1989 (10) TMI 218 - HC - VAT and Sales Tax

Summary

Issues:
1. Prosecution under Gujarat Sales Tax Act, 1969 against a textile company for non-payment of sales tax.
2. Challenge to the prosecution based on Sick Industrial Companies (Special Provisions) Act, 1985.
3. Interpretation of Section 22 of the Sick Industrial Companies Act and its applicability to criminal prosecution.
4. Sanctioning of prosecution under rule 79 of the Rules and its validity against the company and Managing Directors.
5. Reference to a previous court decision regarding winding up proceedings and its relevance to the current case.

Analysis:
1. The case involves a textile company facing prosecution for non-payment of sales tax under the Gujarat Sales Tax Act, 1969. The company had a sales tax liability of Rs. 1,84,220 for the period from December 1986 to June 1987, which remained unpaid despite filing quarterly returns.

2. The petitioners sought to challenge the prosecution order citing Section 22 of the Sick Industrial Companies Act, 1985, which provides for suspension of legal proceedings in certain cases. However, the court noted that the section does not cover criminal prosecution for non-payment of sales tax as the amount is held in trust by the dealer for the government.

3. The court interpreted Section 22 of the Act, emphasizing that it does not bar criminal prosecution against a company but rather prohibits proceedings for winding up or execution against the company's properties. The court clarified that the section does not prevent the initiation of criminal proceedings for non-payment of sales tax.

4. The validity of sanctioning the prosecution under rule 79 of the Rules was discussed, with the court concluding that the sanction against the company was appropriate. The court did not delve into the validity of prosecution against the Managing Directors, stating it as a matter to be raised during the criminal prosecution proceedings.

5. A previous court decision regarding winding up proceedings was referenced, highlighting that it did not pertain to criminal proceedings. The court dismissed the petitioner's reliance on the decision, emphasizing the distinction between winding up proceedings and criminal prosecution.

In conclusion, the court rejected the petition, stating that there was no substance in the challenge against the prosecution. The court discharged the notice and rejected the request to continue interim relief, ultimately dismissing the petition.