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1993 DIGILAW 57 (RAJ)

SHREE PIPES LTD. v. STATE OF RAJASTHAN.

1993-01-25

MAHENDRA BHUSHAN

body1993
JUDGMENT M. B. SHARMA, J. - Shree Pipes Ltd. (for short "the petitioner-company") has challenged the assessment order dated February 11, 1992, made under the Rajasthan Sales Tax Act, 1954 (for short, "the RST Act") as well as the Central Sales Tax Act, 1956 and also challenged the demands made. Two grounds have been raised in challenging the assessment order and the demands as aforesaid and they are - (i) the products of the petitioner-company fall under entry 95 and not entry 115 under the RST Act and are classifiable under entry 95 and (ii) no coercive procedure or measure for the recovery of the demands of sales tax can be taken against the petitioner-company because it is a sick industrial company and section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 [for short, "the SIC (SP) Act"], is applicable. A relief has also been claimed that because under the contract the sales tax was payable by the Public Health and Engineering Department, respondents Nos. 1 and 2 be directed to recover the tax, if any, from that department. 2. The petitioner-company is engaged in the manufacture of asbestos cement pressure pipes which, inter alia, consist of cement and asbestos. There are three different entries under the RST Act under the notification dated March 8, 1988, which govern the rate of tax applicable and as per the case of the petitioner-company are relevant for the present purposes and they are as under : "Entry 74 All types of sanitary goods and fittings and all types of pipes and pipe fittings. Entry 95 Articles made of cement. Entry 115 Products of all sorts of asbestos including flat and corrugated sheets." The asbestos cement pressure pipes are used in the water-supply scheme and irrigation projects. Under the aforesaid notification dated March 8, 1988 and subsequent notifications, the rates of tax applicable in respect of the aforesaid three entries were as under from time to time : -------------------------------------------------------------------- Rate structure Up to 6-3-1986 8-3-1988 23-3-1989 5-3-1986 to to (current) 7-3-1988 22-3-1989 1 2 3 4 --------------------------------------------------------------------- Entry 95(a) Cement and articles made of 12% 13% 12% 12% cement including pipes and pipe fittings. Entry 115(b) Products of all sorts of 12% 12% 14.5% 15% asbestos including flat and corrugated sheets. Entry 115(b) Products of all sorts of 12% 12% 14.5% 15% asbestos including flat and corrugated sheets. Entry 125(c) General rate 10% 10% 10% 10% ---------------------------------------------------------------------- It will be seen from the Notification No. 703-F14(5) FD.Gr.IV/88-13 dated March 8, 1988 (S.O. No. 244) that it was issued by the State Government in exercise of the powers conferred by section 5 of the RST Act and in supersession of all previous notifications. It will further be seen that entry No. 125 is in respect of general rates and it is residuary entry and the said rate is applicable for all goods that are not covered by any entry from serial Nos. 1 to 124. A look at the aforesaid table will further show that up to March 5, 1986, the rate of sales tax under entry No. 95 as well as under entry No. 115 was the same, i.e., 12 per cent. It will further be seen from the aforesaid table that from March 6, 1986 to March 7, 1988 the rate of tax under entry No. 95 was 13 per cent, under entry No. 115 it was 12 per cent. Thus, during the aforesaid period whereas the rate of tax was more on cement and articles made of cement, it was less by 1 per cent on the products of all sorts of asbestos, including flat and corrugated sheets. It is only from March 8, 1988 to March 21, 1989 that whereas under entry No. 95 the rate of tax was 12 per cent, it was 14.5 per cent under entry No. 115. The case of the petitioner-company is that up to July 1, 1988, its product was consistently assessed for sales tax under entry No. 95. It is further the case of the petitioner-company that from April 1, 1989, the concessional rate of 5 per cent became applicable to the asbestos cement pressure pipes supplied to the Government. But it ceased to be applicable with effect from January 6, 1990 and the petitioner-company started collecting and paying tax on asbestos cement pressure pipes at the rate applicable to asbestos products under entry No. 115. The dispute in the present writ petition is, therefore, in respect of the period from July 1, 1987 to March 31, 1989. 3. But it ceased to be applicable with effect from January 6, 1990 and the petitioner-company started collecting and paying tax on asbestos cement pressure pipes at the rate applicable to asbestos products under entry No. 115. The dispute in the present writ petition is, therefore, in respect of the period from July 1, 1987 to March 31, 1989. 