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2021 (9) TMI 267 - HC - VAT and Sales TaxValidity of attachment order - recovery of tax arrears - whether the petitioner is entitled to claim priority over the claims made by the Commercial Tax Department regarding the tax arrears to be recovered? - HELD THAT - This Court considered the provisions of the Tamil Nadu Value Added Tax Act, 2006 and the claim made by the petitioner and in yet another case, the similar priority provision under the Income Tax Act was also considered by this Court elaborately and based on the two judgments of this Court in JANATA SAHAKARI BANK LTD., REPRESENTED BY ITS AUTHORIZED SIGNATORY VERSUS TAX RECOVERY OFFICER VII, INCOME TAX DEPARTMENT, COMPANY RANGE IV, CHENNAI 2021 (8) TMI 1233 - MADRAS HIGH COURT and M/S. FEDERAL BANK LTD. VERSUS COMMERCIAL TAX OFFICER, M/S. ARROW PACK PVT. LTD., MR. S. AMALRAJ, K.V. BALA MURALI KRISHNA KUMARI, SUB-REGISTRAR 2021 (8) TMI 1077 - MADRAS HIGH COURT the present case is also to be decided as the issues are one and the same and the factual aspects are also almost on the same line. It was held in the case that the bank being aggrieved from and out of the action initiated by the 1 st respondent, Commercial Tax department, is entitled to file an appeal before the appellate authority for adjudication of complete facts and circumstances. Petition disposed off.
Issues Involved:
1. Priority of claims between secured creditors and the Commercial Tax Department regarding tax arrears. 2. Application of Section 26E of the SARFAESI Act and Section 31B of the RDDB & FI Act. 3. Interpretation of conflicting statutory provisions under the TNVAT Act, Income Tax Act, and SARFAESI Act. 4. Jurisdiction of the High Court under Article 226 of the Constitution of India to adjudicate disputed facts. Detailed Analysis: 1. Priority of Claims between Secured Creditors and the Commercial Tax Department: The core issue revolves around whether the petitioner bank, as a secured creditor, has priority over the claims made by the Commercial Tax Department concerning tax arrears. The petitioner bank argued that under Section 26E of the SARFAESI Act and Section 31B of the RDDB & FI Act, secured creditors are granted priority. However, the Commercial Tax Department contended that their claims for tax arrears should take precedence. 2. Application of Section 26E of the SARFAESI Act and Section 31B of the RDDB & FI Act: The petitioner bank relied on the provisions of Section 26E of the SARFAESI Act and Section 31B of the RDDB & FI Act, which confer priority to secured creditors over other debts, including government dues. The court acknowledged that these sections provide priority to secured creditors, but it also noted the conflicting provisions under the TNVAT Act and the Income Tax Act, which grant priority to tax arrears. 3. Interpretation of Conflicting Statutory Provisions: The court examined the conflicting provisions under various statutes, including the TNVAT Act, Income Tax Act, and SARFAESI Act. It referred to previous judgments and observed that the TNVAT Act, like the Income Tax Act, contains provisions that give priority to tax arrears over other claims. The court emphasized the "doctrine of constitutional priority," which gives precedence to statutes recognized directly by the Constitution for upholding sovereignty and integrity, such as taxation laws. 4. Jurisdiction of the High Court under Article 226: The court highlighted that the disputed facts, such as the timing of the initiation of proceedings and the creation of charges, cannot be adjudicated by the High Court under Article 226 of the Constitution. It stated that these issues require scrutiny of original documents and evidence, which should be done by the competent appellate authority under the tax laws. Conclusion: The court concluded that the disputes regarding the priority of claims should be adjudicated by the appellate authorities under the TNVAT Act. It rejected the relief sought by the petitioner bank and directed them to approach the appellate authorities for a comprehensive adjudication of the facts and circumstances. The court emphasized that the principles laid down in previous judgments should be considered by the appellate authorities while resolving the disputes. Final Orders: 1. The relief sought in the writ petition was rejected. 2. The petitioner was granted the liberty to approach the appellate authorities under the TNVAT Act. 3. The appellate authorities were directed to entertain the appeal without reference to any delay and dispose of it on merits, following the principles laid down in previous judgments. 4. The writ petition was disposed of with no costs, and the connected miscellaneous petitions were closed.
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