JUDGMENT
N.K. Sodhi, C.J.
1. The short question that arises for consideration in this writ appeal is whether the prescribed authority could refuse to issue for failure to pay the arrears of tax due the declaration Form. No. 40 to a sick industrial company under Sub-section (4) of Section 3 of the Karnataka Tax on Entry of Goods Act, 1979 (hereinafter called the Entry Tax Act) and the Rules framed thereunder having regard to the provisions of Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short the 1985 Act). The learned single judge dismissed writ petition No. 43142 of 2003 and declined to issue a mandamus to the fourth respondent to issue Form No. 40 to the appellant under the Entry Tax Act.
2. Section 3 of the Entry Tax Act provides for the levy and collection of tax on entry of goods specified in the first schedule into a local area for consumption, use or sale therein at such rates not exceeding 5 per cent of the value of the goods. This tax is payable by every registered dealer or a dealer liable to get himself registered under the Entry Tax Act who brings or causes to be brought into a local area the goods whether on his own account or on account of his principal or any other person. No such tax is, however, levied or collected from a dealer who brings or causes to be brought into a local area any goods in respect of which tax has been paid or has become payable in any other local area. This exemption is not granted to a dealer unless he furnishes to the assessing authority a declaration in the prescribed form obtained from the prescribed authority and duly filled and signed by the dealer who is liable to pay tax on such goods under the Entry Tax Act, Rule 9E of the Karnataka Tax on Entry of Goods Rules 1979 provides that the declaration to claim exemption under Section 3 shall be in Form No. 40. It further provides that the declaration issued in Form No. 40 shall be serially machine numbered for each year and the dealer issuing the same shall maintain day-today account in a register in Form No. 41.
3. The appellant is a public limited company which has set up a cement manufacturing unit at Bagalkot in the State of Karnataka where it is engaged in the manufacture of portland cement. The cement unit has a work force of about 600 employees and the financial institutions and bankers have financed the projects of the company including the cement unit. The appellant suffered heavy losses in the recent past and its accumulated losses exceeded its net worth as per the accounts for the year ending June 30, 1999 and, therefore, it made a reference to the Board for Industrial and Financial Reconstruction (hereinafter referred to as ‘the Board’) under Section 15(1) of the 1985 Act. The reference was considered by a Bench of the Board on several dates and the appellant was declared ‘a sick industrial company’. The Industrial Development Bank of India has been appointed the operating agency to formulate a scheme for its revival under Section 17(3) of the 1985 Act and the said scheme is under preparation.
4. While things stood thus, the State of Karnataka in its budget for the financial year 2002-03 decided to levy entry tax on cement under the provisions of the Entry Tax Act and such tax was levied at the rate of 5 percent on consumption, sale and use thereof with effect from 1-4-2002. It appears that the Karnataka Cement Manufacturers’ Association represented to the Commissioner of Commercial Taxes pointing out some practical difficulties and made a request that all the first sellers of cement in the State of Karnataka be allowed to collect and pay tax on entry of cement caused into different local areas and also to allow subsequent dealers to claim exemption from payment of entry tax based on the bills issued by the first sellers without insisting on a declaration in Form No. 40. Thereafter, the Commissioner of Commercial Taxes issued a circular dated 12-8-2002 the relevant portion of which reads as under:
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3. All the assessing authorities shall allow claims of exemption from payment of entry tax by subsequent dealers in the State based on the sale bills issued by the first sellers which indicate entry tax charged and collected separately and which also carry a self-printed declaration in Form-40; only in other cases production of declaration in Form-40 shall be insisted in support of the claims of exemption.
