2018 (11) TMI 148 - HC - VAT and Sales Tax

VAT department s charge and that of the Provident Fund Commissioner - petitioner s grievances are that despite clear position of facts and law, the charge of the State VAT department and the alleged outstanding dues of the Provident Fund Commissioner from the Revenue records is not being removed. Whether the bank as a secured creditor would have a priority charge over the secured assets or whether the VAT department can claim preferential recoveries as a crown debt? Held that - Since the resolution of this issue was likely to take some time, the Court permitted the bank with the active involvement of the Government authorities to dispose of the property by auction sale. This would ensure that there is no further deterioration of the property and the incurring cost of security would also come to an end. Essentially therefore, the intention of the Court was to decide the internal dispute of secured creditor and the Government at a later point of time and not to withheld the disposal of the property till such disputes are resolved - Whatever be the outcome of the petition filed by the bank, the purchaser of the property through such auction sale conducted under the interim order of the Court, cannot be deprived full use and enjoyment of the property, that too after paying sizable sum to the tune of ₹ 13.30 crores. The Revenue authorities shall delete the charge of the VAT department as well as that of the Provident Fund Commissioner - petition disposed off.

Summary

Issues:
1. Dispute over charges of State VAT department and Provident Fund Commissioner on an immovable property purchased through auction.
2. Priority of charge between a secured creditor and government agencies.
3. Removal of charges from Revenue records.

Issue 1: Dispute over charges of State VAT department and Provident Fund Commissioner
The petitioner, a purchaser of an immovable property through auction, raised grievances regarding the State VAT department and Provident Fund Commissioner charges on the property. Despite efforts, these charges could not be removed from the Revenue records, leading to the filing of the petition.

Issue 2: Priority of charge between a secured creditor and government agencies
The main dispute revolved around whether the bank, as a secured creditor, had priority over the property against the claims of the State VAT department for outstanding dues. The Court allowed the bank to conduct an auction sale of the property to prevent further deterioration and end security costs, pending the final resolution of this priority charge dispute.

Issue 3: Removal of charges from Revenue records
The Court directed the Revenue authorities to delete the charges of the State VAT department and the Provident Fund Commissioner from the property's records. It emphasized that the purchaser, who had paid a substantial amount through auction, should be allowed full use and enjoyment of the property despite ongoing disputes between the secured creditor and government agencies.

In conclusion, the Court disposed of the petition, permitting direct service and instructing the Revenue authorities to remove the disputed charges. The judgment aimed to balance the rights of the purchaser with the pending resolution of the priority charge dispute between the secured creditor and government agencies.