3. For the aforesaid period in dispute the petitioner-company under the provisional assessment under section 7B of the RST Act was assessed to sales tax under entry No. 95, but for the aforesaid period under final assessment order dated February 11, 1992 the respondent-department has assessed the product of the petitioner-company falling under entry No. 115 and are accordingly levying sales tax thereon at the rate of 14.5 per cent subsequent to the period from March 8, 1988, vide annexure 5. It is further the case of the petitioner-company that during the aforesaid period it had collected and paid sales tax under the provisional assessment at the rate applicable under entry No. 95, i.e., for articles of cement, and in doing so the petitioner-company was guided and controlled by the orders of provisional assessment passed by the respondents. 4. Under section 12A of the RST Act power has been conferred on the Commissioner to determine the disputed question in respect of classification of goods also but a bare reading of section 12A of the RST Act will show that the disputed question/questions which can be determined by the Commissioner under the aforesaid section must arise otherwise than in proceedings before a court or under sections 7A, 7B, 10, 10A, 10B or 12. So far as the petitioner-company is concerned, as said earlier, there were provisional assessment orders and the law is settled that what is provisional is never final and is subject to final determination and, therefore, any order of provisional assessment will be subject to the final order of assessment made under section 10 of the RST Act. This result will flow by a bare reading of the provisions of sections 7 to 10. This result will flow by a bare reading of the provisions of sections 7 to 10. Therefore, the application under section 12A of the RST Act which was filed by the petitioner-company, in my opinion, was not maintainable and if the Additional Commissioner under its order dated November 8, 1988 (annexure 4) held that the application was not maintainable and the assessee of course would be free to choose appropriate legal remedy, it cannot be said that it did not act in accordance with law. That apart, an order made under section 12A of the RST Act has been made appealable to the Tribunal under section 14 of the said Act. Therefore, if the petitioner-company felt aggrieved of the order made under section 12A, it could prefer an appeal to the Sales Tax Tribunal and thereafter even if the Tribunal would have decided the matter against it, the petitioner-company could have filed a revision petition under section 15 of the RST Act. In other words, the RST Act provides a complete machinery and hierarchy of courts or Tribunal to decide such questions. 5. So far as the question of classification of the products of the petitioner-company, namely, asbestos cement pressure pipes is concerned, the question of its classification is as to whether the said products are falling under entry No. 95 or 115 and this question is again a question of fact. It is even the case of the petitioner-company, as will be seen from a perusal of para 14, page 7 of the writ petition that for the period from July 1, 1986 to June 30, 1987 while passing final order of assessment the respondent-department applied entry No. 115 and assessed tax on the said product for the aforesaid period at the rate applicable to asbestos products. However, the rate applicable to asbestos products during the said period was lower than the rate applicable for the articles made of cement and therefore no demand was raised for payment of additional amount. The final order of assessment was passed in 1991 and the said order has been challenged by way of appeal. I am of the opinion that the question of classification of goods or the question as to under which entry the goods will be classified is a question which should primarily be decided by the authorities under the RST Act. The final order of assessment was passed in 1991 and the said order has been challenged by way of appeal. I am of the opinion that the question of classification of goods or the question as to under which entry the goods will be classified is a question which should primarily be decided by the authorities under the RST Act. The RST Act provides complete machinery and if any goods has been classified under wrong entry the matter should be taken up by way of appeal to the Commissioner, as one is provided and then to further appeal before the Tribunal and thereafter if necessary by revision petition under section 15 of the RST Act to this Court and such matters cannot be and should not be decided in writ jurisdiction because primarily they are the questions of fact. Final order of assessment has been made and as said earlier an appeal lies against the aforesaid order and therefore as the question is involved about the classification of goods and the question is under which entry the goods fall, I would not like to go into this question in writ jurisdiction where a complete machinery is provided for determination of such question under the RST Act, and as such, such matters should be left for determination by the officer/authorities provided under the RST Act. That apart, the law is settled that if two constructions are possible on the question as to under which entry the goods fall, it is not the scope of extraordinary writ jurisdiction of this Court under article 226 of the Constitution of India to go into these questions. 