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TMI Blog2024 (8) TMI 1201X X X X Extracts X X X X X X X X Extracts X X X X ..... HIGH COURT] and the judgment of the Division Bench of this Court in Indian Bank thr. Chief Manager [ 2024 (7) TMI 1309 - BOMBAY HIGH COURT] , there are no hesitation to hold that the claim of secured creditor that is the Petitioner Bank, will have preference over the claim of Respondents (GST Department and the Sales Tax Department). Petition allowed. - A.S. CHANDURKAR RAJESH S. PATIL, JJ For the Petitioner : Mr. Bharat Raichandani a/w. Mr. Aman Mishra i/b. UBR Legal. For the Respondent State : Mr. N. K. Rajpurohit, AGP. JUDGMENT (PER : RAJESH S. PATIL, J.) 1. RULE. Rule is made returnable forthwith. By consent of the parties matter is heard finally. 2. Petitioner Bank has filed this Writ Petition under Articles 226 and 227 of the Constitution of India, seeking to quash and set aside the various demand notices issued by the Respondent GST and Sales Tax Department, under the provisions of Section 79 (1) (c) Maharashtra Goods and Services Tax Act, 2017 (for short MGST Act ) and Section 33 (1) of Maharashtra Value Added Tax Act, 2002 (for short MVAT Act ), and also challenge to impugned orders passed by Sales Tax Department in recovery proceedings, to the Talathi/Revenue Officers fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest, which was due to Respondent No. 4 borrower/Assessee. 9. On 11th June 2019, the Petitioner Bank issued possession notice under Section 13(4) of the SARFAESI Act, thereby informing the borrower that possession of the secured assets will be taken on 28th June 2019 at 11.30 a.m. 10. Subsequently, on 28th June 2019 the Petitioner Bank took symbolic possession of the secured assets by preparing panchanama and affixing the possession notice. So also, the Petitioner Bank published possession notice dated 2nd July 2019 in daily newspapers, thereby informing that the symbolic possession of the secured assets had been taken on 28th June 2019. 11. The Petitioner Bank thereafter received from Respondent No. 2 an order of provisional attachment of properties under Section 83 of MGST Act, dated 12th December 2019, for attaching the property of the borrower. 12. The Sales Tax Department thereafter issued Demand Notice under Section 79 (1) (c) (i) dated 11th November 2020 with regard to their recovery against the Respondent no. 4/borrower/assessee. The Petitioner Bank, replied to the said Demand Notice thereby denying the allegations, and bringing on record the correct facts. 13. On 24th J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Sales Tax Department and against the borrower, arrayed as Respondent No. 4. In the present Writ Petition, the Petitioner Bank has prayed for quashing the Demand Notices issued by the Respondent nos. 2 and 3 and also for quashing and setting aside the impugned order passed by Respondent No. 3 (Sales Tax Department). 19. Respondent No. 2 (GST Department) and Respondent No. 3 (Sales Tax Department) filed their affidavit-in-reply dated 13th February 2024, thereby opposing the prayers made in the Writ Petition. In the said reply, the Respondent nos.2 and 3 stated that the State Tax Department has already taken steps to initiate recovery proceedings under the Maharashtra Land Revenue Code, 1966 (for short MLRC ). The immovable property of the taxpayer has been attached and a lien has been placed on Flat No. 21 22, situated in Shriram Anand Sankul Soceity, Nashik, as well as the land and building located on Gat No. 477, Gonde Shivar, Nashik. The State Tax Department is pursuing the recovery of debts from the taxpayer Respondent No. 4, amounting to Rs.98,15,407/-. As per the provisions of Section 37 of the MVAT, which establishes the precedence of a secured creditor in favour of Sales Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corded. (iv) He submitted that there is no question of Bank having first charge over the subject properties, in view of MVAT Act. (v) He submitted that hence, this Writ Petition should be dismissed with costs. ANALYSIS AND CONCLUSSION:- 22. We have heard counsel for both the sides and with their help we have gone through the documents on record including the provisions of SARFAESI Act. 23. There is no dispute that the Petitioner-Bank has, as on 17th March 2017, registered the Security Interest with CERSAI. So also, there is no dispute that the respondents (GST Department and MVACT) have not registered with the CERSAI. Section 26-E of the SARFAESI Act reads as under:- 26-E. Priority to secured creditors. - Notwithstanding anything contained in any other law for the time being in force, after the registration of security interest, the debts due to any secured creditor shall be paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authority. 24. The Full Bench of this Court in Jalgaon Janta Sahakari Bank Ltd. and another (supra) has clarified the position of law as per Section 26-E. In parag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticularly having regard to the non-obstante clauses in sections 31 B and section 26E, that the dues of the secured creditor shall have priority over all other including all revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authority. 88. Bare perusal of the 2016 Amending Act would show that the dues of the Central/State Governments were in the specific contemplation of the Parliament while it amended the RDDB Act and the SARFAESI Act, both of which make specific reference to debts and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authority and ordains that the dues of a secured creditor will have priority , i.e., take precedence. Significantly, the statute goes quite far and it is not only revenues, taxes, cesses and other rates payable to the State Government or any local authority but also those payable to the Central Government that would have to stand in the queue after the secured creditor for payment of its dues. 150. The contention that rules are yet to be framed for making subsection (4) of section 20B operational is wholly incorrect. By a notification dated 24t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner Bank on 17th March 2017, have registered their Security Interest with CERSAI. The amended Section 26D, makes it mandatory for secured creditors to register their security interest, to be entitled to exercise the rights of enforcement of securities. 27. As far as the argument of the respondents is concerned with regard to precedence of Sales Tax dues, over the Bank dues in view of Section 37 of MVAT Act. We are of the view that sub-section (2) of Section 37 of MVAT Act was introduced on 15th April 2017 by Mah. 31 Act of 2017. The MVAT Act is a State Legislature. The SARFAESI Act is a Central Legislature and Section 26-E was inserted by Act 44 of 2016 and was enforced in the Principal SARFAESI Act on 24th January 2020. The SARFAESI Act being the Central Act, the same will prevail over the State Act i.e. MVAT Act. 28. In the present case, the order of attachment issued by the Sales Tax Department is dated 19th April 2022. It is thereafter that steps have been taken to attach the immovable property. It is on this basis that the respondents seek to rely upon the provisions of Section 37 of MVAT Act. As noted above, the registration of the Bank Security Interest with CERSAI is dated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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