TaxTMI 
TaxTMI 
TaxTMI 
2016 (11) TMI 1132
X X X X Extracts X X X X
X X X X Extracts X X X X
....titioner would further state that the properties which are the subject matter of Auction-Sale, were originally belonged to M/s.Swastika Agro Foods Private Limited, Karaikudi, and they create an equitable mortgage for the purpose of providing security to the loan facilities availed from the Axis Bank and since they defaulted in payment of dues, Recovery Proceedings were initiated under the provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [SARFAESI Act]. 3 The petitioner in pursuant to the Auction-Sale Notification, had submitted his bid for a sum of Rs. 3,50,25,000/- and in the Offer Letter, has specifically indicated that "The Bank should pay the due to the Sales Tax directly as per the Notice dated 13.03.2010 " Daily Thanthi and subject to the Tender, is filed that the Sales Tax due must be paid by the Bank out of the Sale Proceeds". 4 The petitioner was declared as the successful bidder and they recorded the result of the auction as follows:- "The successful bidder Mr.T.Ganesan, Chairman, Indra Ganesan Educational and Charitable Trust, sought clarification regarding the Sales Tax Deferral Dues of Rs. 1,19,73,49....
X X X X Extracts X X X X
X X X X Extracts X X X X
....questing for execution of Sale Deed without any encumbrance of sales tax arrears and it was also followed by a reminder dated 12.11.2010. 8 Thereafter, the petitioner was constrained to file WP (MD) No.13906/2010 praying for issuance of a writ of mandamus directing the respondents 3 and 4 to execute the Sale Deed in his favour without any encumbrance including the encumbrance regarding the sales tax arrears to the tune of Rs. 119,73,498/- and the writ petition was entertained and notices were ordered. The respondents 3 and 4, on entering appearance in the said writ petition, filed their counter, did not seriously dispute the conditional offer made by the petitioner as well as the assurance given by them regarding the priority of claim over the sales tax arrears and pendancy of the writ petition, the respondents 3 and 4 sent the impugned communication dated 24.11.2010 wherein it has been stated that they have never given any assurance either for clearing the encumbrance or registering the Sale Deed without any encumbrance and therefore, requested the petitioner to attend the registration formalities for the purpose of execution of the Sale Deed. The petitioner challenging the legal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rom March 2014 to February 2015 vide proceedings of the Assistant Commissioner, CT, Trichy Town dated 27.05.2005 and the said concern, vide their Letter dated 22.01.2010, had informed the Sales Tax Authorities about the loss suffered by them in their business and also indicated that they will not be in a position to repay the IFST amount payable under the IFST Deferral Scheme and since they have violated the terms and conditions of IFST Deferral Scheme, the entire tax amount availed by them becomes payable in one lump sum along with penalty u/s.24[3] of the Tamil Nadu Value Added Tax Act [TNVAT Act]. The Sales Tax Authorities on becoming aware of the Recovery Proceedings initiated by the Axis Bank under the provisions of SARFAESI Act, had sent a communication to them, as to the dues due and payable to them and has also drawn the attention of this Court to sections 21 and 42 of the TNVAT Act, and would submit that the tax under section 21, shall become due without any notice of demand to the dealer on the last date of the period for filing the return and as per section 42[2], any tax assessed on or has become payable by, or any other amount due under this Act from any dealer or pers....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in 2009 [6] CTC 656 : 2009 [4] SCC 94 [CENTRAL BANK OF INDIA Vs. STATE OF KERALA] and held as follows:- "20.In fine, this Court holds that:- [1] Sale Tax arrears under the provisions of TNGST Act would prevail upon arrears under the claim of the secured creditor like Third Respondent- Bank. [2] Petitioners are bona fide purchasers of the property for a valuable sale consideration without notice in a valid sale under the provisions of the SARFAESI Act. [3] Petitioners' property cannot be auctioned by the 1st respondent for tax dues of the borrowing company. 21. In view of the above reasonings and on equitable consideration also the Auction Notice dated 24.04.2009 issued by the First and Second Respondent to sell the property at No.300, Poonamallee High Road, Maduravoyal, Chennai- 600 095 for recovery of tax arrears of M/s.Pioneer Cashew Industries Limited is not sustained and the same is quashed. Accordingly, the writ petition is allowed. However, there will be no order as to costs." 15 The Division Bench, in the above cited decision, while answering the moot question, has followed the earlier judgment of the Division Bench reported in 2006 [3] MLJ 919 [DB] [PUNJ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e lump sum immediately along with the interest. The 3rd respondent has sent a reply dated 10.03.2010 to the Assistant Commissioner, Commercial Taxes, [FAC], Srirangam Assessment Circle, Trichy-20, the 2nd respondent herein, pointing out their priority in terms of section 35 of the SARFAESI Act as well as the judgment rendered by the Division Bench of this Court in WA.No.1360/2008 [cited supra] and informed the said officer that they are not liable to pay the sales tax arrears or any other amount out of the sale proceeds of the secured asset, as claimed by them in their communication dated 26.02.2010. 18 The 3rd respondent also sent a communication dated 15.03.2010 to the petitioner informing them that in the Auction-Sale held on 15.03.2010, the petitioner has become the successful bidder as their bid amount of Rs. 3,50,25,000/- has been accepted and also acknowledged the remittance of Rs. 88,00,000/- and calling upon the petitioner to remit the balance amount of Rs. 2,62,25,000/- within fifteen days, i.e., on or before 29.03.2010, for transfer of the assets/properties in their favour. In page No.27 of the typed set of documents filed by the respondents 3 and 4, the Auction Sale pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ission of the learned Standing Counsel appearing for the respondents 3 and 4 that as against their arrears of dues to the tune of Rs. 7,56,46,527.22p., due as on 28.08.2001, the property was sold only for Rs. 3,50,25,000/- and in the light of the fact that the information regarding the sales tax arrears was known to the petitioner even at the time of participating in the Auction-Sale, the petitioner has to get it cleared and they cannot execute the Sale Deed free from the said encumbrance. 21 In the decision reported in 2009 [4] SCC 94 [Central Bank of India Vs. State of Kerala and others], the following question arose for consideration:- "2.Whether Section 38-C of the Bombay Sales Tax Act, 1959, [for short "the Bombay Act"] and section 26-B of the Kerala General Sales Tax Act, 1963 [for short "the Kerala Act"] and similar provision contained in other State legislations by which first charge has been created on the property of the dealer or such other person, who is liable to pay sales tax, etc., are inconsistent with the provisions contained in the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 [for short "the DRT Act"] for recovery of "debt" and the Securi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly as per their notice dated 13.03.2010 published in Daily Thanthi and subject to that, the Tender is filed and the sales tax dues must be paid by the Bank out of the sale proceeds. The Bank, after receipt of the communication of the Sales Tax Authorities, calling upon them to pay the sales tax arrears, also took a stand that their dues will prevail over the sales tax arrears and even in the Auction-Sale proceedings [the contents of which have been extracted in paragraph 4 of this order], the Bank had clearly given assurance that they will take care of the sales tax issue and in the light of the said assurance only, the petitioner has paid the entire bid amount and requested the respondents 3 and 4 to execute the Sale Deed free of all encumbrances which include the sales tax arrears. However, the Bank, in their impugned communications dated 25.10.2010 and 24.11.2010, had made a turn around stating that the request/demand made by the petitioner cannot be acted upon as he has purchased the properties knowing pretty well about the attachment from the Sales Tax Department and they are prepared to execute the Sale Deed, subject to the incorporation of the clause regarding sales tax arre....