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Judgment
Goda Raghuram, J.—Heard the several counsel for the petitioners; the learned Special Government Pleader for Commercial Taxes Mr. Krishna Koundinya for the State of Andhra Pradesh, the Commissioner of Commercial Taxes and other designated officials of the Commercial Taxes Department; and other learned Counsel for other respondents in the several writ petitions.
In all the cases the common issue whether the liability of a dealer or other person in respect of tax, penalty, interest or any other sum payable to the State/Commercial/Sales Tax Department under the provisions of the Andhra Pradesh General Sales Tax Act 1957 (''the Act'') has priority, would prevail and have precedence over even an existing secured debt created by such dealer or person in favour of any other individual, institution or instrumentality, falls for consideration.
This issue arises in the context of the provisions contained in Section 16C of the Act, which reads:
16C. Liability under this Act to be the first charge:-Notwithstanding anything to the contrary contained in any taw for the time being in force, any amount of tax, penalty, interest and any other sum, if any, payable by a dealer or any other person under this Act, shall be the first charge on the property of dealer, or such person.
The above provision was introduced into the principal Act by Amendment Act 9 of 1999 w.e.f. 06.04.1999.
The vires of Section 16C of the Act is challenged only in W.P. No. 21865/99 by the A.P. State Financial Corporation (''the Corporation'') on several grounds:
a) That the right of the Corporation u/s 29 of the State Financial Corporations Act, 1951 (''the 1951 Act'') to takeover the management or possession of the industrial concern and the right to transfer the property secured in its favour, creates an overriding charge over the assets of the industrial concern and would have precedence in view of the non obstante clause in Section 46B of this Act;
b) The operation of the 1951 Act a Central legislation (Act 63 of 1951) cannot be curtailed or restricted by a State legislation and therefore a charge in favour of the Corporation would prevail notwithstanding the provisions of Section 16C of the Act;
c) The Corporation being a secured creditor would have precedence over a crown debt and since the Corporation is established for industrial promotion and development, the loans advanced by it also partake the nature of public assets. Section 16C of the Act is therefore invalid on account of irrational classification, violative of Article 14 of the Constitution;
d) Since the amounts due and payable to the Corporation are liable to be recovered as arrears of land revenue in terms of Section 32(g) of the 1951 Act, the debt due to the Corporation is a public debt;
e) The charge created in favour of the Corporation being prior in point of time constitutes a first charge and would prevail;
f) Section 16C of the Act is inconsistent with and repugnant to the provisions of Sections 29, 31 and 32 of the 1951 Act and Sections 58 and 100 of the Transfer of Property Act (Central Legislations) and is void in terms of Article 254 of the Constitution.
The other cases in this batch of writ petitions fall into three broad categories:
A) W.P. Nos. 13102/2000, 19091/99, 24334/01, 24097/03 and 25394/03 are also by the Corporation. In W.P. No. 13102/99 a notice of attachment ordered by the Commercial Taxes Department (Revenue) for recovery of dues under the provisions of Act is challenged. In W.P. No. 19091/99 a demand notice by the Revenue directing the Corporation to remit the proceeds of the sale of a secured asset ordered by the Corporation u/s 29 of the 1951 Act in respect of the property of a dealer attached under the provisions of the Act, is in challenge. In W.P. No. 24334/01 the Corporation challenged a notice of attachment, issued by the Revenue to enable the Corporation to proceed against the attached property for realization of its own dues u/s 29 of the 1951 Act, in respect of a borrower who is also a dealer under the provisions of the Act. In W.P. No. 24097/03 the Corporation challenged a letter of the Revenue intimating sale of property under the provisions of the A.P. Revenue Recovery Act 1864 (''the RR Act''). W.P. No. 25394/03 is a challenge by the Corporation to the notice of attachment of the property of the 6th respondent for tax arrears. The property was attached by the 3rd respondent. The 6th respondent had also defaulted on repayments of a loan advanced by the Corporation.
