TaxTMI 
TaxTMI 
TaxTMI 
2014 (7) TMI 701
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....on. As per the notification, the State Financial Corporation shall ensure that no industrial unit be sold without obtaining "no objection certificate" from the Department of Commercial Taxes, Jharkhand. The impugned notification reads as under: "Department of Commercial Tax Notification 27 August, 2004 S.O. 95, dated 1st September, 2004/2384-Government of Jharkhand in exercise of powers as conferred by section 29 of adopted Bihar Finance Act, 1981, makes following provisions for ensuring recovery of the Government dues, deeming it as first charge, upon sale/auction of closed/old industrial units in the State. 1. State Financial Corporation shall ensure that no industrial unit be sold without obtaining No Objection Certificate from Department of Commercial Tax, Jharkhand, Ranchi. 2. State Financial Corporation, after deducting dues amount of sales tax from the proceeds of sale, shall send it to the Department of Commercial Tax, Jharkhand, Ranchi. Sale Tax/Misc./7/2002 By the order of the Governor of Jharkhand Alka Tiwari Secretary-cum-Commissioner Department of Commercial Tax, Jharkhand, Ranchi." The petitioner is a statutory corporation, established in terms of section....
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....ount of tax and penalty, if any, payable by a dealer shall be a first charge on the property of the dealer or such persons. According to the respondents, in view of the non obstante clause in section 29 of the adopted Bihar Finance Act, 1981, the State of Jharkhand has every right to issue such notification in the territory of the State and section 46B of the State Financial Corporation Act does not restrict the State Government from issuing befitting notification under section 29 of the adopted Bihar Finance Act, 1981. The learned senior counsel appearing for the writ petitioner contended that section 29(4) of the State Financial Corporation Act clearly indicates that money received by the Corporation shall be adjusted against (i) all costs, charges and expenses, which in the opinion of the Financial Corporation have been primarily incurred by it; (ii) thereafter the money received shall be paid for the discharge of the debts due to the Financial Corporation and only the residuary amount shall be paid to the person entitled thereto. The learned senior counsel submitted that as per section 29(4) of the State Financial Corporation Act, the sale proceeds realized by the Corporation....
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....ed in [1995] 96 STC 612 (SC); [1995] 82 Comp Cas 551 (SC); [1995] 2 SCC 19 (State Bank of Bikaner & Jaipur v. National Iron & Steel Rolling Corporation) and [2010] 153 Comp Cas 497 (SC); [2009] 4 SCC 94 (Central Bank of India v. State of Kerala) and submitted that the first priority of the State Government in respect of any amount of tax and penalty is no longer res integra. In exercise of powers conferred under section 29 of the adopted Bihar Finance Act, 1981, the State of Jharkhand issued Notification S.O. No. 95 dated September 1, 2004. As per the impugned notification the State Financial Corporation shall ensure that no industrial unit be sold without obtaining "no objection certificate" from the Department of Commercial Taxes, Jharkhand, Ranchi. The notification further directed the State Financial Corporation that after deducting the sales tax amount due from the proceeds of the sale, the sales tax be sent to the Department of Commercial Taxes, Jharkhand. The question falling for consideration is whether the impugned notification issued by the State of Jharkhand in exercise of its powers conferred by section 29 of the adopted Bihar Finance Act, 1981 is without jurisdiction ....
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....on under this part shall be a first charge on the property of the dealer or such person." By exercising its power under section 29 of the adopted Bihar Finance Act, 1981, the State of Jharkhand issued the impugned notification directing that the State Financial Corporation shall ensure that no industrial unit be sold without obtaining "no objection certificate" from the Department of Commercial Taxes, Ranchi and further directing that the State Financial Corporation, after deducting the amount of sales tax from the proceeds of sale, shall send the deducted amount to the Department of Commercial Taxes, Jharkhand. The non obstante clause is appended to a provision with a view to give the enacting part of the provision an overriding effect in case of a conflict. Considering the same question, whether there is any conflict between section 34(1) of the Debts Recovery Tribunal Act and section 35 of the Securitisation Act on the one hand and the provisions contained in section 38C of the Bombay Sales Tax Act and section 26B of the Kerala General Sales Tax Act and similar State legislations, elaborating upon the interpretation of a 'non obstante clause' in the decision reported i....
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....] 96 STC 612 (SC); [1995] 82 Comp Cas 551 (SC); [1995] 2 SCC 19 and Central Bank of India v. State of Kerala [2010] 153 Comp Cas 497 (SC); [2009] 4 SCC 94. In [1995] 96 STC 612 (SC); [1995] 82 Comp Cas 551 (SC); [1995] 2 SCC 19 (State Bank of Bikaner& Jaipur case), the honourable Supreme Court considered the effect of section 11AAAA of the Rajasthan Sales Tax Act, 1954 by which first charge was created on the property of dealer, inter alia, of the amount of tax, penalty, etc., on an existing mortgage on the property of the dealer. After noticing that section 11AAAA of the Rajasthan Sales Tax Act, which is in pari materia with section 38C of the Bombay Act and section 26B of the Kerala Act as section 100 of the Transfer of Property Act, the honourable Supreme Court at paragraphs 7, 8, 10 and 11 of the said decision held as under (pages 614 to 616 in 96 STC): "7. . . . Section 100 of the Transfer of Property Act deals with charges on an immovable property which can be created either by an act of parties or by operation of law. It provides that where immovable property of one person is made security for the payment of money to another, and the transaction does not amount to a mortga....
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....Act can operate only over the equity of redemption, cannot be accepted. The charge operates on the entire property of the dealer including the interest of the mortgagee therein. 11. Looked at a little differently, the statute has created a first charge on the property of the dealer. What is meant by a 'first charge'? Does it have precedence over an earlier mortgage? Now, as set out in Dattatreya Shanker Mote v. Anand Chintaman Datar [1974] 2 SCC 799, a charge is a wider term than a mortgage. It would cover within its ambit a mortgage also. Therefore, when a first charge is created by operation of law over any property, that charge will have precedence over an existing mortgage." The above judgment was referred and the same view was approved in the judgment in Central Bank's case [2010] 153 Comp Cas 497 (SC); [2009] 4 SCC 94. The right of the State to have priority in the matter of recovery of sales tax from the defaulters over the equitable mortgages created by them in favour of Banks and Financial Institutions is no longer res integra. In Central Bank's case [2010] 153 Comp Cas 497 (SC); [2009] 4 SCC 94, the honourable Supreme Court was considering whether the ....
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....k's case [2010] 153 Comp Cas 497 (SC); [2009] 4 SCC 94, the honourable Supreme Court was considering the statutory first charge of sales tax vis-a-vis the charge of the bank in the capacity of mortgagee and therefore the honourable Supreme Court held that when a first charge is created by operation of law over any property, that charge will have precedence over an existing mortgage. In both cases, the statutory right conferred upon the State Financial Corporation under section 29(4) of the State Financial Corporation Act vis-a-vis statutory charge created by the State legislation under Sales Tax Act has not been dealt with. There is no merit in the contention that the honourable Supreme Court has not dealt with the provisions of the State Financial Corporation Act vis-a-vis the statutory charge created by the State Legislation under Sales Tax Act. While considering the non obstante clause occurring in various Central legislations in paragraph 97.1 of the decision in Central Bank's case [2010] 153 Comp Cas 497 (SC); [2009] 4 SCC 94, the honourable Supreme Court has also referred to non obstante clause in section 46B of the State Financial Corporation Act. The honourable Sup....