the SICA 1985 on account of the company getting revived and all the accumulated loss having wiped off and the net worth also had become positive. The appellant, in the meanwhile had paid the entire principal amount. The respondent, subsequently, vide order memo dated 22.01.2007 (Annexure P-13) raised a fresh demand claiming interest on the electricity duty to the tune of Rs.3,13,45,231/-. It was this notice dated 22.01.2007 which led to the filing of the writ petition.
3. Before the learned Single Judge, the appellant/writ petitioner challenged the two orders i.e. 29.12.2003 (Annexure P/6) and 22.01.2007 (Annexure P/13) and contended that respondents could not have claimed electricity duty from the appellant-Company for the said period during which they were declared sick and the proceedings were pending before the BIFR. According to the appellant, it was entitled for protection provided under Section 22 of the SICA 1985.
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4. The said petition was duly contested by the respondents stating that that even if the appellant had the protection under the SICA 1985 or for that matter, the Madhya Pradesh Sahayata Upakram (Vishesh Upbandh) Adhiniyam, 1978 (for short, the Act of 1978), the protection would be only to the extent of not taking any coercive steps for recovery during the period they were sick. That by itself would not lead to the conclusion that the appellant was entitled for the waiver off the entire liability itself.
5. The learned Single Judge, after hearing the parties, dismissed the writ petition filed by the appellants. Hence, this appeal. 6. Mr. Ashish Shrivastava, learned Senior Advocate assisted by Mr. Aman Pandey, learned counsel for the appellants/writ petitioners would submit that the learned Single Judge has erred in law by dismissing the writ petition and by not considering and appreciating the fact that the impugned demand notice dated 29.12.2003 and 22.01.2007 demanding electricity duty along with interest for the period from April 1999 till March 2004 was not only arbitrary and illegal but also in serious violation of the provisions of Section 22 of SICA 1985 as well as the provisions of Section 3 to 6 of the Act of 1978 in as much as the fact that impugned demand notices with regard to payment of electricity duty along with interest was raised during the period when the appellant-Company was declared a sick industry in terms of Section 3 (1) (o) of the SICA 1985 and was relief undertaking Company during the period from 10.06.1998 to 28.06.2005, as such, in view of the aforesaid provisions of the Act of 1985 as well as the Act of 1978, no coercive action ought to have been taken with regard to payment of any dues, much less the electricity duty including interest part during such period. He relies on a decision of the Supreme Court in the matter of Gram Panchayat and Another v. Shree Vallabh Glass Works Limited & Others {(1990) 2 SCC 440}, wherein it has been held that, "when BIFR is satisfied that a Company had become a sick industrial Company in terms of Section 3 (1) (o) of the SICA 1985 and further the steps have already
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been taken by the Board under Section 16 and 17 of the Act, then no proceedings for execution, distress or the like against any of the properties of the industrial company shall lie or be proceeded with further except with the consent of the Board. Indeed, there would be automatic suspension of such proceedings against the company's properties. Thus, as soon as the inquiry under Section 16 is ordered by the Board, the various proceedings set out under sub-section (1) of Section 22 would be deemed to have been suspended. Further, the recovery of their dues/ outstanding/ overdues or arrears by whatever name it is called, it is for the Board at its discretion may accord its approval for proceeding against the company. As such, the alleged outstanding dues of electricity duty along with interest in respect of the period during which the appellant/writ petitioner Company was remained sick, was absolutely arbitrary illegal and unsustainable in the eye of law.
