- (1.) THE Sales Tax Officer, Kanpur, has filed this application under rule 164 of the Companies Rules, 1959, appealing against the decision of the Official Liquidator refusing his claim. It is not disputed that on the application of the Registrar of Companies, U.P., dated the 24th of May, 1962, an order for the winding up of M/s. Northern India Oil Industries was made by this Court on the 7th August, 1963. The appellant filed a claim for Rs. 22,468.88 against the said company before the Official Liquidator on account of the arrears of sales tax (both Central and State) due from the former as per the following details: ------------------------------------------------------------------------ Date of assessment Assessment Total Tax Amount order Years amount paid of tax Remarks of tax in arrears assessed --------------------------------------- --------------------------------- 1 2 3 4 5 6 ------------------------------------------------------------------------ 21-11-1955 1954-55 14,062.50 6,813.08 7,249.42 U.P.S.T. Act. 31-8-1957 1955-56 1,208.33 997.02 211.31 Do. 20-5- 1958 1956-57 324.78 324.73 0.05 Do. 9-1-1960 1957-58 85.22 78.72 6.50 Do. 26-9-1960 1958- 59 2,291.00 2,048.21 242.79 Do. 26-9-1960 1958-59 668.81 -- 668.81 Central. 28-3-1964 1959-60 7,020.00 - - 7,020.00 U.P.S.T. Act. 10-8-1964 1959-60 7,070.00 -- 7,070.00 Central. ------------------------------------------- ----------------------------- 32,730.64 10,261.76 22,468.88 ------------------------------------------------------------------- -----
(2.) IN support of the aforesaid claim the Assistant Sales Tax Officer of Kanpur Circle appeared before the Official Liquidator, and filed the relevant orders of the Sales Tax Officer along with copies of the assessment orders and copies of the acknowledgements in token of the receipt of the assessment orders and demand notices by the company. The Official Liquidator accepted the claim in respect of the first six items, but rejected to give them priority under section 530(1) of the Companies Act. He also rejected the claim for the last two items on the ground that the assessment orders on which they were based were made without any notice to him and the demand notices in respect of them were not served on him. Feeling aggrieved the Sales Tax Officer has preferred the aforesaid appeal. On behalf of the appellant his learned counsel Sri T. N. Sapru challenged the correctness of the findings of the Official Liquidator on both the points. So far as the question of priority was concerned his contention was of a twofold nature. His first contention was that on a correct interpretation of section 530(1)(a) of the Companies Act the sales tax in question was entitled to priority. His second contention was that, in any case, as the said sales tax had been ordered to be recovered as arrears of land revenue within the twelve months next preceding the date of the winding up order it was entitled to priority as land revenue. As for the claim for the last two items which was totally disallowed by the Official Liquidator his contention was that as under section 17 of the Sales Tax Act, the legality and correctness of an assessment order could not be challenged in any other manner except that provided in that Act and as the Official Liquidator had not got the assessment order in question set aside under the Act he was in error in rejecting the appellant's claim in respect of those items. After hearing Sri Sapru and the Official Liquidator, I am satisfied that while the second contention of Sri Sapru is well-founded his first contention has no merit and is liable to be rejected. I shall, therefore, proceed to deal with those contentions in the order stated above. Section 530(1)(a) of the Companies Act, 1956, which deals with priorities in a winding up lays down: "In a winding up, there shall be paid in priority to all other debts - (a) all revenues, taxes, cesses and rates due from the company to the Central or a State Government or to a local authority at the relevant date as defined in clause (c) of sub-section (8), and having become due and payable within the twelve months next before that date." Clause (c) of sub-section (8) states: "(c) the expression 'the relevant date' means - (i) in the case of a company ordered to be wound up compulsorily, the date of the appointment (or first appointment) of a provisional liquidator, or if no such appointment was made, the date of the winding up order, unless in either case the company had commenced to be wound up voluntarily before that date." As stated earlier it is not disputed that the relevant date in this case is the 7th of August, 1963. We have, therefore, to see whether the sales tax claimed under the assessment orders for the assessment years 1954-55 to 1958-59 can be held to have become due and payable within the twelve months next before the 7th August, 1963, i.e. to say, between the 7th August, 1962, and the 7th August, 1963.
(3.) SO far as the question of the sales tax having become due and payable within the period commencing the 7th August, 1962, and ending the 7th August, 1963, is concerned, it is obvious that since the said sales tax was payable for the assessment years 1954-55 to 1958-59, it could neither have become due nor payable within the period aforementioned. It seems to me that what section 530(1)(a) envisages is the revenue, sales tax etc., which are currently due and payable at the time of the winding up order and it does not include in its ambit arrears of the same. Besides this section not only requires that the tax etc. should have become due within the relevant period but that they should have also become payable within that period. Both these conditions must therefore co-exist before the priority mentioned therein can be claimed. Hence even if the sales tax regarded as land revenue is held to be payable within the material period, it cannot possibly be held to have become due within that period. The view taken by me is supported by the decisions in Recols (India) Ltd., In re ([1953] 4 S.T.C. 271; 23 Comp. Cas. 380) and The Income-tax Officer, Company Circle v. The Official Liquidator and Others ([1967] 37 Comp. Cas. 114). Thus the first part of the first contention of Sri Sapru has no force and is rejected.;