6. The contention of the learned counsel for the petitioner is also that the sales tax is payable by the Public Health and Engineering Department and the liability, if any, on the petitioner-company to pay sales tax should be passed on to the Public Health and Engineering Department and the said department alone should be asked to pay the dues. 6. The contention of the learned counsel for the petitioner is also that the sales tax is payable by the Public Health and Engineering Department and the liability, if any, on the petitioner-company to pay sales tax should be passed on to the Public Health and Engineering Department and the said department alone should be asked to pay the dues. In my opinion, in the assessment proceedings the assessee and the sales tax department were parties and so far as the assessment order is concerned, it is bound to be against the assessee and the assessee has to make the payment and if under the contract the payment was to be made by the Public Health and Engineering Department or any other party, then the assessee will be entitled for reimbursement to that extent, but it cannot be said that these questions should be gone through in the writ jurisdiction as it will depend on the contract to contract basis and it is a question of fact. 7. The last contention of the learned counsel for the petitioner is that the petitioner-company has been declared as a sick industry and a scheme for its revival is under consideration and therefore by virtue of section 22 read with section 32 of the SIC (SP) Act the respondents cannot initiate coercive method for recovery of the impugned demand. On the material placed before this Court it does appear that under the proviso to section 15(1) the Board has decided to make an enquiry under section 16 of that Act and under order annexure 7, the Board has decided that the petitioner-company would not be able to revive and make its networth positive and after examining the matter, it was considered necessary and expedient by the Board in public interest to make attempt to revive the unit because its closure will lead to unemployment and loss of substantial funds of the financial institutions, banks, etc. The unit is located in under-developed area and the Board therefore appointed IPCI as the operating agency for preparing a scheme for rehabilitation of the company, if possible, in terms of sub-section (3) of section 17 of SIC (SP) Act. 8. The unit is located in under-developed area and the Board therefore appointed IPCI as the operating agency for preparing a scheme for rehabilitation of the company, if possible, in terms of sub-section (3) of section 17 of SIC (SP) Act. 8. Under section 32(1) of the SIC (SP) Act, the provisions of that Act and of any rules or schemes made thereunder have overriding effect notwithstanding anything inconsistent therewith contained in any other law except the provisions of the Foreign Exchange Regulation Act, 1973 and the Urban Land (Ceiling and Regulation) Act, 1976, for the time being in force or in the Memorandum or Articles of Association of an industrial company or in any other instrument having effect by virtue of any law other than that Act. Section 22 of the SIC (SP) Act to which reference has already been made in the earlier part of this order, provides that where an inquiry under section 16 is pending or any scheme referred to under section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under section 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956 or any other law or the Memorandum and Articles of Association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof shall lie or be proceeded further, except with the consent of the Board, or as the case may be, the appellate authority. It will, therefore be clear no proceedings for distress or like nature can be taken against the company during the pendency of the inquiry under section 16 or under preparation of a scheme or implementation of the sanctioned scheme. Therefore, even for recovery of sales tax dues no coercive measure can be taken when the matter is before the Board unless the consent of the Board is taken. Therefore, even for recovery of sales tax dues no coercive measure can be taken when the matter is before the Board unless the consent of the Board is taken. The result will be that even for the recovery of sales tax dues, if any, against the demand raised no coercive steps like sale of the properties can be taken till the matter is before the Board without the consent of the Board and if the sales tax department wants to take coercive measure like sale of the properties, the consent of the Board has to be obtained. 9. Consequently, I allow this writ petition only to the extent that no coercive measure shall be taken for the recovery of the sales tax, if any, till the matter is before the Board in view of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985. Costs made easy. Writ petition allowed.