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Issues: Whether the Commercial Taxes Department could proceed against the sale proceeds of mortgaged properties by treating the petitioner as a garnishee under the recovery provision and, if so, to what extent the departmental charge could be enforced.
Analysis: The sale proceeds in the hands of the petitioner were not money payable by the petitioner to the defaulting dealer and therefore did not answer the description of a garnishee debt under the recovery provision. However, a first charge had already been created on the dealer's property by the statutory amendment, and once the mortgaged property was sold, the charge attached to the cash equivalent of the property. The departmental action was therefore sustainable as enforcement of the statutory charge over the sale proceeds, notwithstanding that the petitioner had acted under the mortgage and sale powers. At the same time, the earlier interim arrangement contemplated preservation only of an amount equivalent to the assessed tax dues, and the department could not extend recovery to interest and penalty at the statutory rate in the facts of the case.
Conclusion: The attachment was upheld in substance as an enforcement of the statutory first charge, but the petitioner's liability was confined to the principal tax amount of Rs. 10,51,175/- with interest at 6% per annum from the date of sale till payment; recovery of higher amounts by way of interest and penalty was not permitted.
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