Decided on February 07,1992

The Coastal Chemicals Limited Appellant


S.C. Pratap, C.J. - (1.)BY order dated 2nd August, 1991, the Board for Industrial and Financial Reconstruction (BIFR) declared the petitioner -Company as a sick unit and has initiated rehabilitation programme by appointing an operating Agency to prepare revival package. A Division Bench of this Court has held that where a Company is declared to be a sick industrial unit, the authorities are prohibited from proceeding against the property of the company for recovery of sales tax arrears for the period prior to the passing of the order of the Board for Industrial and Financial Reconstruction, except with the consent of the Board -vide judgment dated 6th February, 1991 is Writ Petition No. 17090 of 1990. Thus, sofar as sales tax on sales effected prior to the declaration date, 2nd August, 1991, is concerned, the authorities cannot proceed against the property of the petitioner -company without the consent of the Board.
(2.)THERE is, however, no embargo against the authorities to proceed to recover sales tax on sales effected after the declaration and tax recovered from the customers. In the present case the company has effected large sales after the declaration in question and has also recovered thereon sales tax from their customers. Sales tax so recovered is in the region of over rupees thirty lakhs. As held by another Division Bench, deciding Writ Petition No. 12701 of 1991, the Sick Industrial Companies (Special Provisions) Act, 1985 does not permit the company to withhold payment of tax on sales subsequent to the declaration in question. If a company effected sales after the declaration and recovers sales tax from its customers, there is no reason why the same should not be passed on to the State. Here is a case where the petitioner -Company has recovered over rupees thirty lakhs as sales tax on post -declaration sales is nevertheless refusing or declining to pay the same to the State.
In the circumstances, we are not inclined to grant to the petitioner -Company any relief by way of permission or liberty to withhold the sales tax recovered by the Company on post -declaration sales. In the event the demand included amount of sales tax on pre -declaration sales, no recovery thereof can be effected. However, sofar as post -declaration sales are concerned, it is not open to the Company to with hold payment of sales tax already recovered thereon from its Customers. In this view of the matter, this petition is dismissed. Interim order is vacated. No costs. At the request of the petitioners' learned counsel, Status Quo to be maintained for a period of four weeks from today.


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