B) W.P. Nos. 4625/04, 24489/05, 459/06, 25305/07, 5322/08 are filed by the Revenue. In W.P. No. 4625/04 auction of the specified property by the Recovery Officer of the Debts Recovery Tribunal (''DRT'') is challenged. Despite being notified of attachment of the property by the Revenue under the provisions of Section 17C of the Act the Recovery Officer of the DRT pursuant to an order of the Tribunal in RP No. 168/03 in OA No. 626/02 had conducted auction for recovery of the amounts due to the 1st respondent-Bank. W.P. No. 24489/05 assails the action of the respondent-Bank proposing auction of the property under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (''the Securitisation Act''), in view of the primacy accorded to tax arrears due by the 1st respondent-dealer, under the provisions of Section 16C of the Act. W.P. No. 459/06 challenges sale of the property of the 1st respondent by the 2nd respondent as in valid. The 1st respondent committed breach of the conditions of a tax deferment scheme and became liable to tax under the Act and the Central Sales Tax Act, 1956 (''the CST Act''). Despite intimation by the Revenue of the prioritized claim of the tax arrears u/s 16C of the Act, the 2nd respondent sold the 4th respondent''s property to the 3rd respondent under the provisions of the Securitisation Act and delivered possession of the property as well. W.P. No. 25305/07 assails an order of the DRT. The 3rd respondent-a registered dealer fell in arrears of tax and penalty under the Act and the CST Act. The respondent-Bank issued a sale notification to recover the amounts due to it from the 2nd respondent, pursuant to an order of the DRT. The Revenue applied to the DRT to withhold the amount of arrears of tax and penalty due to it and to make over the same to the Revenue instead of to the respondent-Bank. This application IA No. 12/06 in OA No. 902/02 was dismissed by the DRT, Visakhapatnam by the order dated 26.04.2002. In W.P. No. 5322/08 the Corporation (R2) sold the property of the respondents 3 and 4 (registered dealers) for defaulting in repayment of amounts advanced by the Corporation, under the 1951 Act. The Revenue addressed a letter to the Corporation intimating the tax arrears due by the respondents 3 and 4, claiming priority u/s 16C of the Act and calling upon the Corporation to remit the sale proceeds for securing tax dues of respondents 3 and 4. The 2nd respondent Corporation by a legal notice dated 20.08.2007 intimated the petitioner that the assets of respondents 3 and 4 were seized and sold and an amount of Rs. 4,55,250/- was kept in Fixed Deposit.
C) W.P. Nos. 10744/04 and 5761/05 are by Bank/Financial Institutions. In W.P. No. 10744/04 the Bank assails an order of attachment and consequent sale by the Revenue of the assets of the 2nd respondent, which was mortgaged to the petitioner for a loan availed. The 1st respondent Revenue attached and sold the assets secured to the Bank even while Bank''s application in OA No. 175/03 was pending before the DRT, Visakhapatnam. W.P. No. 5761/05 is again by a Bank challenging the action of the Revenue in attaching the specified property under the provisions of the RR Act even while the petitioner''s application before the DRT, Hyderabad for recovery of the amounts due to it from the borrower/dealer is pending.
Vires of Section 16(c) of the APGST Act 1967:
The policy justification for the impugned provision is the well entrenched common law doctrine of priority of Crown debts. The common law doctrine postulates that the State is entitled to claim, for the recovery of the amount of tax due to it from a citizen precedence and priority over unsecured debts due from the said citizen to his other private creditors. The basic justification for such claim of priority rests on the well recognized principle that the State is entitled to raise money by taxation, otherwise it will not be able to function as a sovereign Government at all. This consideration emphasizes the necessity and wisdom of conceding to the State the right to claim priority in respect of its tax dues Builders Supply Corporation Vs. The Union of India (UOI) Represented by the Commissioner of Income Tax, West Bengal and Others, ; Dena Bank Vs. Bhikhabhai Prabhudas Parekh and Co. and Others,
Central Bank of India Vs. State of Kerala and Others, considered the issue whether Section 38C of the Bombay Sales Tax Act 1969 and Section 26B of Kerala Sales Tax Act 1963 (State legislations under Entry-54 of List-11 providing for a first charge on the property of a dealer or a person liable to pay sales tax), were invalid on account of inconsistency with provisions of the Recovery of Debts Due to Banks and Financial Institutions Act 1993 (DRT Act) and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (Securitisation Act) in view of the non obstante provision in Sections 34(1) and 35 of the DRT Act and Securitisation Act, respectively. The Supreme Court on an extensive analysis of the provisions of the relevant legislations; Articles 245, 246 and 254, Entry 45 of List-11 and Entry 54 of List-11 of the Seventh Schedule, of the Constitution; the enacting history of the DRT and Securitisation Acts; provisions of other State legislations incorporating a first charge such as Section 14A of the Workmen Compensation Act 1923, Section 11(2) of the Employees Provident and Miscellaneous Provisions Act 1952, Section 74(1) of the Estate Duty Act 1953, Section 25(2) of the Mines and Minerals (Regulation and Development) Act 1957, Section 30 of the Gift Tax Act 1958, and Section 529A of the Companies Act 1956 held:
