Supreme Court Upholds Tax Settlement: Niket Udyog Ltd Vs State of M.P.

Niket Udyog Ltd Vs State of M.P. & Ors (Supreme Court of India)

The case of Niket Udyog Ltd vs State of Madhya Pradesh & Ors reached the Supreme Court, challenging the tax liability determined under various tax acts. This article delves into the court’s decision and its implications.

Detailed Analysis

The core issue revolved around the tax liability imposed by the Commercial Tax Officer while proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA Act) were ongoing. Despite the company’s reference to the Board for Industrial and Financial Reconstruction (BIFR), the tax determination proceeded, leading to legal contestation.

However, the crucial development occurred with the conclusion of proceedings under the SICA Act, as evidenced by the BIFR’s order dated 28.01.2014. The order acknowledged the settlement of the company’s dues, relieving the government of further involvement in the matter. This pivotal revelation rendered the appeals moot, prompting the Supreme Court to uphold the tax settlement.

The representation made by the Government of Madhya Pradesh before the BIFR, acknowledging the settlement of dues by the company, significantly influenced the court’s decision. With the final direction of the BIFR relieving the government from attending further hearings, the legal dispute lost its grounds.

Conclusion

The Supreme Court’s decision to uphold the tax settlement of Niket Udyog Ltd under the SICA Act, as directed by the BIFR, signifies a crucial legal precedent. It underscores the importance of adherence to statutory provisions and the significance of institutional mechanisms like the BIFR in resolving complex financial matters of distressed companies. This ruling not only resolves the specific case but also provides clarity on the interplay between tax liabilities and corporate restructuring under the SICA Act, thereby contributing to the stability and efficacy of India’s financial regulatory framework.

FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER

1. These appeals arise out of the judgment of the High Court of Madhya Pradesh at Jabalpur in Writ Petition Nos. 18982-18984/2006 dated 30.03.2020.

2. This Court granted leave to appeals on 16.07.2010 and we have today taken up appeals and heard Mr. Gaurav Agarwal, learned Senior Counsel appearing for the appellant and Ms. Mrinal Ekar Majumdar, learned counsel appearing for the respondent-State.

3. The Writ Petitions came to be filed against the order of the Commercial Tax Officer determining the tax liability under the M.P. Sales Tax Act, M.P. Vat Tax Act, Central Sales Tax Act and Entry Tax Act. Appeal against the decision of the Commercial Tax Officer was dismissed by the Additional Commissioner dated 11.08.2006 and, therefore, the appellant filed writ petitions before the High Court. The High Court by the order impugned herein dismissed the Writ Petitions.

4. An important fact was brought to our notice by Shri Gaurav Agarwal, learned Senior Counsel for the appellant. He submits that the appellant-company was referred to BIFR way back on 26.04.2000 and while proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985¹ were continuing, the Commercial Tax Officer proceeded with tax determination and passed ex-parte order on 04.12.2004.

5. We are informed that proceedings under the SICA Act were concluded by the order passed by the Board for Industrial and Financial Reconstruction (BIFR) on 28.01.2024. A copy of the order dated 28.01.2014 is placed before us and it evidences that the issue relating to the tax claim by the State of Madhya Pradesh has attained finality. The following paragraphs are extracted herein for ready reference:

“2.2. Ld. Advocate representing Commercial tax, GOMP submitted that the company has settled their dues and they may be exempted from attending further hearings in the matter.

..

3. Having considered the submissions made, materials on records, the Bench issued the
following directions:

(a) BOB to examine the issue of uninterrupted power supply to the company in the light of reply submitted by MPSEB/MPKVVCL; by taking services of some technical person and submit their final recommendation/report to the Board within four weeks. Company to reimburse the expenses to BOB, within two weeks of their visit to the Unit.

(b) MPSEB/MPKVVCL to continue to supply best possible power to the company and avoid getting the situation from bad to worse.

(c) Commercial Tax Department, GOMP is exempted from attending further hearings in the captioned case as their dues admitted to have been settled by the company.

(d) Next date of hearing is fixed on 15.04.2014.”

6. In view of the representation of the Government of Madhya Pradesh in the above referred order of BIFR that the Company had settled their dues, followed by the final direction of the BIFR, that Government need not attend further hearings, nothing remains for consideration in these appeals.

7. These Civil appeals are disposed of in terms of the above referred development.

Notes:

¹SICA Act