TaxTMI 
TaxTMI 
2014 (5) TMI 32
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.... dated 18.08.2008 proposing to auction the property mortgaged by the 3rd respondent Bank in favour of the petitioner Bank purportedly under the A.P. Revenue Recovery Act, 1864 (for short, 'the Revenue Recovery Act') for recovery of the arrears of commercial tax amount of Rs. 1,74,530/-. The petitioner got issued a legal notice dated 28.2.2008 informing the 1st respondent that a preliminary decree has already been passed in its favour on 3.4.2006 in respect of the properties in question and requesting to withdraw the property in question from the auction. However, the 1st respondent by reply notice dated 10.3.2008 contended that the property was attached by them towards arrears of tax dues under Section 27 of the Revenue Recovery Act published in the District Gazette dated 25.1.2008 and thus claimed priority of charge under Section 16C of the A.P. General Sales Tax Act, 1957 (for short, 'APGST Act') and Section 26 of the A.P. Value Added Tax Act, 2005 (for short, 'APVAT Act') over the property in question under the category of crown debt. Aggrieved by the said action of the 1st respondent, this writ petition is filed seeking a declaration that the proceeding....
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....n her counter-affidavit while reiterating the stand taken by the 1st respondent with regard to the legal position that the crown debt will have preference over the other debts whether under the Central or Local Act, further explained that she had complied with all the terms and conditions prior to auction conducted by the respondents 1 & 2 in pursuance of the sale notification dated 18.2.2008 and therefore she is entitled for conveyance of the property. We have heard the learned counsel for both the parties. The facts borne out of the record may be reiterated as under: The petitioner Bank sanctioned loan to the respondent No.3 on 27.2.1997. Even prior to that, the property in question was mortgaged in favour of the petitioner Bank by deposit of title deeds on 27.2.1996. The petitioner bank filed O.S.No.24 of 2004 and a preliminary decree was passed on 3.4.2006. Petitioner's application for final decree is pending. Coming to the claim of the 1st respondent, the 3rd respondent fell into arrears of payment of commercial tax for the period 1995-96 to 2000-01. Therefore, the property of the 3rd respondent was attached on 22.1.2008 by issuing Form-5 under the Revenue Recovery Act. ....
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....he well recognized principle that the State is entitled to raise money by taxation, otherwise it will not be able to function as a sovereign Government at all. This consideration emphasizes the necessity and wisdom of conceding to the State the right to claim priority in respect of its tax dues." So far as the effect of the first charge created under Section 16-C in respect of the tax, penalty, interest and any other sum payable under the APGST Act is concerned, in STATE OF M.P. v. STATE BANK OF INDORE (2002) 10 SCC 441 the Apex Court considered an identical statutory first charge created under Section 33-C of the M.P. General Sales Tax Act, 1958 which is in pari materia to Section 16-C of the A.P. General Sales Tax Act, 1957. In the said case, the 2nd respondent therein had obtained a term loan from the State Bank of Indore and executed a promissory note apart from pledging certain machinery to the Bank. While so, the State claimed a first charge upon the machinery in respect of the sales tax dues from the 2nd respondent in priority to the charge held by the Bank. It was held by the Apex Court that the charge created in favour of the State in respect of the sales tax dues prevail....
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.... 2002, fell for consideration. After reviewing all the decided cases on the issue, the Supreme Court answered the question in negative and held that the Parliament did not intend to give priority to the dues of private creditors over sovereign debt of the State. It was also observed that in the absence of any specific provision to that effect it is not possible to read any conflict or inconsistency or overlapping between the provisions of the DRT Act and Securitisation Act on the one hand and Section 38-C of the Bombay Sales Tax Act and Section 26-C of the Kerala General Sales Tax Act on the other and the non-obstante clauses contained in Section 34 (1) of the DRT Act and Section 35 of the Securitisation Act cannot be invoked for declaring that the first charge created under a State legislation would not operate qua or effect the proceedings initiated by Banks, Financial Institutions and other secured creditors for recovery of their dues or enforcement of security interest as the case might be. As could be seen from the above decisions, the statutory first charge held by the State has been consistently upheld by the Courts. However, the contention of the learned counsel for the pe....
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....property, it is now proposed that the liability under the Sales Tax Act shall be the first charge on the property. Similar provision is available in the Rajasthan Sales Tax Act and it was upheld by the Court." It is no doubt true that Section 17-A appears to have diluted the absolute precedence given to the arrears of tax under Section 16-C, however the principles of statutory interpretation require that the Court in such circumstances must have regard to consequences and has to reject a construction that results in hardship, absurdity or anomaly or which leads to inconsistency in the system which the Statute purports to regulate. [vide Principles of Statutory Interpretation by G.P. Singh ]. As held in STATE OF WEST BENGAL v. UNION OF INDIA AIR 1963 SC 124 the Court must ascertain the intention of the Legislature by directing its attention not merely to the clauses to be construed but to the entire statute and it must compare the clause with the other parts of law and the setting in which the clause to be interpreted occurs. In CENTRAL BANK OF INDIA v. STATE OF KERALA ((2009) 4 SCC 94 supra) the Court considered the question whether the non-obstante clauses contained in Section ....