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TMI Blog2011 (12) TMI 494X X X X Extracts X X X X X X X X Extracts X X X X ..... ver secured debt of a secured creditor - there is nothing on record to suggest that under the Central Excise Act or the Rules framed thereunder priority of charge over the secured debt has been created – no such law has been brought on record to suggest that the Central Government has any first charge or priority over the secured or unsecured debt - dues of the Sales Tax Department cannot have primacy over the secured debt of banks – the petitioner was fully secured by the Kabulatnama given in his favour by both Smt. Meena Parikh and the directors of the erstwhile company. The purchaser has purchased the property for value without notice from the auction held by secured creditor-financial institution - It cannot be affected by any subsequent attachment nor by way of any earlier deed on the part of the erstwhile owners and, therefore, on both these counts also the title of the present petitioner cannot be affected - therefore, any notice issued in relation to the land purchased by the present petitioner by way of a registered sale deed on and by an entry mutated cannot be effected and the same requires to be protected by way of an order in this petition - in the wake of the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mended by No. 2887 on May 8, 2007. In the said property admeasuring 7,823 sq. meters, there are sheds admeasuring 750 sq. meters. 3. The present petitioner purchased part of the land admeasuring 4,812 sq. meters from Smt. Minaben Parikh by a registered sale deed on August 31, 2007 for the sale consideration of ₹ 40,00,000 and an entry was mutated for the said transfer being the entry No. 5497 on registration. 4. It is averred by the petitioner that prior to the execution of the sale deed, an advertisement was published in the newspaper, on July 24, 2007 in Gujarati daily Gujarat Samachar to ensure a clear title. No objections were raised or received from any quarter and consequently, the property was registered in the name of the present petitioner. Previously, Minaben Parikh had executed an affidavit and undertaking specifying that all the rights and liabilities were transferred after marketable title and no previous liability exists. It is also further averred in the petition that for and on behalf of M/s. Swet Zinc Limited, the directors Shailesh Shah and Krishnavadan Desai had executed an undertaking with regard to marketable title of the said property. 5. Afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and bearing Survey No. 49/1 was attached on July 18, 2003 by the then Sales Tax Officer and Sales Tax Officer (3) and Sales Tax Recovery Mamlatdar, Kalol. The amount to be recovered is ₹ 8,14,106 with running interest. It is also further contended that the order of attachment was sent to Talati of Khatraj Gram Panchayat, Taluka Kalol on July 18, 2003 itself and to the Mamlatdar, Kalol with a request to effect necessary entry in the relevant revenue/property records pertaining to the said attachment, which was received by the Mamlatdar Office, Kalol on August 2, 2003. 8. It is further contended that as the said dues of assessment year 2000-01 were not paid, the said piece of land bearing Survey No. 49/1 was attached on July 23, 2008 once again by respondent No. 1 and a copy of second attachment order duly acknowledged by Talati-cum-Mantri, Khatraj Gram Panchayat on August 1, 2008 and Sub-Registrar, Kalol on August 4, 2008 are placed on record. It is also contended in the affidavit-in-reply that the petitioner has not stated as to whether he got a title clearance certificate or not, assuming without admitting that he got it since no one raised objections to the newspaper a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed had taken a loan from State Bank of India, Gandhidham Railway Station Branch and the property in question was mortgaged with the State Bank of India, in lieu of the said loan of ₹ 209 lakhs, the amount could not be deposited or repaid to the bank as it had initiated actions for selling the land, factory building and the machinery. Notice under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was issued and the fact that the land was sold being plot No. 49/1 admeasuring about 10,164 sq. yards and the entire property was purchased by Smt. Meena Parikh on April 30, 2007 by way of registered sale deed as mentioned hereinbefore, out of which 4,812 sq.meters was sold to the present petitioner. It is, therefore, contended that the order passed by the Sales Tax Officer issuing notice under section 152 on July 30, 2008 was much after the property was sold by the State Bank of India to Smt. Meena Parikh and the part of the land thereafter was sold to the present petitioner and, therefore, the question of any attachment being effected by the sales tax authority would not arise as prior to the notice under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the open market by the bank in lieu of its dues from the erstwhile owner M/s. Swet Zinc Limited, title of the present owners cannot be affected. Also on the count that mutation of the entry admittedly of the second attachment is subsequent to the change of hands of the property by way of a registered sale deed in favour of the present petitioner, therefore also, it does not affect the title. When the order of August 4, 2009 of Deputy Commissioner of Commercial Tax is suggestive of refund of ₹ 94,188, the claim of the Sales Tax Department does not stand to remain. 