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5. It is common case of the parties that the appellant is liable to pay entry tax on cement with effect from 1-4-2002 and it has filed the appropriate declarations as required under the provisions of the Entry Tax Act and the Rules made thereunder. The tax that has become payable has not been paid due to financial difficulties. It appears that the appellant is selling cement to other parties who are dealers and proposes to issue declarations in Form No. 40 to them. It approached the Deputy Commissioner of Commercial Taxes (Assessment) the 4th respondent herein for issuance of books containing Forms No.40 to enable it to issue the same to the respective dealers. It is asserted in the writ petition that the representations made by the appellant in this regard evoked no response from the 4th respondent and on the other hand this respondent directed the appellant to first clear the dues towards entry tax before the book containing declaration Forms No. 40 could be made available to it. This action of the 4th respondent in not issuing the declarations was sought to be challenged in the writ petition out of which the present appeal has arisen on the ground that the appellant is a sick industrial company and therefore non-issuance of Form No. 40 was a coercive method resorted to by the 4th respondent to compel it to pay the entry tax dues and this, according to the appellant, is prohibited by Section 22 of the 1985 Act and the action of the 4th respondent violates the said provision. The prayer made in the writ petition is for the issue of a mandamus to the 4th respondent to make available to the appellant the statutory Forms No. 40. On a consideration of the matter, the learned single judge did not accept the contention and dismissed the writ petition. Hence this writ appeal.
6. We have heard the Learned Counsel for the parties and it is their common case that the appellant is “a sick industrial company” within the meaning of Sub-section (O) of Section 3 of the 1985 Act and that a scheme for its rehabilitation is under preparation under Section 17(3) of the said Act. Shri S. Vijayashankar Learned Senior Counsel appearing for the appellant reiterated the submission made before the learned Single Judge and he urged that the 4th respondent by not issuing the statutory Forms No. 40 without payment of tax due from the appellant under the Entry Tax Act is resorting to a measure to compel the appellant which is a sick industrial company to pay its dues and such an action, according to the Learned Counsel, is prohibited by Section 22 of the 1985 Act. The argument, indeed, is that non-issue of statutory Forms amounts to “proceedings for … execution, distress or the like against any of the properties of the industrial company” which cannot lie or be proceeded with further without the consent of the Board as required by Section 22 of the 1985 Act. He has placed reliance on a single bench judgment of the Calcutta High Court in Himalaya Rubber Products Limited and Anr. v. The Board For Industrial And Financial Reconstruction and Ors. 88 (1993) STC 47. Since the argument of the Learned Senior Counsel depends upon the interpretation of Section 22(1) of the 1985 Act it is necessary to refer to the same which reads as under:
“Where in respect of an Industrial company, 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 (1 of 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 and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority.”
7. Sickness in industrial companies results in loss of production, loss of employment, loss of revenue to the Central and State Governments and locking up of investible funds of banks and financial institutions. These are mattters of grave concern and affect the Government and the society at large. It was realised that it would be imperative to revive and rehabilitate the potentially viable sick industrial companies as quickly as possible. It was equally imperative to salvage the productive assets and realise the amounts due to the banks and financial institutions to the extent possible, from the non-viable sick industrial companies through liquidation. It was with this object that the 1985 Act was enacted. It provides for the establishment of a Board consisting of experts to inquire into and determine the incidence of sickness in industrial companies and devise suitable remedial measures through appropriate schemes including schemes for their revival. It is in this background that Section 22 of the 1985 Act provides that as long as an inquiry is pending with the Board or any scheme for its rehabilitation is under preparation or consideration or a sanctioned scheme is under implementation no proceedings should be allowed to be taken against the industrial company either for its winding up or for execution, distress or the like against any of its properties except with the consent of the Board. The legislative intention is clear that the properties of the sick industrial company should be kept intact so long as inquiry into its working is pending or any scheme for its rehabilitation is under preparation or consideration or a sanctioned scheme is under implementation. This object is further clear from the provisions of Sub-section (3) of Section 22 whereunder the Board can declare with respect to a sick industrial company that the operation of all or any of the contracts, assurances of property, agreements, settlements, awards standing orders or