7. Mr. Shrivastava further submits that the impugned demand notices dated 29.12.2003 and 22.01.2007 with regard to payment of electricity duty alongwith its interest for the period from April 1999 to March 2004 was subsequently raised for the first time in the month of November/December 2003 whereas, no show-cause notice or any notice/reminder was issued prior to November/December 2003 with regard to payment of electricity duty alongwith its interest, as such, the same is not only bad, arbitrary and illegal in nature but also is in serious violation of the principles of natural justice in as much as the fact that no opportunity of hearing was granted to the appellant/writ petitioner Company before raising the demand in respect of outstanding payment of electricity duty alongwith its interest prior November/December 2003. 8. Relying on the decision of the Supreme Court in Tata Davy Ltd. v. State of Orissa & Others {(1997) 6 SCC 669} as well as in the matter of Maharashtra Tubes Ltd. vs State Industrial and Investment Corporation of Maharashtra Ltd . & Another {(1993) 2 SCC 144}, Mr. Shrivastava submits that the demand and the recovery proceedings drawn pursuant to demand
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notices under the Chhattisgarh Electricity Act, 1949 ( for short, the Act of 1949 ), would be bar during the enquiry under Section 16 or preparation/ consideration/ sanction under Section 17 or appeal under Section 25 of the SICA 1985. Further, the provisions of Section 5 of the Act of 1949, enumerates that on account of some duty is due and remaining unpaid shall carry interest. But the learned Single Judge has completely failed to appreciate that no such demand notice with regard to payment of electricity duty due was issued prior to 19.11.2003 or 29.12.2003 for the period from April 1999 till March 2004 and it is for the first time, in the month of November/December 2003 and that too, including the interest at the highest rate of 24% for the period from April 1999 till March 2004, was raised, nor the mode of recovery in the manner of issuing any RRC was followed, within the meaning of Section 5 (2) of the Act of 1949. The learned Single Judge has further not only failed to consider and appreciate the provisions of Section 5 of the Act of 1949 but also Rule 5 of the Chhattisgarh Electricity Duty Rules, 1949 ( for short, the Rules of 1949 ). The appellant/ writ petitioner immediately after discharging from the ambit of SICA 1985, upon its revival and when its net worth turned positive, applied for its discharge and accordingly was discharged from the purview of the SICA 1985, vide order dated 28.06.2005 of the BIFR, later on, the appellant/writ petitioner-Company paid the principal amount of electricity duty to the tune of Rs.2,98,06,336/- up to 07.04.2007, however, despite this, the appellant/writ petitioner company was saddled with the subsequent demand notice vide dated 22.01.2007 with enhanced interest part to the tune of Rs.3.13.45.231/- despite having paid the principal amount of electricity duty by the appellant/ writ petitioner company.
9. Mr. Shrivastava next submits that the action on the part of the respondent State and the subsequent demand notice dated 22.01.2007 was nothing but an arbitrary and illegal exercise of power to penalize the appellant/writ petitioner company whereas, there was no intention on the part of the appellant/writ petitioner company for non-payment of any dues during the
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period from 10.06.1998 to 28.06.2005 during which period the appellant/writ petitioner company remained sick and was under relief undertaking company, as such, was not liable for payment of interest on the unpaid electricity duty, in view of the judgment of Hon'ble the Supreme Court in the matter of Uttar Gujarat S.R.V. Sangh Limited v. Mehsana District Central Cooperative Bank Limited and others {(2008) 11 SCC 492}.
10. Mr. Shrivastava further contends that the appellant/writ petitioner industry was declared as a relief undertaking under Section 3 of the Act of 1978 by issuance of notification under Section 3 of which the Act remained in force up to 31 March, 2003. Therefore, the appellant/writ petitioner Unit was not liable to make any payment up to the month of March, 2004 so far electricity duty and interest are concerned, otherwise, the object of declaring sick unit as a relief undertaking would be frustrated especially when Act, the 1978 was enacted to make special provision in respect of industrial relations for giving relief to with them the assent of His Highness the President of India. Even by virtue of Section 5 of as the Act, 1978 from the date specified in the notification under issued Section 3 of the Act, 1978, no suit or other proceeding shall be instituted or commenced period in during the period in which it remained as a relief undertaking. The appellant/writ petitioner unit has already made representation relying upon its being a sick industry in terms of Section 3 (1) (o) of the Act, 1985, the 1978 declaration of the State Government under the Act as a relief undertaking by the State Government up to 31st March, 2004 and other points, but the respondent No. 1 has not even considered the representation of the appellant/writ petitioner with regard to levy of electricity duty and interest, and straight-away issued the notice of memo directing recovery. The appellant/writ petitioner industry is entitled to be treated fairly by the State Government especially when upon its own efforts the industry has come out from the purview of a sick industry and started paying electricity duty and has already paid the principal amount of electricity duty. If the respondent
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State is allowed to recover even the amount of interest, then the object of the Act of 1978 declaring the appellant/writ petitioner unit as a relief undertaking under the Act of 1978 even for the Court proceeding during that period, the object of the SICA 1985 in declaring the appellant/writ petitioner unit as a sick industry and keeping out the industry from the purview of legal proceedings, recoveries etc. will stand frustrated, if the interest is allowed to be recovered in this arbitrary and illegal manner by the State Government, as firstly declaring the industry as a relief undertaking for two years and then for the same period recovering the interest even on electricity duty at the rate of 24%, then object beyond the whole declaring and reviving the unit sick from industry would be frustrated.
