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TMI Blog2009 (1) TMI 794X X X X Extracts X X X X X X X X Extracts X X X X ..... regards the date of the passing of the assessment orders as stated in the counter in paragraph 4, have no hesitation in accepting the plea of the petitioner.The provisions of the Tamil Nadu Act cannot stand the comparison of the Rajasthan Act or the Bombay Act to have the decisions of the Supreme Court applied in favour of the respondent's claim. Appeal allowed of petitioner. - W.P. (MD) No. 10366 of 2008 - - - Dated:- 19-1-2009 - CHITRA VENKATARAMAN , J. ORDER:- MRS. CHITRA VENKATARAMAN J. The petitioner seeks the issue of a writ of certiorari to quash the proceedings dated July 18, 2008 in ROC2192/99 A3 from the Commercial Tax Officer, Madurai, in respect of the tax dues from a defaulter for the period 1993-94 to 1997-98. It is seen that in respect of the tax arrears of a defaulter-assessee, the respondent herein issued notice in form IV on August 26, 1999 under the Revenue Recovery Act, 1864 and attached the property of the assessee. The attachment was published in the District Gazette on December 8, 2000 and notice as to bring the property for sale was published in the newspaper on March 4, 2001. Placing reliance on the decision in Electornics Trade and Technol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner that section 26 of the Tamil Nadu General Sales Tax Act or section 45 of the Tamil Nadu Value Added Tax Act, 2006, have no application and resisted the action of the respondent. Since the respondent rejected the claim of the petitioner, the present writ petition is filed before this court contending that the mortgage in favour of the petitioner is much prior to the demand raised. Hence, the question of the petitioner's charge being defeated by reason of section 24 of the Act does not arise. In this connection, learned counsel for the petitioner placed reliance on the decision of the honourable apex court in Dena Bank v. Bhikhabhai Prabhudas Parekh Co. reported in [2000] 120 STC 610; [2000] 4 CTC 170 that the priority of the charge available to the State cannot supersede the commercial transactions under which the property had already been subjected to charge in favour of the bank. In the above circumstances, learned counsel for the petitioner seeks the issue of a writ of certiorari to quash the order dated July 18, 2008. On notice, the respondent has filed a counter-affidavit wherein, they have given the details as to the date of assessment and the dem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ajasthan reported in [1999] 115 STC 545 (RTT) and submitted that the said decision does not contemplate tracing the sale proceeds for recovery, as section 24 of the Tamil Nadu General Sales Tax Act provided for a charge only on the asset of the defaulting-assessee. It is also pointed out that the above decision related to a case of auction purchaser purchasing not only the assets but also the entire business of the defaulter on as is where is basis; hence, distinguishable. Thereafterwards, the respondent sent a letter that the respondent was not aware of the liabilities to be discharged by the defaulter; hence, notice was not given to the petitioner herein. However, it was published in the Madurai District Gazette dated December 8, 2000, apart from the advertisement in the local newspaper on March 4, 2001. A reference was sent in the respondent's office proceedings dated August 25, 1999 to create an encumbrance of the suit property and the same was entered by the Sub-registrar, Madurai. Quoting section 26 of the Tamil Nadu General Sales Tax Act, the respondent sought for remitting the sale proceeds. This was once again reiterated in the notice dated July 18, 2008. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble by the partnership firm. The arrears related to the periods 1957-58 and 1966-67 to 1969-70 under the State Act and 1958-59 to 1964-65, and 1967-68 to 1969-70 under the Central Act. It is stated that in the sale organised by the State, the State of Karnataka itself purchased the property in auction. On a prayer from the bank, the State was impleaded as a party in the suit. The trial court decreed the suit filed by the bank and held that the charge created in the property by mortgage in favour of the bank was held proved. Hence, the trial court took the view that the State could not attach and sell the property belonging to the partners for recovery of the sales tax dues against the firm. However, the suit was directed to be dismissed on the ground that the authority of the Manager and the power of attorney holder to sign and verify the plaint and institute the suit was not proved. The petitioner preferred an appeal. During the pendency of the same, the bank entered into a compromise with the borrowers and the same was recorded by the court. As the State was not a party to the compromise, the appeal as regards the rights of the State was contested by the bank. The High Court