11. The learned Assistant Government Pleader Ms. Maithili Mehta has vehemently argued in support of the contentions raised in the affidavit-inreply although she admitted that even though the first attachment had been communicated to the office of the Talati-cum-Mantri, Khatrej Gram Panchayat and Mamlatdar, Kalol on August 2, 2003, the second time attachment order was needed to be passed on July 23, 2008. She agreed that for the reasons best known to the authority concerned, no entry was mutated despite specific direction from the Sales Tax Department while communicating order of August 2, 2003. Vide order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d section 200 of the Land Revenue Code after calculating total dues of ₹ 8,14,106 with interest and penalty, it had failed to pay the same and thereby discharge its liability to pay the sales tax dues differed. Resultantly, there was a need to auction the said property and hence this outstanding dues, which arose in the form of charge was to be mutated in the Revenue record. What gets revealed from the record is that till the order of the second attachment dated July 23, 2008 was sent, no entry was mutated by the office of Mamlatdar despite specific request in the form of direction through the communication dated July 18, 2003. There is no explanation as to why despite a specific order of attachment and intimation to both these offices, no entry has been mutated, and corresponding vigilance is also absent on the part of the office of the sales tax authority to ensure that its order had been duly effected and executed. This non-action and non-performance on the part of the concerned authorities and lack of due care on the part of the sales tax authorities to ensure the execution of its order of attachment, by way of mutation of the entry in the revenue record led to the transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue record. 15. Taking first issue, as rightly pointed out by the learned advocate for the petitioner, purchase of the property was by Smt. Meena Parikh, who had purchased it from the State Bank of India, which had sold it after invoking notice under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the total area of the land is 7,000 sq. meters and the area of the land purchased by the present petitioner was 4,812 sq. meters on August 31, 2007 by an entry No. 4497 effected in the Revenue record. Admittedly, prior to the purchase, there was no objection raised against that and as rightly pointed that sales tax dues cannot claim priority over the secured dues of the bank. The bank after exercising its powers had sold the same by way of an auction. 16. It is pertinent to mention that this court in Special Civil Application No. 3786 of 2010 and connected petitions decided by the Division Bench in the case of Tax Recovery Officer v. Industrial Finance Corporation of India [2012] 346 ITR 11 (Guj) followed the decision of this court in the case of Kotak Mahindra Bank Ltd. v. Dist. Magistrate reported in [201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormal course, the doctrine of first charge/priority cannot prevail over secured debts, but if first charge of the State is over the secured debts, both debts being equal, the State can claim priority even over the secured debts, and (e) The secured debts under the Securitization Act or debt under the R.D.D.B. Act has no first charge, and thereby, cannot compete with first charge/priority claim of the State if made under the statute. 18. In the light of the decision above, it can be held that dues of the Sales Tax Department cannot have primacy over the secured debt of banks. The petitioner was fully secured by the Kabulatnama given in his favour by both Smt. Meena Parikh and the directors of the erstwhile company. In such situation, it can be held that the purchaser has purchased the property for value without notice from the auction held by secured creditor-financial institution. It cannot be affected by any subsequent attachment nor by way of any earlier deed on the part of the erstwhile owners and, therefore, on both these counts also the court is of the opinion that the title of the present petitioner cannot be affected. And therefore, any notice issued in relation to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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