2006 (2) TMI 621 - HC - VAT and Sales Tax

Summary

Issues:
1. Priority of claims under the Industrial Disputes Act against revenue recovery proceedings under the Kerala General Sales Tax Act.
2. Application of section 26B of the KGST Act in determining priority of claims.
3. Precedential value of previous court decisions on similar issues.

Issue 1: Priority of claims under the Industrial Disputes Act against revenue recovery proceedings under the Kerala General Sales Tax Act

The petitioners, workmen of the first respondent firm, filed a writ petition contending that their claims under the Industrial Disputes Act should be treated as preferential claims over the revenue recovery proceedings initiated by the State for dues under the KGST Act. The petitioners argued that claims for wages, bonus, and other statutory benefits have first priority against all other claims, including those of secured or unsecured creditors. The petitioners relied on various decisions, including National Textile Workers' Union v. P.R. Ramakrishnan and other apex court judgments, to support their position. However, the Senior Government Pleader for Taxes argued that the State has a first charge on the property of the respondents under section 26B of the KGST Act for the arrears due under the Act.

Issue 2: Application of section 26B of the KGST Act in determining priority of claims

Section 26B of the KGST Act establishes that any amount due under the Act, including tax, penalty, and interest, shall be the first charge on the property of the dealer or person liable. This statutory provision creates a first charge that takes precedence over other claims. The liability to pay tax is automatic and does not depend on adjudication or issuance of assessment orders. The court noted that the provision of section 26B would run in preference to the rights of the petitioners and other claimants under the Industrial Disputes Act, even if their claims culminate in an order under section 33C(3). The court referred to a previous decision where it was held that claims for wages and benefits have priority over other dues but clarified that the decision was based on specific facts and does not apply to the current case.

Issue 3: Precedential value of previous court decisions on similar issues

The court reviewed a previous decision where it was held that claims of workmen for wages and benefits had priority over other dues, but distinguished that decision based on the timing of the award and the introduction of section 26B into the KGST Act. The court emphasized that the previous decision was not a precedent applicable to the current case. Ultimately, the court concluded that the petitioners were not entitled to relief against the revenue recovery proceedings initiated by the State for arrears under the KGST Act. The court issued a temporary injunction to restrain the respondents from alienating the properties until the final disposal of the claim petition under the Industrial Disputes Act.

In conclusion, the court dismissed the writ petition, stating that the petitioners were not entitled to relief against the revenue recovery proceedings. The court emphasized the priority of claims under section 26B of the KGST Act and the specific circumstances of the case. The court directed the Labour Court to expedite the final disposal of the claim petition under the Industrial Disputes Act.