A) That the DRT Act facilitated establishment of a two tier system of Tribunals vested with the jurisdiction, powers and authority to summarily adjudicate the claims of banks and financial institutions in the matter of recovery of their dues without being bogged down by the technicalities of the Code of Civil Procedure; and that securitization enables banks, financial institutions and other secured creditors to recover their dues without the intervention of the courts or tribunals and incorporates provisions for registration and regulation of securitization/reconstruction companies, securitisation of financial assets of banks and financial institutions and related provisions;
B) That significantly there is no provision in either of these enactments by which a first charge has been created in favour of banks, financial institutions or secured creditors qua the property of the borrower;
C) That u/s 13(1) of the Securitisation Act a limited primacy is given to the right of the secured creditors to enforce security interest vis-a-vis Section 69 or 69A of the Transfer of Property Act without the intervention of a court or tribunal. However, the primacy conferred u/s 13(1) does not extend to other provisions like Sections 38(C) and 26(B) of the Bombay and Kerala Acts by which first charge has been created in favour of the State over the property of the dealer or any person liable to pay the dues of sales tax etc. Section 13(7) of the Securitisation act envisages application of the money received by the secured creditors, it does not create a first charge in favour of secured creditors;
D) Section 13(9) of the Securitisation Act merely reiterates the priority of the claim of the workers of a Company in liquidation spelt out in Section 529A of the Companies Act 1956 vis-a-vis the secured creditors under this Act. However no first charge is created in favour of worker of a company in liquidation for the first time; also companies which are not in liquidation or are not being wound up, are not covered by the provisions of Sub-section (9).
E) The non obstante clause in Section 34(1) of the DRT Act or Section 35 of the Securitisation Act does not over-ride those provisions of the State legislations which create a first charge fortified by non obstante provision in the State Acts.
F) After referring to its earlier decisions in Dattatreya Shanker Mote and Others Vs. Anand Chintaman Datar and Others, , State Bank of Bikaner and Jaipur Vs. National Iron and Steel Rolling Corporation and Others, , Rm. Arunachalam Vs. Commissioner of Income Tax, , State of Madhya Pradesh and Another Vs. State Bank of Indore and Others, and quoting with approval the judgment of a Division Bench of Kerala High Court in The Recovery Officer and Assistant Provident Fund Commissioner v. Kerala Finance Corporation ILR (2002) 3 Kerala 4, held that the primacy of the State''s first charge in respect of sales tax dues owed by a dealer or other person to the State, fortified by a non obstante provision in the State legislation is not inconsistent with the provisions of a central legislation such as the DRT Act or the Securitisation Act which do not incorporate a first charge in favour of a bank or financial institution in respect of the dues owed by a borrower to such bank or financial institution, notwithstanding the generic non obstante provision in the central legislation. The primacy of the State''s first charge shall therefore have priority.
G) The contention that the claim of a bank or financial institution would have precedence over the claim of Sales Tax authorities, since the mortgage in their favour was prior in point of time was rejected relying on the following passages of its earlier judgment in State Bank of Bikaner and Jaipur Vs. National Iron and Steel Rolling Corporation and Others,
Section 100 of the Transfer of Property Act deals with charges on an immovable property which can be created either by an act of parties or by operation of law. It provides that where immovable property of one person is made security for the payment of money to another, and the transaction does not amount to a mortgage, a charge is created on the property and all the provisions in the Transfer of Property Act which apply to a simple mortgage shall, so far as may be, apply to such charge. A mortgage on the other hand, is defined u/s 58 of the Transfer of Property Act as a transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced as set out therein. The distinction between a mortgage and a charge was considered by this Court in Dattatreya Shanker Mote and Others Vs. Anand Chintaman Datar and Others, The Court has observed (at SCC pp. 806-07) that a charge is a wider term as it includes also a mortgage, in that, every mortgage is a charge, but every charge is not a mortgage. The Court has then considered the application of the second part of Section 100 of the Transfer of Property Act which inter alia deals with a charge not being enforceable against a bona fide transferee of the property for value without notice of the charge. It has held that the phrase ''trasnferee of property'' refers to the transferee of entire interest in the property and it does not cover the transfer of only an interest in the property by way of mortgage.
