Writ petition relief rejected, bank to appeal under TNVAT Act, no costs, timely appeal, fair hearing.

The court rejected the relief sought in the writ petition, directing the petitioner bank to approach the appellate authorities under the TNVAT Act for adjudication. The appellate authorities are instructed to entertain the appeal without reference to any delay and dispose of it on merits, ensuring an opportunity for all parties to present their case. The writ petition was disposed of with no costs, and the connected miscellaneous petitions were closed.

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Issues Involved:
1. Priority of charges between the petitioner bank and the Commercial Tax Department.
2. Validity of the encumbrance certificate issued by the Sub-Registrar.
3. Jurisdiction of the High Court under Article 226 of the Constitution of India to adjudicate the disputed facts.

Detailed Analysis:

1. Priority of Charges:
The primary issue revolves around the priority of charges between the petitioner, a scheduled bank, and the Commercial Tax Department. The petitioner bank had advanced a loan to M/s. Arrow Pack Pvt. Ltd., which defaulted, leading to the attachment and auction of the property by the Debts Recovery Tribunal (DRT). However, the Commercial Tax Department claimed a first charge over the property under the TNGST Act and TNVAT Act due to arrears of Rs. 1,44,53,818/-. The court referred to the provisions of the TNVAT Act, which prioritize tax recovery over other claims, similar to the Income Tax Act. The SARFAESI Act and the DRT Act also promise priority to secured creditors, leading to conflicting provisions. The court cited previous judgments to emphasize the doctrine of constitutional priority, which gives precedence to state tax dues over other debts, including those of secured creditors.

2. Validity of the Encumbrance Certificate:
The petitioner sought to quash the encumbrance certificate dated 08.12.2008, which recorded the Commercial Tax Department's charge. The court noted that Section 42(2) of the TNVAT Act gives tax dues priority over other claims against the property of the dealer. Additionally, Section 43 of the TNVAT Act voids any transfer of assets intended to defraud the revenue during pending proceedings. The court highlighted that the TNVAT Act's provisions regarding priority and void transfers were similar to those in the Income Tax Act, reinforcing the priority of tax dues over other claims.

3. Jurisdiction of the High Court:
The court observed that the disputed facts, such as the initiation and priority of proceedings, could not be adjudicated under Article 226 of the Constitution of India. These issues require scrutiny of original documents and evidence, necessitating an enquiry. The court directed that such disputes should be adjudicated before the competent appellate authority under the tax laws. The appellate authorities, being quasi-judicial bodies, are empowered to resolve these disputes by affording opportunities to all parties and considering the principles laid down in relevant judgments.

Conclusion:
The court rejected the relief sought in the writ petition, directing the petitioner to approach the appellate authorities under the TNVAT Act for adjudication. The appellate authorities are instructed to entertain the appeal without reference to any delay and dispose of it on merits, ensuring an opportunity for all parties to present their case. The writ petition was disposed of with no costs, and the connected miscellaneous petitions were closed.

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