r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and several liability of the partners came into force on December 18, 1983, while the decree in favour of the bank was passed on August 3, 1992 and was yet to be executed. Consequently, the apex court held that the claim of the bank was still outstanding and even if the sale was to be set aside, it would only revive the arrears of sales tax to add on further interest to this. In the light of the amended provisions of section 15(2A) of the Karnataka Sales Tax Act, effective from December 18, 1983, the apex court held that the State will have a preferential right to recover its dues over the rights of the bank. Applying the said decision to the facts herein, as already pointed out, the State dues arose only in the year 1999, whereas the mortgage created in favour of the bank was well before the demand was raised by the respondent on the assessee. In the circumstances, the decision of the Supreme Court has relevance herein to the facts that the mortgage in favour of the petitioner created well before the liability arose will supersede the claim of the respondent. The respondent relied on the decisions in State Bank of Bikaner Jaipur v. National Iron Steel Rolling Corporation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 1983-84 for which revenue recovery proceedings were taken by issuing a notice in form V and in form VII dated April 17, 1989. As far as the borrowing by the defaulter is concerned, the bank extended credit facilities in April, 1983 and equitable mortgage was created thereafterwards by deposit of title deeds in February, 1984. This court referred to the decision of the Supreme Court in State Bank of Bikaner Jaipur v. National Iron Steel Rolling Corporation reported in [1995] 96 STC 612 and held that in the wake of the decisions of the Supreme Court, it was no longer open to the bank to contend that the amendment had not achieved a purpose on Crown priority. This court further held that sections 24(2) and 26(6), as amended by the Tamil Nadu Act 78 of 1986, sufficiently safeguarded the interest of the State to enforce the recovery of the dues as a first-charge holder in supersession of the claims of an existing mortgagee. This court negatived the plea of unconstitutionality of the said provision and further held that the fact as to whether a particular claim satisfied the legal requirements necessary to treat the same as a secured creditor would depend upon the nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s: Section 24. Payment and recovery of tax. (1)... (2) Any tax assessed on or has become payable by, or any other amount due under this Act from a dealer or person and any fee due from him under this Act, shall, subject to the claim of the Government in respect of land revenue and the claim of the Land Development Bank in regard to the property mortgaged to it under section 28(2) of the Tamil Nadu Co-operative Land Development Banks Act, 1934 (Tamil Nadu Act X of 1934), have priority over all other claims against the property of the said dealer or person and the same may without prejudice to any other mode of collection be recovered, (a) as land revenue; or (b) on application to any Magistrate, by such Magistrate as if it were a fine imposed by him: Provided that no proceedings for such recovery shall be taken or continued as long as he has, in regard to the payment of such tax, other amount or fee, as the case may be, complied with an order by any of the authorities to whom the dealer or person has appealed or applied for revision, under sections 31, 31A, 33, 35, 36, 37 or 38. The abovesaid section stands in contrast to the Rajasthan enactment and the Bombay S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act position as regards the date of the passing of the assessment orders as stated in the counter in paragraph 4, I have no hesitation in accepting the plea of the petitioner. It may be noted that in the decision in ICICI Bank Ltd. (formerly Bank of Madura Ltd.) v. Official Liquidator, Liquidator of Vibrant Investments and Properties Ltd. (in liquidation) reported in [2005] 124 Comp Cas 550 (Mad); [2005] 1 CTC 758, following the decision in Dena Bank v. Bhikhabhai Prabhudas Parekh Co. reported in [2000] 120 STC 610 (SC); [2000] 4 CTC 170, a Division Bench of this court held that the Income-tax Department cannot claim priority over debts due to secured creditors. Respectfully following the same and the decision of the apex court relied on by the Division Bench of this court in the decision in Dena Bank v. Bhikhabhai Prabhudas Parekh Co. reported in [2000] 120 STC 610 (SC); [2000] 4 CTC 170, I have no hesitation in allowing the writ petition and thereby quashing the order impugned. The provisions of the Tamil Nadu Act cannot stand the comparison of the Rajasthan Act or the Bombay Act to have the decisions of the Supreme Court applied in favour of the respondent's claim. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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