The argument though ingenious, will have to be rejected. Where a mortgage is created in respect of any property, undoubtedly, an interest in the property is carved out in favour of the mortgagee. The mortgagor is entitled to redeem his property on payment of the mortgage dues. This does not, however, mean that the property ceases to be the property of the mortgagor. The title to the property remains with the mortgagor. Therefore, when a statutory first charge is created on the property of the dealer, the property subjected to the first charge is the entire property of the dealer. The interest of the mortgagee is not excluded from the first charge. The first charge, therefore, which is created u/s 11AAAA of the Rajasthan Sales Tax Act will operate on the property as a whole and not only on the equity of redemption as urged by Mr. Tarkunde.
In the present case, the section creates a first charge on the property, thus clearly giving priority to the statutory charge over all other charges on the property including a mortgage. The submission, therefore, that the statutory first charge created u/s 11AAAA of the Rajasthan Sales Tax Act can operate only over the equity of redemption, cannot be accepted. The charge operates on the entire property of the dealer including the interest of the mortgagee therein.
Looked at a little differently, the statute has created a first charge on the property of the dealer. What is meant by a ''first charge''? Does it have precedence over earlier mortgage? Now as set out in Dattatreya Shanker Mote case a charge is a wider term than a mortgage. It would cover within its ambit a mortgage also. Therefore, when a first charge is created by operation of law over any property, that charge will have precedence over an existing mortgage.
(emphasis added)
(H) Repelling the contention that the earlier judgments in State Bank of Bikaner and Jaipur Vs. National Iron and Steel Rolling Corporation and Others, State Bank of Bikaner and Jaipur Vs. National Iron and Steel Rolling Corporation and Others, and Rm. Arunachalam Vs. Commissioner of Income Tax, require reconsideration for incorrectly appreciating the true import of the judgment in Dattatreya Shanker Mote and Others Vs. Anand Chintaman Datar and Others, the Court held:
In our opinion, the judgments in State Bank of Bikaner and Jaipur v. National Iron and Steel Rolling Corporation and R.M. Arunachalam v. CIT are based on a correct reading of the ratio of Dattatreya case and the propositions laid down therein do not call for reconsideration. At the cost of repetition, we consider it appropriate to observe that in Dattatreya case the Court was not dealing with the statutory first charge created in favour of the State. (para 174)
(I) Applying the several ratios above referred to, the court held that the first charge created by the State Sales Tax Act will have primacy and would prevail even over a decree obtained by a Bank. (CA No. 3973 of 2006 Bank of Baroda v. State of Kerala.
(J) In another appeal (CA No. 4174 of 2006 Ahmad Koya v. District Collector, Kollam), the judgment of the Division Bench of the Kerala High Court was affirmed and thus the view that the statutory first charge created under the Kerala Sales Tax Act would not only prevail over a prior mortgage in favour of a bank but would also nullify a sale of the property effected at the instance of the bank through the DRT process and even where the property was in possession of the auction purchaser, consequent on a sale of the mortgaged property in his favour through judicial process.
As a result of the above analysis the writ petitions are disposed of as under:
A) W.P. No. 21865/99 filed by the Corporation challenging the vires of Section 16C of the Act is without merit or force. The impugned legislative provision is legislatively competent and impeccable. This writ petition is accordingly dismissed.
B) W.P. Nos. 13102/2000, 19091/99, 24334/01, 24097/03 and 25394/03 are filed by the Corporation in the circumstances and for the reliefs, already adverted to.
