TaxTMI 
TaxTMI 
2011 (12) TMI 494
X X X X Extracts X X X X
X X X X Extracts X X X X
....averred to have committed a default in paying tax in instalments. The amount, therefore, sought to be recovered by the sales tax authorities stood at Rs. 8,14,106 with running interest. 2. M/s. Swet Zinc Limited sold its aforementioned property to one Smt. Minaben Parikh by way of a registered sale deed executed and registered on April 30, 2007 for the consideration of Rs. 45,00,000 and entry was mutated being numbered as No. 2708 and subsequently amended by No. 2887 on May 8, 2007. In the said property admeasuring 7,823 sq. meters, there are sheds admeasuring 750 sq. meters. 3. The present petitioner purchased part of the land admeasuring 4,812 sq. meters from Smt. Minaben Parikh by a registered sale deed on August 31, 2007 for the sale consideration of Rs. 40,00,000 and an entry was mutated for the said transfer being the entry No. 5497 on registration. 4. It is averred by the petitioner that prior to the execution of the sale deed, an advertisement was published in the newspaper, on July 24, 2007 in Gujarati daily "Gujarat Samachar" to ensure a clear title. No objections were raised or received from any quarter and consequently, the property was registered in the name of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e registration of sale deeds in favour of the present petitioner. 7. In the affidavit-in-reply filed by the Department, respondent No. 1, has stated that it has acted in the legitimate interest of the State, which is its bounden duty. It is also said that the erstwhile original owner M/s. Swet Zinc Limited, after retaining the tax, did not pay the same in instalments as was required of it to do and, therefore, the said piece of land bearing Survey No. 49/1 was attached on July 18, 2003 by the then Sales Tax Officer and Sales Tax Officer (3) and Sales Tax Recovery Mamlatdar, Kalol. The amount to be recovered is Rs. 8,14,106 with running interest. It is also further contended that the order of attachment was sent to Talati of Khatraj Gram Panchayat, Taluka Kalol on July 18, 2003 itself and to the Mamlatdar, Kalol with a request to effect necessary entry in the relevant revenue/property records pertaining to the said attachment, which was received by the Mamlatdar Office, Kalol on August 2, 2003. 8. It is further contended that as the said dues of assessment year 2000-01 were not paid, the said piece of land bearing Survey No. 49/1 was attached on July 23, 2008 once again by respond....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ales tax liability. Adding the penalty, total amount of claim came to Rs. 19,05,597 out of which Rs. 11,03,948 was paid in advance and the outstanding stood at Rs. 8,01,649. Therefore, it is averred that though for the alleged tax liability attachment effected cannot be sustained legally as in appeal, the party had got the refund. It is also fur ther stated that the fact that the Swet Zinc Limited had taken a loan from State Bank of India, Gandhidham Railway Station Branch and the property in question was mortgaged with the State Bank of India, in lieu of the said loan of Rs. 209 lakhs, the amount could not be deposited or repaid to the bank as it had initiated actions for selling the land, factory building and the machinery. Notice under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was issued and the fact that the land was sold being plot No. 49/1 admeasuring about 10,164 sq. yards and the entire property was purchased by Smt. Meena Parikh on April 30, 2007 by way of registered sale deed as mentioned hereinbefore, out of which 4,812 sq.meters was sold to the present petitioner. It is, therefore, contended....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Commercial Tax is suggestive of the refund of Rs. 94,188. 10. This court has heard at length learned counsel for the petitioner, who has vehemently and strenuously argued on the lines of the averments made in the petition. It is urged that as the Sales Tax Department cannot have any priorities of its dues over the secured dues of the bank and as the properties have been sold in the open market by the bank in lieu of its dues from the erstwhile owner M/s. Swet Zinc Limited, title of the present owners cannot be affected. Also on the count that mutation of the entry admittedly of the second attachment is subsequent to the change of hands of the property by way of a registered sale deed in favour of the present petitioner, therefore also, it does not affect the title. When the order of August 4, 2009 of Deputy Commissioner of Commercial Tax is suggestive of refund of Rs. 94,188, the claim of the Sales Tax Department does not stand to remain. 11. The learned Assistant Government Pleader Ms. Maithili Mehta has vehemently argued in support of the contentions raised in the affidavit-inreply although she admitted that even though the first attachment had been communicated to the office....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... request to effect necessary entry in the relevant revenue record. Inward entry of this communication was made for this very purpose in the offices of the Talati and Mamlatdar on August 2, 2003. This order unequivocally is suggestive of the fact that though the notices have been served duly to M/s. Swet Zinc Limited under section 152 and section 200 of the Land Revenue Code after calculating total dues of Rs. 8,14,106 with interest and penalty, it had failed to pay the same and thereby discharge its liability to pay the sales tax dues differed. Resultantly, there was a need to auction the said property and hence this outstanding dues, which arose in the form of charge was to be mutated in the Revenue record. What gets revealed from the record is that till the order of the second attachment dated July 23, 2008 was sent, no entry was mutated by the office of Mamlatdar despite specific request in the form of direction through the communication dated July 18, 2003. There is no explanation as to why despite a specific order of attachment and intimation to both these offices, no entry has been mutated, and corresponding vigilance is also absent on the part of the office of the sales tax ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....an Desai for himself and as a attorney holder of Mr. Shailesh Jayantilal Shah when had executed Kabulatnama of the property being marketable with clear title, the second attachment cannot affect his title with all protections that have been taken prior to his executing the registered sale deed and mutating his entry in the revenue record. 15. Taking first issue, as rightly pointed out by the learned advocate for the petitioner, purchase of the property was by Smt. Meena Parikh, who had purchased it from the State Bank of India, which had sold it after invoking notice under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the total area of the land is 7,000 sq. meters and the area of the land purchased by the present petitioner was 4,812 sq. meters on August 31, 2007 by an entry No. 4497 effected in the Revenue record. Admittedly, prior to the purchase, there was no objection raised against that and as rightly pointed that sales tax dues cannot claim priority over the secured dues of the bank. The bank after exercising its powers had sold the same by way of an auction. 16. It is pertinent to mention that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f tax due to the State can claim priority over the unsecured debt. (b) If first charge by way of priority is not claimed under the statute, the said doctrine is not applicable. (c) Normally, the doctrine of first charge/priority of State will prevail over the private debt which is an unsecured debt. (d) In normal course, the doctrine of first charge/priority cannot prevail over secured debts, but if first charge of the State is over the secured debts, both debts being equal, the State can claim priority even over the secured debts, and (e) The secured debts under the Securitization Act or debt under the R.D.D.B. Act has no first charge, and thereby, cannot compete with first charge/priority claim of the State if made under the statute." 18. In the light of the decision above, it can be held that dues of the Sales Tax Department cannot have primacy over the secured debt of banks. The petitioner was fully secured by the Kabulatnama given in his favour by both Smt. Meena Parikh and the directors of the erstwhile company. In such situation, it can be held that the purchaser has purchased the property for value without notice from the auction held by secured creditor-financial inst....