2013 (5) TMI 208 - HC - VAT and Sales Tax

Properties in question were mortgaged - The properties were sold - Revenue recovery proceedings were initiated against the properties for realising the sales tax dues - Section 26A of the KGST Act - Section 100 of the Transfer of Property Act - Held that - The other contention raised by the learned counsel is based on S.100 of the Transfer of Property Act. It is urged by the learned counsel that the charge created under S.100 at the time of creation of the mortgage cannot be defeated by a statutory charge which came into operation at a later stage. This contention under Section 100 has also been answered by their Lordships in Bhikhabhai s case and the answer is against the petitioner - This judgement has been followed by this Court in the judgment in W.P.(C).8179/08 -These writ petitions are only to be dismissed and I do so

Summary

Issues:
1. Applicability of Section 26A of the KGST Act to mortgage created in SARFAESI proceedings.
2. Impact of Section 100 of the Transfer of Property Act on properties purchased in SARFAESI proceedings.

Analysis:

*Issue 1: Applicability of Section 26A of the KGST Act*
The judgment addresses the contention raised regarding Section 26A of the KGST Act, which states that any charge created during or after proceedings under the Act shall be void against tax claims. The petitioners argued that this section does not apply to the mortgage in their favor. However, the court found this contention untenable as the tax dues were pending against the mortgagors at the time of creating the charge. Citing precedent cases like Hamsa v. Assistant Commissioner, the court upheld that assessment completion is not necessary for Section 26A to apply. Additionally, the argument that Section 26A does not apply to involuntary transfers was rejected based on previous judgments like Lucy Vincent v. District Collector and Shini Linson v. Tahsildar. Thus, the court dismissed the first contention.

*Issue 2: Impact of Section 100 of the Transfer of Property Act*
The second contention raised was regarding Section 100 of the Transfer of Property Act, stating that properties in the hands of purchasers cannot be proceeded against. The petitioners relied on various judgments to support this argument. However, the court referred to the Division Bench's decision in Sherry Jacob v. Canara Bank, which rejected a similar plea. The court held that the charge created at the time of mortgage creation cannot be defeated by a statutory charge later on. Citing Bhikhabhai's case and subsequent judgments, the court dismissed the second contention. Consequently, the court dismissed the writ petitions based on the analysis provided for both issues.