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TMI Blog1975 (2) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... e ground that the mortgagors were in arrears of Central sales tax. The plaintiffs' case is that the fourth defendant, in such a public auction held on 28th December, 1965, by the Commercial Tax Officer, purchased the same and obtained a sale certificate on 1st March, 1966, under exhibit B-3 of which exhibit B-4 is a carbon copy. The plaintiffs' specific allegation is that the auction held by the Commercial Tax Officer, Erode, would not bind him and, in any event, as the fourth defendant is only a subsequent purchaser in the sense that the mortgage is prior to the purchase, their rights are unaffected and that they would be entitled to the usual mortgage decree as against the hypotheca without reference to the sale conducted by the State for the recovery of tax arrears of the mortgagors. It was in those circumstances, the plaintiffs, after issuing a registered notice dated 22nd January, 1966, under exhibit B-6, filed the action and sought for a mortgage decree. Defendants 1 to 3, obviously, remained ex parte. The fourth defendant's contention is that he was not aware of any encumbrance over the suit property and as it was publicised under exhibit B-1 that the property was being so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales tax, we requested the learned Additional Government Pleader, who is specially in-charge of sales tax cases, to assist us to arrive at a decision in this case. The learned Additional Government Pleader as also the learned counsel for the appellant brought to our notice certain decisions. On a conspectus of the ratio in those decisions before us, we are unable to dislodge the finding rendered by the trial Judge that the fourth defendant should, in the circumstances, be held to have not purchased the property free from all encumbrances. Section 9(2) of the Central Sales Tax Act provides that the authorities for the time being empowered to assess, reassess, collect and enforce payment of any tax under the general sales tax law of the appropriate State shall, on behalf of the Government of India, assess, reassess, etc., and for the purposes of the Act, the authorities may exercise all or any of the powers they have under the general sales tax law of the State. It is necessary, therefore, to see the Tamil Nadu General Sales Tax Act of 1959 to find out what are the powers which can be exercised by the taxing authorities under the Central Sales Tax Act. Section 24(2) of the Tami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il Nadu Agricultural Incometax Act of 1955, the Tamil Nadu City Municipal Corporations Act, the Tamil Nadu Court Fees and Suits Valuation Act, the Tamil Nadu Courts of Wards Act, the Tamil Nadu Sales of Motor Spirit Taxation Act, the Tamil Nadu Private Forests (Assumption of Management) Act, the Tamil Nadu Electricity Duty Act, the Tamil Nadu Entertainments Tax Act and other similar enactments are all Acts which do have a particular public purpose to serve. The cess or the levy under the Revenue Recovery Act or the loans lent in connection with such land from the public exchequer or such levy made on land are bound to be repaid by the borrower since such cess or levy has relation to the land and since the loan has come from public exchequer. It is significant to note that in the Revenue Recovery Act and the other Acts, referred to above, stress is made on "land" and "the ways and means of recovery of moneys lent by the Government towards the improvements of such lands or for the recovery of such assessment, levies, or cesses made in relation to such land ". Such moneys are payable to the public exchequer and avoidance of such payment is, therefore, against public interest. It is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from all prior encumbrances. If such an intent was envisaged they would have used the expression that such arrears "shall be deemed to be land revenue" or "shall be recovered as land revenue". This fiction essentially creates the division. Regard for public welfare is, undoubtedly, the highest law and it is contained in the expression "salus populi suprema lex". But, the priority of the State debt cannot, unless otherwise provided by a particular statute, prevail as against a prior secured creditor such as a mortgagee or a charge-holder so as to completely efface his security and prejudice his rights as a secured creditor. As between an unsecured creditor and the State, the above doctrine of priority of State debts will ordinarily be attracted. But, this rule cannot be automatically extended so as to extinguish the rights of the secured creditors and prefer State debts if such a competition arises. In the ultimate analysis, therefore, it depends upon the language of a particular statute, and if a statute says that the arrears of tax or cess or assessment, etc., are "deemed to be land revenue", or may be "recovered as land revenue", then, by such operation of a fiction the sale whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preferred to the debt of a single creditor. But this rule of priority in favour of the Crown for the realisation of its dues can only prevail and be enforceable as between unsecured creditors of equal degree, there being no question of any lien, charge or mortgage in favour of one or other of such creditors. The priority of the Crown cannot rank as against a secured creditor so as to deprive him of his security or to affect or injure his rights as such secured creditor." The authorities, therefore, need not be multiplied. But, the learned counsel for the appellant referred to a decision of Somayya, J., in Secretary of State for India in Council v. Jodaraj Dhupajee[1941] 2 M.L.J. 993. That was a case where the learned judge was considering the recovery of public revenue under the Tamil Nadu Land Encroachment Act. A penal assessment was made under section 9 of the said Act. For recovery thereof, the land of the pattadar was sold. While considering that aspect, the learned judge said that section 9 of the Land Encroachment Act equates the penal assessment levied under it to land revenue and provides that it may be recovered as land revenue. It was in those circumstances, the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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