TaxTMI 
TaxTMI 
2009 (1) TMI 794
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....e over any other arrears, the respondent issued notice to the petitioner in form B6 and called upon the petitioner to remit within fifteen days the amount realised by the bank towards its dues by auction sale of the said property given as security along with interest at two per cent per month in terms of section 24(3) of the Tamil Nadu General Sales Tax Act, 1959. Since there was no response from the petitioner-bank, a reminder was sent on March 10, 2008. On March 24, 2008, the petitioner-bank replied contending that the property in 228-C, Chinnakadai Street, Madurai, was mortgaged by one Somalingam, the proprietor of Ashok Jewels, as early as October 29, 1993. Since there was default on the part of the borrower, the petitioner filed a suit before the Debts Recovery Tribunal and in execution of the decree obtained, the mortgaged property was sold in auction sale and the auction sale was confirmed by a registered certificate dated November 20, 2006. Since the auction purchaser was a bona fide purchaser for value entitled to protection under section 41 of the Transfer of Property Act, 1882, the sale could not be questioned even otherwise. It was pointed out that the mortgage fetched ....
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....Bikaner & Jaipur v. National Iron & Steel Rolling Corporation reported in [1995] 96 STC 612 (SC), (ii) Dena Bank v. Bhikhabhai Prabhudas Parekh & Co. reported in [2000] 120 STC 610 (SC); [2000] 4 CTC 170, (iii) Central Bank of India v. State of Tamil Nadu reported in [1999] 113 STC 145 (Mad) and (iv) Thane Janata Sahakari Bank Ltd. v. Commissioner of Sales Tax reported in [2006] 148 STC 32 (Bom). the respondent contended that the State has the preferential right over that of the petitioner-bank; consequently, the contention of the petitioner has to be rejected. Heard counsel for either side and perused the records. It is stated that one N. Somalingam, proprietor of Ashok Jewel Exports, availed of a loan facility from the petitioner-bank for which he deposited the title deeds of his property as security. This was done as early as October 29, 1993. However, the said borrower defaulted in payment of the loan account. This led to the petitioner proceeding against the defaulter before the Debts Recovery Tribunal. A Debt Recovery Certificate was granted as early as July 24, 2003. The property was brought for auction on October 20, 2006. A sale certificate was issued on November 20, ....
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.... raised on the defaulter assessee. The extract of the register maintained by the petitioner shows that the borrower had deposited the title deed with the petitioner with an intention to create equitable mortgage on the property and for securing loans, and the title deeds had been handed over to the petitioner herein as early as October 29, 1993. The demand raised by the respondent, as given in the counter-affidavit, is as follows: Asst. year Date of issue of notice & date of service Date of issue of order & date of service Arrears 1993-94 17.02.1999 17.02.1999 21.07.1999 26.07.1999 Tax Rs. 51,842 Penalty Rs. 77,763 Total Rs.1,29,605 1994-95 18.02.1999 18.02.1999 21.07.1999 26.07.1999 Tax Rs. 3,75,759 Penalty Rs. 5,63,639 Total Rs. 9,39,498 1995-96 19.02.1999 23.02.1999 21.07.1999 26.07.1999 Tax Rs. 13,47,582 Penalty Rs. 20,21,373 Total Rs. 33,68,955 1996-97 21.07.1999 26.07.1999 Tax Rs. 9,10,812 Penalty Rs. 13,66,218 Total Rs. 22,77,030 1997-98 21.07.1999 26.07.1999 Tax Rs. 5,43,041 Penalty Rs. 8,14,561 Total Rs. 13,57,602 Grand total R....
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....n before the apex court, namely, whether the State's claim for the recovery of sales tax dues shall have precedence over the right of the bank to proceed against the property of the borrowers; secondly, whether the property belonging to the partners can be proceeded against for recovery of dues on account of sales tax of the partnership firm under the provisions of the Karnataka Sales Tax Act, 1957. Dealing with the Crown's priority for the arrears due to the State towards the tax liability, the apex court pointed out that the principle of priority of the Government itself is founded on the rule of necessity and of public policy. In paragraph 10 of the judgment, the apex court pointed out "the Crown's preferential right for recovery of debts over other creditors is confined to ordinary or unsecured creditors". The apex court pointed out that the common law doctrine of the priority of the Crown's debts would not extend to providing preference to the Crown's debts over the secured private debts. Referring to the provisions of the Karnataka Land Revenue Act, 1964 as well as section 13 of the Karnataka Sales Tax Act, 1957 and the decision in Commissioner of Sales T....
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....AAAA of the Rajasthan Sales Tax Act, 1954. The creditor bank filed a suit for recovery of the amount payable by the defaulter and for the realisation of the same, asked for enforcement of the mortgage security under Order 34, Rule 4 of the Code of Civil Procedure. In the course of the suit proceedings, the Commercial Tax Officer, Bharatpur, got himself impleaded therein contending that the State had a prior claim for recovery of the sales tax dues; hence, entitled to realise the same by sale of the mortgaged property. In this, the Commercial Tax Officer placed reliance on the provisions of section 11AAAA of the Rajasthan Sales Tax Act which was introduced by way of an amendment in 1989. Going by the provisions of section 11AAAA of the Rajasthan Sales Tax Act that notwithstanding anything contained in any law for the time being in force, any amount of tax, penalty, interest and any sum payable by a dealer under the Act shall be the first charge on the property of the dealer, the apex court, following the decision in Dattatreya Shanker Mote v. Anand Chintaman Datar [1974] 2 SCC 799, held that when a first charge is created by operation of law over any property, that charge w....
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....ods 1995-96 and 19992000. The company mortgaged its land and building in equitable mortgage in favour of the bank on February 18, 1997. The provisions of section 38C of the Bombay Sales Tax Act, 1959 also creates a first charge on the property of the dealer as regards any amount of tax, penalty or interest or any other sum due and payable by a dealer. The question raised before the court was whether section 35 of the Securitisation Act was inconsistent with the Bombay Sales Tax Act, 1959 and consequently overrides the said provisions by reason of a non-obstante clause in the Securitisation Act. The Bombay High Court took the view that there being no provision under the Securitisation Act providing for first charge in favour of the bank, section 35 of the Securitisation Act cannot be held to override section 38C of the Bombay Sales Tax Act, 1959 which specifically provides for a first charge. Referring to the decision of the apex court in State Bank of Bikaner Jaipur v. National Iron & Steel Rolling Corporation reported in [1995] 96 STC 612, the Bombay High Court held that by virtue of section 38C of the Bombay Sales Tax Act and section 169 of the Maharashtra Land Revenue Code, 196....
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....ontrary contained in any law for the time being in force, any amount of tax, penalty, interest and any other sum, if any, payable by a dealer or any other person under this Act, shall be the first charge on the property of the dealer, or such person." (emphasis Here italicised. supplied) The decision of the Bombay High Court rested on the provisions of the Bombay Act which is also on the same line as the Rajasthan Act. The rights of the State under the Tamil Nadu Act, hence, has to be seen in the context of the statutory provision. All that the provision contemplates is that tax assessed on or has become payable by, or any other amount due under this Act from a dealer or person and any fee due from him under the Act, shall be subject to the claim of the Government in respect of land revenue and the claim of the Land Development Bank in regard to the property mortgaged to it under section 28(2) of the Tamil Nadu Co-operative Land Development Banks Act, 1934 (Tamil Nadu Act X of 1934), and it will have priority over all other claims against the property of the said dealer or person to be recovered as land revenue. By so holding, the provision, by itself, does not create the first ch....