11. Mr. Shrivastava further submits that the learned Single Judge ought to have considered that the rate of interest @ 24% is too high looking to the prime lending rate at market and cannot be said to be reasonable rate of interest by any stretch of imagination and consequently, it deserves to be quashed. He places reliance on the judgment of the Supreme Court in Small Scale Industrial Manufacturers Association (Registered) v. Union of India & Others, {(2021) 8 SCC 511 paragraphs 99 to 103} and Punjab & Sind Bank v. Allied Beverage Company Private Limited & Others {(2010) 10 SCC 640, paragraphs 18 and 19}.
12. On the other hand, Mr. Vikram Sharma, learned counsel appearing for the State/respondents No. 1 to 3 submits that the order passed by the learned Single Judge is just and proper warranting no interference. The learned Single Judge has taken into consideration all the contentions raised herein by the learned counsel for the appellant and after meticulous analysis of the facts and law on the subject, has arrived at a proper finding which requires no interference. If the appellant-writ petitioner intended to claim any exemption from payment of electricity duty alongwith interest accrued, there has to be some express provision in the SICA 1985 or any other Act. The appellant-writ
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petitioner only had the protection that till the said Company was a sick unit, but not thereafter when it revived from the financial crunch.
13. Mr. Sharma further submits that the appellant/writ petitioner has not been able to point out that the appellant-Company was exempted from payment of electricity duty during the period it was declared sick. The appellantCompany was declared sick and thereafter it got revived and as such, in absence of any statutory provision with regard to complete exemption from payment of any duties/taxes/levies, the appellant-Company was required to make the entire payment. He relies on a decision of the Supreme Court in Voltas Ltd. v. Staet of A.P. {(2004) 11 SCC 569, paragraphs 16 and 20} and a judgment of this Court in Uniworth Textiles Ltd. v. State of Chhattisgarh {(2019) SCC OnLine Chh 408, paragraphs 5, 6, 7 and 8} and Deputy Commercial Tax Officer & Another v. Corromandal Pharmaceuticals & Others , {(1997) 10 SCC 649, paragraph 13}.
14. We have heard learned counsel for the parties, perused the pleadings and documents appended thereto.
15. While the writ petition was pending before the learned Single Judge, interim protection was granted to the appellant/writ petitioner vide order dated 20.04.2007 to the effect that the impugned recovery notice dated 22.01.2007 (Annexure P/13) was stayed. The said interim protection continued till the final disposal of the writ petition on 22.01.2022. In the appeal, this Court granted an interim protection that no coercive steps with regard to recovery of interest part as per the impugned demand notice shall be taken. The said interim order continued from time to time.
16. The crux of the matter has been taken note of at paragraph 11 of the order of the learned single Judge that from which it transpires that the admitted position in this case is that the appellant-Company was exempted from payment of electricity duty for an initial five years period during which they enjoyed the protection of waiver. Thereafter they were required to pay electricity
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duty. As the appellants did not pay the said electricity duty, the respondents had called upon the appellant to clear the outstanding amount payable towards electricity duty beyond the period of five years during which they had the protection of waiver. The said notice was not acted upon or honoured by the appellant. Meanwhile, the appellant had been declared sick between June, 1998 to June, 2005. Thereafter, the appellant realizing its liability, voluntarily deposited the principal amount in the year 2007 to the tune of Rs. 2.98 Crores. Once when the appellant/writ petitioner has voluntarily made the payment of principal amount, the question of liability part stands settled. The next question which was considered by the learned Single Judge was with regard to payment of interest amount. A plain reading of Section 5 of the Chhattisgarh Electricity Duty Act clearly enumerates that the amount of duty due and remaining unpaid shall carry interest. Thus statutes itself provides for charging interest on unpaid and delayed payments.
17. The learned Single Judge has also taken note of the provisions of Section 22 of the SICA 1985 which in essence is only suspension of the legal proceedings and contracts etc. till the company is sick. The moment the Company stands revived, they would be liable to clear off the liabilities which at one point of time they could not do on account of they being declared sick. The statute does not have a provision whereby it is envisaged waiver off of all the liabilities during the intervening period, if the company is sick, Section 22 of SICA only refers of suspension or deferring of all the proceedings as long as they are sick.
