Court prioritizes state's sales tax claim over bank's secured creditor claim, directs wide property sale publication for higher price.

The court held that the state's claim for sales tax dues takes priority over the appellant-bank's secured creditor claim. The court directed the Commercial Tax Department to conduct wide publication for the sale of properties to ensure a higher price, benefiting both parties. The writ appeal was disposed of with these directions, and the connected W.A.M.P. was closed.

---

---

Issues Involved:
1. Priority of secured creditor vs. crown debts under Section 24(2) of the Tamil Nadu General Sales Tax Act, 1959.
2. Validity of the sale notice issued by the Commercial Tax Department for arrears recovery.
3. Applicability of Government Order (G.O. Ms. No. 1394, dated December 4, 1990) regarding priority of claims.
4. Requirement of paper publication for the sale of mortgaged property.

Detailed Analysis:

1. Priority of Secured Creditor vs. Crown Debts under Section 24(2) of the Tamil Nadu General Sales Tax Act, 1959:
The appellant-bank argued that as a secured creditor, it should have priority over the crown debts, citing the decision in *ICICI Bank Ltd. v. Official Liquidator* where it was held that the claim of a secured creditor prevails over crown debts. However, the first respondent contended that under Section 24(2) of the TNGST Act, the Commercial Tax Department's claim has priority over other claims against the property of the dealer. The court upheld the first respondent's stance, referencing *Central Bank of India v. State of Tamil Nadu*, which established that a statutory first charge created by law takes precedence over existing mortgages. The court also cited *State Bank of Bikaner & Jaipur v. National Iron & Steel Rolling Corporation*, where the Supreme Court held that statutory first charges have precedence over existing mortgages.

2. Validity of the Sale Notice Issued by the Commercial Tax Department for Arrears Recovery:
The appellant challenged the sale notice dated November 26, 2004, issued by the Commercial Tax Department for the recovery of sales tax arrears amounting to Rs. 1,08,39,558. The court found that under Section 24(2) and Section 26(6) of the TNGST Act, the tax department's claim has priority over other debts, including those of secured creditors. The court referenced *Delhi Auto and General Finance Pvt. Ltd. v. Tax Recovery Officer*, which supported the precedence of sales tax dues over other claims.

3. Applicability of Government Order (G.O. Ms. No. 1394, dated December 4, 1990) Regarding Priority of Claims:
The appellant-bank relied on G.O. Ms. No. 1394, which suggested that the Commercial Tax Department's claims would be a second charge after loans from financial institutions/banks. However, the court noted that the sixth point of the G.O. allows the Commercial Tax Department to act according to the provisions of the Sales Tax Act if the industry fails to pay deferred sales tax. Thus, the G.O. did not support the appellant's claim for priority over the tax dues.

4. Requirement of Paper Publication for the Sale of Mortgaged Property:
The court acknowledged that no paper publication was given for the sale of the property by the Commercial Tax Department. It directed the department to give wide publication throughout the country for the sale of the properties to fetch a higher price, benefiting both the state and the bank. The court emphasized that selling the property at a higher price would allow the state to recover its dues, and any surplus could be used by the bank to realize its claims.

Conclusion:
The court concluded that the state's claim for sales tax dues has priority over the appellant-bank's secured creditor claim. The writ appeal was disposed of with directions for the Commercial Tax Department to give wide publication for the sale of the properties, ensuring a higher price and benefiting both parties. The connected W.A.M.P. was also closed.

---