2004 (1) TMI 652 - HC - VAT and Sales Tax

Summary

Issues:
1. Priority of recovery of sales tax arrears by the State over a bank's right to recover as a secured creditor.

Analysis:
The appellant challenged a notice from the State to recover sales tax arrears from a company. The bank claimed a right to recover the amount due to a loan secured by the company's property. The learned single Judge ruled in favor of the State's right to recover under section 26-B of the Kerala General Sales Tax Act, 1963, dismissing the writ petition. The appellant contended that as a secured creditor, the bank should have priority in recovery.

The Court held that as per section 26-B, any tax amount payable by a dealer shall be the first charge on the dealer's property, giving the State a statutory right overriding other agreements or laws. Even though the land was mortgaged with the bank before the State's demand, the Supreme Court's decisions in Dena Bank v. Bhikhabhai Prabhudas Parekh Co. and State of Madhya Pradesh v. State Bank of Indore establish that public dues take precedence over all others, including secured creditors like the bank. No other points were raised, leading to the dismissal of the appeal as the Court found no merit in the bank's argument.

In conclusion, the High Court upheld the State's priority in recovering sales tax arrears over the bank's right as a secured creditor. The statutory right of the State under section 26-B prevails over any other agreements or laws, as established by Supreme Court precedents. The appeal was dismissed, affirming the decision of the learned single Judge and emphasizing the precedence of public dues in such matters.