(i) In W.P. No. 13102/2000 the relief sought of quashing the orders of attachment passed by the Revenue, is unsustainable in view of the provisions of Section 16C of the Act. Hence the writ petition requires to be dismissed and is accordingly dismissed. In exercise of its powers u/s 29 of the 1951 Act the Corporation has sold the assets of the dealers to realise dues from them. The amounts due to the Revenue from these dealers (R3 and R4) are Rs. 13,92,578/- and 13,31,102/-, while the amounts realized by the Corporation from the sale of the assets of these dealers is Rs. 8,25,000/- and Rs. 12,00,000/-, respectively i.e., lesser than the amounts due from these dealers to the Revenue. Accordingly the petitioner is liable to pay to the Revenue the amounts realized from the sale of the assets of the respondents 3 and 4. If the petitioner has deposited these amounts in a FD, the petitioner shall also be liable to pay the interest accrued/received thereon, to the Revenue. This writ petition is disposed of as above,
(ii) In W.P. No. 19091/99 a notice of demand u/s 25 of the Act and an order of attachment dated 14.7.1999 is challenged. The liability of the defaulting dealer/Bharani Oils, Kattamur, E.G. District to the Revenue under the Act and the ST Act is Rs. 1,10,93,513/-. The petitioner-Corporation sold the property of the defaulting dealer for recovery of its dues, u/s 29 of the 1951 Act. Interim directions were issued in this writ petition granting stay of the attachment ordered by the Revenue, subject to the condition that the amounts realized by the petitioner on disposal of the defaulting dealer''s unit should be kept in a separate deposit in a bank. The relief sought in this writ petition is unsustainable and is accordingly rejected. The amount realized by the petitioner along with the interest accrued on the amount consequent on its deposit in a bank is liable to be made over to the Revenue. This writ petition is disposed of as above,
(iii) In W.P. No. 24334/01 the Corporation has questioned the attachment ordered by the Revenue of the property of the dealer towards realization of sales tax dues under the provisions of the Act. The liability of the 2nd respondent dealer to the Revenue is Rs. 23,88,850/-. Pending the writ petition and in exercise of its power u/s 29 of the 1951 Act, the petitioner-Corporation sold the mortgaged assets of the defaulting dealer including the land, buildings, plant and machinery and realized an amount of Rs. 19,50,000/-. By interim orders of this Court dated 27.11.2001 the petitioner was directed to deposit the amount equivalent to the tax liability of the defaulting dealer in an interest yielding deposit and to maintain a separate account for this purpose. The relief sought in this writ petition is rejected as unsustainable and the writ petitioner is declared liable to make over to the Revenue the sale proceeds deposited by it as directed together with the interest accrued thereon. The writ petition is disposed of accordingly,
(iv) In W.P. No. 24097/03 the 5th respondent defaulted on tax arrears of Rs. 1,39,24,597/-. To realize the same the Revenue initiated action under the RR Act and published an auction notice. This is challenged by the Corporation to whom the defaulting dealer defaulted in repayment of a loan advanced by the Corporation. The Corporation challenged the proceedings initiated by the Revenue under the RR Act. By an interim order dated 17.11.2003 this Court permitted the petitioner to auction the property (Under Section 29 of the 1951 Act), within four weeks and on realization of the sale proceeds to deposit the amount equivalent to the tax liability to the Revenue, in a separate account. The petitioner could not conduct the auction. Eventually by an order dated 22.12.2003 this Court permitted the Revenue to notify the property for auction within four weeks and directed further that the sale proceeds be kept in a deposit with the Registrar of this Court till the disposal of the writ petition. The Revenue conducted the auction on 12.1.2004. As no competitive and responsive bids were received the Revenue aborted the auction process and approached this Court for permission to conduct a fresh auction. No auction has however been conducted. In the facts and circumstances the relief sought by the Corporation cannot be granted and the writ petition is dismissed,
(v) In W.P. No. 25394/03 the 6th Respondent defaulted in payment of taxes under the Act and the CST Act. The dealer also availed financial assistance from the petitioner-Corporation and defaulted in repayment of instalments. The Revenue attached the property of the dealer under the provisions of the RR Act, published on 20.09.2003. The attachment of the dealer''s assets by the Revenue is challenged by the Corporation. On 15.12.2003 this Court granted liberty to the Revenue to proceed under the RR Act. No sale of the property has however been effected. In the facts and circumstances the relief sought in the writ petition cannot be granted and the writ petition is dismissed.
