TaxTMI 
TaxTMI 
2009 (6) TMI 931
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.... was created by the company along with its directors giving personal guarantee. The company, having failed to discharge its liability, the bank proceeded against it for recovery of debt in O.A. No. 1568 of 1998 before the Debts Recovery Tribunal (hereinafter referred to as, "the Tribunal") under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as, "the DRT Act") and the case was decreed in favour of the bank on September 30, 2004. Pursuant to the decree, a recovery certificate was issued in DRC No. 191 of 2004 and mortgaged properties were brought to sale by public auction notice dated November 9, 2005. One, K.O.P. Enterprises carrying on business at Chennai, represented by its proprietor, P.K. Peer Mohammed, was the successful bidder in favour of whom a sale certificate vide Document No. 537 of 2006 dated May 9, 2006, was issued, followed by mutation in his name. Later on, the said Peer Mohammed sold the land in favour of the petitioner vide document No. 279 of 2007 dated January 24, 2007, who also mutated the land in his name. In regard to the same very land, the notice having been issued, the petitioner, a subsequent purch....
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....person subject to claim of the Government in respect of land revenue and the claim of Land Development Bank in regard to property mortgaged to it under section 28(2) of the Tamil Nadu Co-operative Land Development Bank Act, 1934 and the same may, without prejudice to any other known mode of collection be recovered as- (a) land revenue; or (b) on application to any magistrate as if it were a fine imposed by such magistrate. The learned counsel for the respondents further submitted that in the present case the assessee-company has submitted monthly returns under sub-section (2) of section 13 and the admitted tax dues payable as per the said return becomes a charge, created on the properties of the assessee. The actual payment stood postponed under the deferral scheme. The monthly return is filed as per rule 18 of the Tamil Nadu General Sales Tax Rules, 1959 and the monthly return under sub-section (2) of section 13 has to be submitted on or before the 20th day of every succeeding month. On May 10, 2000, notice was issued upon the assessee calling upon it to remit the sales tax arrears of Rs. 1,48,01,177 due under both the GST Act and the CST Act. Revenue proceeding under ....
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....covery Tribunal, issued auction notice and sold the land in favour of K.O.P. Enterprises represented through P. K. Peer Mohammed in whose favour the sale certificate was issued on May 9, 2006. Later on, the land in question was transferred in favour of the petitioner by sale deed dated January 24, 2007. The learned counsel appearing on behalf of the petitioner submitted that the sale certificate having been issued by the Tribunal under rule 65 of Schedule II of the Income-tax Act read with section 29 of the DRT Act, without setting aside the sale, no action could be taken by the respondents. Further, according to him, the petitioner having obtained an encumbrance certificate in respect of the property and only after satisfying himself that there was no attachment, encumbrance or charges, he having purchased the property in good faith and his vendor having purchased the property pursuant to an auction sale, which was never challenged by any authority, the respondent cannot re-auction sale the very same property in question. There was no notice of any charge prior to auction sale and transfer issued by respondents nor there is any material to show that P.K. Peer Mohamed had ....
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....AIR SC 1061). In the same case, the Constitution Bench has noticed a consensus of judicial opinion that the arrears of tax due to the State can claim priority over private debts and that this rule of common law amounts to law in force in the territory of British India at the relevant time within the meaning of article 372(1) of the Constitution of India and therefore continues to be in force thereafter. On the very principle on which the rule is founded, priority would be available only to such debts as are incurred by the subject of the crown by reference to the State's sovereign power of compulsory exaction and would not extend to charges for commercial services or obligation incurred by the subjects to the State pursuant to commercial transactions. Having reviewed the available judicial pronouncements their Lordships have summed up the law as under: (1) There is a consensus of judicial opinion that the arrears of tax due to the State can claim priority over private debts. (2) The common law doctrine about priority of crown debts which was recognised by Indian High Courts prior to 1950 constitutes 'law in force' within the meaning of article 372(1) and continues....
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....ate Legislature makes an enactment, the same would prevail over the common law." In the said case, the Supreme Court further observed as hereunder: (para 13, page 536 of Comp Cas) "12. To achieve the same purpose, the Parliament as also the State Legislatures inserted provisions in various statutes some of which have been referred to hereinbefore providing that the statutory dues shall be the first charge over the properties of the tax-payer. This aspect of the matter has been considered by this court in a series of judgments." The learned counsel for the petitioner laid much stress on the decision of the Supreme Court in SICOM case [2009] 147 Comp Cas 531; [2009] 1 JT 87 (SC). In reply learned counsel for the respondents referred to the judgment of the Supreme Court in Central Bank of India case [2009] 21 VST 505; [2009] 3 JT 216 (SC) and submitted that the subsequent case has been decided later on by a larger Bench of three honourable judges, while the earlier one was decided only by Bench of two honourable judges. Such submission requires no deliberation as both the judgments have dealt on two different aspects, one not covering the other issue. In Central Ban....
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....nactments and held as follows: "26. In the light of the above discussion, we conclude, '(i) Generally, the dues to Government, i.e., tax, duties, etc., (crown's debts) get priority over ordinary debts. (ii) Only when there is a specific provision in the statute claiming "first charge" over the property, the crown's debt is entitled to have priority over the claim of others. (iii) Since there is no specific provision claiming "first charge" in the Central Excise Act and the Customs Act, the claim of the Central Excise Department cannot have precedence over the claim of secured creditor, viz., the petitioner-bank. (iv) In the absence of such specific provision in the Central Excise Act as well as in the Customs Act, we hold that the claim of secured creditor will prevail over crown's debts.' In view of our above conclusion, the petitioner-UTI Bank, being a secured creditor is entitled to have preference over the claim of the Deputy Commissioner of Central Excise, first respondent herein." Having regard to the judicial pronouncements rendered by courts and noticed above, we may sum up the law as under: "(i) Arrears of tax due to the S....
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....nactments, such as Bombay Sales Tax Act, 1959 and the Rajasthan Sales Tax Act, 1954 where first charge was created. It will be evident from the Bombay Sales Tax Act, Rajasthan Sales Tax Act and the Kerala General Sales Tax Act that in all those Acts it was specifically mentioned that notwithstanding anything contrary contained in any law for the time being in force, any amount of tax, etc., due from a dealer or person under these Acts shall be the first charge in the property of the dealer. The rights of the State under the GST Act have to be seen in the context of the statutory provisions. All that the provision contemplates is that the tax assessed on or which has become payable by, or any other amount due under the said Act from, a dealer or person or any due from him under the said Act, shall be subject to 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 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 (section 24 of the GST Act) by itself does not cre....