other instruments in force to which such company is a party shall remain suspended. Such a direction, if made, is only to preserve its properties. Similarly, under Section 22A of the 1985 Act the Board can issue a direction to the sick industrial company not to dispose of any of its assets except with the consent of the Board. The object of issuing such a direction is to quicken the process of revival of the sick industrial company by preserving its assets. What is prohibited by Section 22(1) is that no creditor of a sick industrial company including a Government to which monies may be due shall be allowed to initiate any proceedings either for the winding up of that company or for execution; distress or the like against any of the properties of the company to recover its dues except with the permission of the Board. As already observed, the purpose is to preserve the properties of the company so long as proceedings of the kind referred to in Section 22(1) are pending. This provision, in our opinion, does not make it obligatory for the creditors including the Government to take all or any steps to enable the sick industrial company to carry on its business in a more meaningful manner. In the case before us, the 4th respondent has not initiated any proceedings against the appellant to recover the entry tax dues, he has only refused to issue the statutory declarations in Form No. 40 which, if issued, would enable the appellant to give them to the dealers to whom cement is sold so that they could in turn claim exemption under Section 3 of the Entry Tax Act. The effect of non-issue of the statutory forms would be that the appellant will not be able to furnish those forms to the dealers who purchase cement from it and those dealers shall not be entitled to claim exemption under Section 3 and therefore they may make their purchases from other sources from where they could get those forms and in that way the appellant may lose its business. Issue of those forms may only enable the appellant to retain its customers. Section 22(1) prohibits a positive action on the part of a creditor including the Government to whom money is due from initiating action to recover the amount. By refusing to issue Form No. 40 it cannot be said that the 4″‘ respondent has initiated proceedings against the appellant “for execution, distress or the like against any of the properties of the industrial company” to recover the tax dues. That may only be a pressure on the company to pay the tax due but surely Section 22(1) of the 1985 Act does not mandate the said respondent to issue those forms. As already observed, the issue of those forms will only enable the company to have better business prospects by retaining its customers which is not within the scope of Section 22 of the 1985 Act. What is prohibited by Section 22(1) of the 1985 Act is a positive act on the part of a creditor including the Government to whom money is due from initiating action to recover the amount. It does not oblige the creditor including the Government from taking any step that may facilitate the sick industrial company to carry on its business. In this view of the matter no fault can be found with the order of the learned single Judge refusing to give a direction to the 4th respondent to issue the statutory declarations in Form No. 40.
8. We may now refer to Himalaya Rubber Products case relied upon by the Learned Senior Counsel for the appellant. After going through the judgment carefully we find that it supports the contention advanced by the Learned Senior Counsel but we have not been able to persuade ourselves to agree with that view. That was also a case where the sales tax authorities had refused to issue sales tax declaration forms to a sick industrial company under the Central Sales Tax Act due to non payment of arrears of tax and a mandamus had been issued to the said authorities to issue the said forms. The question that arose in Himalaya Rubber Products case (supra) was whether the Sales Tax Authorities could refuse to issue sales tax declaration forms under the Central Sales Tax Act having regard to the provisions of Section 22(1) of the 1985 Act and after considering the meanings assigned to the words ‘execution’, ‘distress’, ‘or the like’, the question was answered in the affirmative. The learned Judge observed that the refusal to give sales tax declaration forms was to put pressure on the company to clear its arrears and that was a coercive measure to recover dues from the sick company. It was further observed that the sales tax declaration forms had become a necessary adjunct of trade without which a trader cannot carry on competitive business. We have already observed in the earlier part of our order that non-issue of the declaration forms on account of non-payment of arrears of tax may be a pressure on the sick company to clear its tax arrears but it cannot amount to initiation of coercive proceedings for the recovery of the amount. It is only a positive act on the part of a creditor to recover the amount from a sick company that is barred by Section 22(1). Moreover, it is not the object of Section 22(1) of the 1985 Act to force a creditor including the Government to take steps which may enable the sick company to carry on competitive business. We, therefore, respectfully express our dissent with the view expressed in Himalaya Rubber Products case (supra).
10. In the result, the writ appeal fails and the same stands dismissed with no order as to costs.