C) W.P. Nos. 4625/04, 24489/05, 459/06, 25305/07 and 5322/08 are by the Revenue.
(i) In W.P. No. 4625/04 respondents 3 to 5 were due a total amount of Rs. 16,12,736/- towards arrears of tax and interest thereon. To recover the liability, the Revenue initiated proceedings under the RR Act and attachment of the property of the defaulted dealers was also notified. While so the Debts Recovery Officer, DRT, Visakhapatnam conducted auction and sold the property mortgaged to the 1st respondent-Bank with a view to recover the liability of the defaulted dealer to the said bank. The revenue therefore filed this writ petition to declare the auction of the property conducted on 26.2.2004 by the 2nd respondent-the Debts Recovery Officer as invalid and for a declaration that the Revenue is entitled to recover the arrears of tax by auctioning the properties of the respondents 3 to 5 in view of the provisions of Section 16C of the Act. By an interim order this Court directed that the amount of Rs. 8,61,354/- (amount due to the Revenue as on 15.2.2004) realized by the 2nd respondent on the sale of the property shall be set apart by the 2nd respondent. Accordingly the 2nd respondent deposited Rs. 8,61,354/- with the 1st respondent-bank on 1.4.2005. The present liability of respondents 3 to 5 together with interest is stated to be of the order of Rs. 16,12,736 (as on 31.3.2010). As the amount directed to be deposited under the interim order of this Court i.e., Rs. 8,61,354 was on the basis of the amount due from respondents 3 to 5 by 15.2.2004 and the Revenue estimates the current liability of these respondents to be Rs. 16,12,736/-and the property was sold by the 2nd respondent at the instance of the 1st respondent-bank, the 1st respondent-bank is declared liable to pay to the Revenue the entire amount currently due by the respondents 3 to 5 (but limited to the amounts realized on the sale of the properties at the instance of the 1st e-Bank), since the amount realized on the sale of the property is Rs. 23.2.0 lakhs. The writ petition is allowed as above.
(ii) The Revenue filed W.P. No. 24489/05 to declare the action of the respondents 2 and 3 in bringing the property of the 1st respondent-defaulting dealer to sale as per the auction notice dated 7.1.2005 issued by the 2nd respondent, as inconsistent with the right of the Revenue u/s 16C of the Act. The 1st respondent committed breach of sales tax deferment incentive and became liable in a total amount of Rs. 18,13,268 under the provisions of the Act and the CST Act. The Revenue initiated proceedings under the RR Act and attached the properties of the 1st respondent. Meanwhile the respondents 2 and 3 initiated process for auction of the properties of the 1st respondent under the provisions of the Securitization Act for recovery of the amount due by the 1st respondent. The writ petition is filed by the Revenue challenging the auction notice dated 7.11.2005 as inconsistent with the statutory first charge in favour of the Revenue, u/s 16C of the Act. This writ petition requires to be allowed and is accordingly allowed as prayed for. (iii) W.P. No. 459/06 is by the Revenue for a declaration that it has a first charge over the property of the 1st respondent -defaulting dealer. The Revenue initiated proceedings under the RR Act and attached the property, duly notifying the attachment. The 2st respondent - a financial institution informed the Revenue that the 1st respondent''s property was sold by it pursuant to an auction, for Rs. 80.50 lakhs. The 2st respondent and the Corporation to which the 1st respondent had defaulted on repayment of loan instalments had shared the sale proceeds amongst themselves on a pro rata basis. Hence the Revenue is before this Court. In accordance with the interim order of this Court, the 2st respondent deposited Rs. 40,21,558 with a nationalized bank on 17.5.2006, but the Corporation did not deposit the balance amount of the Revenue dues (owed by the 1st respondent) out of the sale proceeds appropriated by it on a pro rata basis. In the facts and circumstances, the writ petition is allowed as prayed for. The 2st respondent and the Corporation are declared liable to make over to the Revenue the sale proceeds appropriated by them on pro rata basis, to the extent of the liability of the 1st respondent to the Revenue up-to-date; and if any balance amount is available after discharging the liability to the Revenue as above, such balance amount may be retained