18. In Voltas Ltd. (supra), the Supreme Court observed at paragraphs 16 and 20 as under:
“16. It was submitted that this authority shows that a liberal interpretation had to be given and that the assessee should not be made liable for interest amounts. In our view this authority is against the appellants. This authority shows that the tax becomes due on the date that the returns are filed. In
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J.K.Synthetic case, the assessee had paid the tax which the assessee thought was payable. In this case the appellants were not exempted from paying tax. All that happened was that payment of tax was deferred. Thus the appellants collected tax from the customers but were not paying the same over to the Government. The concession of deferral did not mean that the payment had not become due.
xxx xxx xxx
20. Thus time for payment can be extended. But if such an extension is granted a statutory liability to pay interest at the rate of 18 per cent arises. This is a statutory liability. If a statutory liability has to be waived then there must be an express waiver of the same. The fact that the scheme is silent about such waiver shows that there is no waiver. This becomes further clear from Clause 13(b)(3) of the scheme. That clause specifies that interests shall only be at the rate of 6 per cent. Such a provision had to be made because otherwise the statutory liability would have been to pay interest at the rate of 18 per cent. In Clause 13(b)(4) there is no express waiver of or reduction in the rate of interest and the payment thereof.”
19. Further, this Court, in Uniworth Textiles Ltd. (supra), held at paragraphs 5, 6, 7 and 8, as under:
“5. The learned Single Judge, therefore, came to an opinion that payment of interest and the liability so created for noncompliance within the time frame of filing returns or paying taxes would not be covered under the BIFR Rehabilitation Scheme and the obligation and liability to pay interest amount as held by the Assessing Authority as well as the Appellate Authority cannot be said to bad in law.
6. It is in this background that the appeals have been preferred. At the appellate stage, learned Counsel representing the Appellants submits that the entire case should be basically examined from the view whether the reason of non- payment was bonafide and there were justifiable reasons in existence which prevented non-payment of the outstanding tax dues within the time frame.
7. The argument made is that since the industry ran into difficult
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time and that was the reason why it took shelter under the BIFR and therefore, this fact cannot be overlooked or can be said not to be a valid ground or sufficient cause to not impose interest upon the Unit for delay.
8. Section 22(1) of the SIC Act is unambiguous. Unless the scheme would be extended to the extent of even non-payment of outstanding dues of various Revenue Departments, in this case, the Sales Tax Department, mere registration of an application of a sick unit before the BIFR cannot be said to be a ground for either exemption from such payment or will provide protection as a justification for non-payment. Another thing of significance is that the registration of the application of the Appellant has been made on 29.05.2002, whereas this liability has arisen prior to the said date and we are of the opinion that in matters of obligations created under taxing statute, no leeway as such can be permitted to shy away from compliance or else the entire fiscal management of the State and the Union will go into disarray.”
20. In Corromandal Pharmaceuticals (supra), the Supreme Court has held that embargo under Section 22(1) of the SICA 1985 is applicable only to dues reckoned or included in the sanctioned scheme and not to amounts like sales tax etc. collected by the sick industrial company after the date of the sanctioned scheme and legitimately belonging to the revenue.
