2001 (3) TMI 872 - SC - VAT / Sales Tax

Section 33-C gives State first charge over sales tax dues, overriding banks' security interest in dealer's machinery

SC held that section 33-C creates a statutory first charge in favour of the State for recovery of sales tax dues, which overrides any existing contractual ... Charge creation - claimed a first charge under section 33-C upon the machinery in priority to the charge held by the bank. - Held that:- Section 33-C creates a statutory first charge that prevails over any charge that may be in existence. Therefore, the charge thereby created in favour of the State in respect of the sales tax dues of the second respondent prevailed over the charge created in favour of the bank in respect of the loan taken by the second respondent. There is no question of retrospectivity here, as, on the date when it was introduced, section 33-C operated in respect of all charges that were then in force and gave sales tax dues precedence over them The Supreme Court of India allowed the civil appeal, setting aside the judgment of the High Court of Madhya Pradesh at Indore. The State of Madhya Pradesh's first charge under section 33-C of the M.P. General Sales Tax Act, 1958 prevailed over the bank's charge on machinery. The court also found that the High Court erred in dismissing the appeal based on a technicality.