by the 2nd respondent and the Corporation in accordance with their respective entitlement. This writ petition is allowed as above, (iv) W.P. No. 25305/07 is by the Revenue for a declaration that the orders of the 1st respondent - Recovery Officer, DRT, Visakhapatnam, dated 26.4.2006 rejecting/dismissing IA No. 12/06 in RP No. 7/03 in OA No. 902/02 is unsustainable; that the Revenue has a first charge over the property of the 3rd respondent-dealer; and to declare the entitlement of the Revenue to proceed with recovery of the tax dues of Rs. 10,96, 767. The 3rd respondent fell in arrears of tax and was also liable towards penalty. The 2st respondent bank issued a sale. notification on 15.11.2005 and proceeded to auction the property of the 3st respondent, pursuant to an order passed by the DRT in RP No. 7/03 in OA No. 902/02. The Revenue thereupon petitioned the DRT in 1A No. 12/06 for a direction to withhold Rs. 10,96,767/- representing the tax liability of the 3rd respondent. This petition was dismissed by the DRT by the order impugned dated 26.4.2006. This writ petition requires to be allowed and is accordingly allowed. The order dated 26.4.2006 of the DRT in IA No. 12/06 in RP No. 7/03 in OA No. 902/02 is quashed. The amount realized by the 2st respondent-bank on the sale of the assets of the 3rd respondent-defaulting dealer is liable to be made over to the Revenue to the extent of the current tax and interest thereon liability of the 3rd respondent to the Revenue. Any balance amount out of the sale proceeds (after payment to the Revenue as aforesaid) may be retained by the 2nd respondent,
(v) In W.P. No. 5322/08 the respondents 3 and 4 were liable to arrears of tax under the Act and the CST Act and RD Cess in an amount of Rs. 18,20,273/- and Rs. 14,00,379/-, respectively. The Revenue intiated proceedings under the RR Act and attached the property on 17.7.2007. The Corporation (R1 and R2) exercised powers u/s 29 of the 1951 Act and sold the property of the respondents 3 and 4 for recovery of its dues. It would appear that the Corporation deposited an amount of Rs. 4,55,250/- out of the sale proceeds in a separate account towards the tax liability under the Act in respect of the 4th respondent. This writ petition by the Revenue requires to be and is accordingly allowed. The Corporation represented by the respondents 1 and 2 is directed to make over to the Revenue an amount representing the up-to-date liability of respondents 3 and 4 (in respect of which liability the Revenue initiated proceedings under the RR Act), to the extent of the amounts realized by the Corporation from the sale of the assets of respondents 3 and 4 and the interest accrued and received by the Corporation on the deposit of such sale proceeds, if any.
D) W.P. Nos. 10744/04 and 5761/01 are by a bank/financial institution.
(i) In W.P. No. 10744/04 the petitioner-bank assailed an order of attachment by the Revenue of the assets of the defaulting dealer represented by respondents 2 to 4 and for invalidation of the sale of assets of these non-official respondents by the Revenue. To recover the tax arrears of Rs. 8,22,158/- under the Act and the CST Act from the defaulting dealer this property was put to auction. The auction could not be conducted and as on today it appears no sale of the property has taken place. This writ petition requires to be and is accordingly dismissed.
(ii) W.P. No. 5761/05 is by a banking company challenging the action of the Revenue (represented by respondents 1 and 2) in proceeding against the scheduled property for recovery of sales tax arrears, by attaching the property and proceeding to auction the same. The 3rd respondent defaulted and became liable to tax arrears in an amount of Rs. 28,83,601/-. The said respondents also availed credit facility and to secure the same created hypothecation and mortgage of its assets, in favour of the petitioner. In view of the default by the 3rd respondent, the petitioner approached the DRT for recovery of Rs. 56,25,714/- with interest. No sale of the property however appears to have taken place either under the DRT Act or under the RR Act. The writ petition is without merits. If the tax arrears liable from the defaulting dealer have since been realized by the Revenue, the petitioner would be at liberty to proceed in accordance with law to recover its dues. The writ petition is disposed of as above.
There shall however be no order as to costs in the several writ petitions.