“13. On a fair reading of the provisions contained in Chapter III of Act 1 of 1986 and in particular Section 15 to 22, we are of the opinion that the plea put forward by the Revenue is reasonable and fair in all the circumstances of the case. Under the statute, the BIFR is to consider in what way various preventive or remedial measures should be afforded to a sick industrial company. In that behalf, BIFR is enabled to frame an appropriate scheme. To enable the BIFR to do so, certain preliminaries are required to be followed. It starts with the reference to be made by the Board of Directors of the sick company. The BIFR is directed to make appropriate inquiry as provided in Sections 16 and 17 of the Act. At the conclusion of the inquiry, after notice and opportunity afforded to various persons including the creditors, the BIFR is to prepare a
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scheme which shall come into force on such date as it may specify in that behalf. It is in implementation of the scheme wherein various preventive, remedial or other measures are designed for the sick industrial company, steps by way of giving financial assistance etc. by Government, banks or other institutions, are contemplated. In other words, the scheme is implemented or given effect to, by affording financial assistance by way of loans, advances or guarantees or reliefs or concessions or sacrifices by Government, banks, public financial institutions and other authorities. In order to see that the Scheme is successfully implemented and no impediment is caused for the successful carrying out of the scheme, the Board is enabled to have a say when the steps for recovery of the amounts or other coercive proceedings are taken against sick industrial company which, during the relevant time, acts under the guidance/control or supervision of the Board (BIFR). Any step for execution, distress or the like against the properties of the industrial company or other similar steps should not be pursued which will cause delay or impediment inthe implementation of the sanctioned scheme. In order to safeguard such state of affairs, an embargo or bar is placed under Section 22 of the Act against any step for execution, distress or the like or other similar proceedings against the company without the consent of the Board or, as the case may be, the appellate authority. The language of Section 22 of the Act is certainly wide. But, in the totality of the circumstances, the safeguard is only against the impediment, that is likely to be caused in the implementation of the scheme. If that be so, only the liability or amounts covered by the scheme will be taken in, by Section 22 of the Act. So, we are of the view that though the language of Section 22 of the Act is of wide import regarding suspension of legal proceedings from the moment an inquiry is stated, till after the implementation of the scheme or the disposal of an appeal under Section 25 of the Act, it will be reasonable to hold that the bar or embargo envisaged in Section 22(1) of the Act can apply only to such of those dues reckoned or included in the sanctioned scheme. Such amounts like sales tax, etc., which the sick industrial company is enabled to collect after the date of the sanctioned scheme
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legitimately belonging to the Revenue, cannot be and could not have been intended to be covered within Section 22 of the Act. Any other construction will be unreasonable and unfair and will lead to a state of affairs enabling the sick industrial unit to collect amounts due to the Revenue and withhold it indefinitely and unreasonably. Such a construction which is unfair, unreasonable and against spirit of the statute in a business sense, should be avoided.”
21. Reliance placed by the learned counsel for the appellant/writ petitioner on the cases referred to above are not of any assistance to the appellant. The appellant has utterly failed to demonstrate that there was any provision which completely exempts the appellant-Company from making payment of electricity duty or the interest thereon even if the company stands revived from a sick industry. The appellant-Company had already availed the benefit of exemption during the period it was a sick Unit. Deferral of payment of dues cannot be construed as complete exemption from payment.
22. Applying the ratio laid down by the Supreme Court in Voltas Ltd. (supra), Corromandal Pharmaceuticals (supra) and by this Court in Uniworth Textiles Ltd. (supra), we are of the view that no case for interference is made out with the order passed by the learned Single Judge.
23. This appeal, being devoid of merit, is accordingly dismissed . Consequently, interim order also stands vacated.
Sd/Sd/- (Naresh Kumar Chandravanshi) (Ramesh Sinha) JUDGE CHIEF JUSTICE
Amit
3 issues framed by the court
Whether Section 22 of SICA 1985 exempts a revived sick industry from liability to pay interest on electricity duty.
Whether the embargo under Section 22 of SICA 1985 applies to revenue dues collected after the sanctioned scheme.
Whether interest charged under electricity duty statutes is waivable solely on grounds of sickness relief.
Colour shows how this judgement treated each authority
Gram Panchayat and Another v. Shree Vallabh Glass Works LimitedReferred¶24
(1990) 2 SCC 440 · Who else cites this
Tata Davy Ltd. v. State of OrissaReferred¶27
(1997) 6 SCC 669 · Who else cites this
Uttar Gujarat S.R.V. Sangh Limited v. Mehsana District Central Cooperative Bank LimitedReferred¶31
(2008) 11 SCC 492 · Who else cites this
Small Scale Industrial Manufacturers Association (Registered) v. Union of IndiaReferred¶36
(2021) 8 SCC 511 · Who else cites this
Punjab & Sind Bank v. Allied Beverage Company Private LimitedReferred¶36
(2010) 10 SCC 640 · Who else cites this
Voltas Ltd. v. State of A.P.Distinguished¶47
(2004) 11 SCC 569 · Who else cites this
Uniworth Textiles Ltd. v. State of ChhattisgarhApplied¶53
(2019) SCC OnLine Chh 408 · Who else cites this
Deputy Commercial Tax Officer & Another v. Corromandal PharmaceuticalsReferred¶39
(1997) 10 SCC 649 · Who else cites this
Uttar Gujarat S.R.V. Sangh Limited v. Mehsana District Central Cooperative Bank LimitedDistinguished¶60
(2008) 11 SCC 492 · Who else cites this
3 provisions across 3 enactments
M/s Prakash Industries Ltd
State Of Chhattisgarh
Ramesh Sinha
Naresh Kumar Chandravanshi
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
