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2005 (7) TMI 653 - HC - VAT and Sales Tax
Issues:
1. Priority of decree obtained by a bank before the introduction of Section 26B of the Kerala General Sales Tax Act over the first charge created in favor of the State. Analysis: Issue 1: The case involved a dispute regarding whether a decree obtained by a bank prior to the introduction of Section 26B of the Kerala General Sales Tax Act would override the first charge created in favor of the State. The bank had obtained a decree for recovery of amounts due to it, secured by an equitable mortgage of properties. The State, through the Tahsildar, initiated proceedings for the sale of some of the mortgaged properties for recovery of sales tax arrears. The bank contended that the decree passed before the introduction of Section 26B should have precedence over the State's charge. However, the State argued that it had the right to proceed against the properties covered by the decree, even if the decree had not been executed. The Court referred to various legal precedents, including decisions of the Supreme Court, which recognized the statutory first charge in respect of sales tax arrears. The Court held that the State's statutory first charge under Section 26B of the Kerala General Sales Tax Act would prevail over the rights created in favor of the bank by an unexecuted decree. The Court emphasized that the decree only determined the rights between the mortgagor and mortgagee and did not affect the statutory rights of the State. Therefore, the decree obtained by the bank would not have precedence over the first charge created in favor of the State under Section 26B of the Act. Conclusion: The Court concluded that the decree obtained by the bank did not have precedence over the first charge created in favor of the State under Section 26B of the Kerala General Sales Tax Act. The Court dismissed the appeal, stating that the State's right to recover tax dues had priority over the bank's decree, emphasizing the operation of law that granted the State a prior charge over the properties in question.
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