TaxTMI 
TaxTMI 
2008 (12) TMI 53
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....xcise duty for the said sum was confirmed. 4. Indisputably the provisions of Sections 27, 29, 30, 31, 32A to 32F, 41 and 41A of the 1951 Act have been extended in favour of the respondent by the Government of India in exercise of its power conferred upon it under sub-section (1) of Section 46 of the said Act by issuing an appropriate notification. 5. Respondent No. 2 having committed defaults in repayment of the principal amount of loan as also the interest accrued thereon, the first respondent invoked Section 29 of the 1951 Act by issuing notice to take possession of the said securities. Actual physical possession of the mortgaged assets was taken over. Respondent No. 2, however, continued to commit defaults as a result whereof the first respondent recalled the entire amount of loan wherefor a notice dated 19-3-1996 was served. 6. Respondent No. 2 owed a sum of Rs. 48,08,242/- to the appellant. It expressed its intention to attach and seize its properties. First Respondent, however, by its letter dated 11-11-1996 informed them that they had the first charge of the said properties which are mortgaged in their favour. Despite the same, the appellant expressed intention to procee....
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....lf of the appellant, would submit that the crown debt and, in particular, arrears of tax will have a priority over all other debts and in that view of the matter, the impugned judgment is wholly unsustainable. Strong reliance has been placed in this behalf upon a decision of this Court in Macson Marbles Pvt. Ltd. v. Union of India [2003 (158) E.L.T. 424 (S.C.)]. 9. Mr. Shekhar Naphade, learned senior counsel appearing on behalf of the respondent, on the other hand, submitted that principle that a crown debt prevails over other debts is confined only to the unsecured ones as secured debts will always prevail over a crown debt. Our attention in this behalf has been drawn to the non obstante clause contained in Section 56 of the 1951 Act. It was furthermore contended that for the self-same reason Section 529A in the Companies Act was inserted in terms by way of special provisions creating charge over the property and some of the State Governments also amended their Sales Tax Laws incorporating such a provision. The Central Government also with that view, amended the Employees Provident Fund and (Miscellaneous) Provisions Act, 1952 and Employees State Insurance Act, 1948. 10. The lea....
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....arrears of tax into arrears of land revenue either; all that it purports to do is to indicate that after receiving the certificate from the Income-tax Officer, the Collector has to proceed to recover the arrears in question as if the said arrears were arrears of land revenue. We have already seen that other alternative remedies for the recovery of arrears of land revenue are prescribed by sub-section (3) and (5) of section 46. In making a provision for recovery of arrears of tax, it cannot be said that section 46 deals with or provides for the principal of priority of tax dues at all; and so, it is impossible to accede to the argument that section 46 in terms displaces the application of the said doctrine in the present proceedings." {See also Superintendent and Remembrancer of Legal Affairs, West Bengal v. Corporation of Calcutta [AIR 1967 SC 997]} 15. Yet again in Bank of Bihar v. State of Bihar & Ors. [AIR 1971 SC 1210], it was laid down: "4. Now it is common ground that the plaintiff (which is the appellant before us) held the sugar which was seized from its custody as security for payment of the debts or advances made to Defendant 2 in its cash credit account. There were ar....
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....erential right for recovery of its debts over a mortgagee or pledgee of goods or a secured creditor. It is only in cases where the Crown's right and that of the subject meet at one and the same time that the Crown is in general preferred. Where the right of the subject is complete and perfect before that of the King commences, the rule does not apply, for there is no point of time at which the two rights are at conflict, nor can there be a question which of the two ought to prevail in a case where one, that of the subject, has prevailed already. In Giles v. Grover it has been held that the Crown has no precedence over a pledgee of goods. In Bank of Bihar v. State of Bihar the principle has been recognised by this Court holding that the rights of the pawnee who has parted with money in favour of the pawnor on the security of the goods cannot be extinguished even by lawful seizure of goods by making money available to other creditors of the pawnor without the claim of the pawnee being first fully satisfied. Rashbehary Ghose states in Law of Mortgage (TLL, 7th Edn., p. 386') - 'It seems a government debt in India is not entitled to precedence over a prior secured debt." 17. The princ....
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....ced in the Rajasthan Sales Tax Act, 1954 by way of an amendment in 1989. Section l1-AAAA is as follows: "11-AAAA. Liability under this Act to be the first charge. - Notwithstanding anything to the contrary contained in any law for the time being in force, any amount of tax, penalty, interest and any other sum, if any, payable by a dealer or any other person under this Act, shall be the first charge on the property of the dealer, or such person." Under this section the amount of sales tax or any other sum due and payable by a dealer or any other person under the Rajasthan Sales Tax Act, 1954, is a first charge on the property of the dealer or of such person. it is on account of the provisions of this section that the Commercial Taxes Officer claimed priority for the recovery of the sales tax dues from the sale proceeds of the mortgaged property. The appellant, however, contended that since the mortgage in their favour is prior in point of time, their claim will have precedence over the claim of the sales tax authorities." 20. If a company had a subsisting interest despite a lawful seizure, there cannot be any doubt whatsoever that a charge/mortgage over immoveable property will h....
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....uing the provisions of sub-section (2) and (3) of Section 73 of the code of Civil Procedure, held as under: "It is a general principle of law that debts due to the State are entitled to priority over all other debts. If a decree holder brings a judgment-debtor's property to sale and the sale proceeds are lying in deposit in court, the State may, even without prior attachment exercise its right to priority by making an application to the executing court for payment out. If however, the State does not choose to apply to the court for payment of its dues from the amount lying in deposit in the court but allows the amount to be taken away by some other attaching decree holder, the State cannot thereafter make an application for payment of its dues from the sale proceeds since there is no amount left with the court to be paid to the State. However, if the State had already effected an attachment of the property which was sold even before its sale, the State would be entitled to recover the sale proceeds from whoever has received the amount from the court filing a suit. Section 73(3) read with 73(2) CPC contemplate such a relief being granted in a suit. 23. This Court in that case was ....
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....ay be recoverable or due which may be in his hands or tinder his disposal or control, or may recover the amount by attachment and sale of excisable goods belonging to such person; and if the amount payable is not so recovered, he may prepare a certificate signed by him specifying the amount due from the person liable to pay the same and sent it to the Collector of the district in which such person resides or conducts his business and the said Collector, on receipt of such certificate, shall proceed to recover from the said person the amount specified therein, as if it were an arrear of land revenue. Provided that where the person (hereinafter referred to as predecessor) from whom the duty or any other sums of any kind, as specified in this section, is recoverable or due, transfers or otherwise disposes of his business or trade in whole or in part, or effects any change in the ownership thereof, in consequence of which he is succeeded in such business or trade by any other person, all excisable goods, materials, preparations, plants, machineries, vessels, utensils, implements and articles in the custody or possession of the person so succeeding may also be attached and sold by such....