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2014 (5) TMI 32 - ANDHRA PRADESH HIGH COURTPriority of Charge u/s 16-C of A.P. General Sales Tax Act in re tax, penalty, interest and any other sum payable - whether the Revenue is entitled to have precedence over the secured debt created by co- respondent in favour of the Bank - whether Section 17-A operates as an exception to Section 16 - Held that:- Decision in State Bank Of Bikaner And Jaipur Versus National Iron And Steel Rolling Corporation And Others [1994 (12) TMI 72 - SUPREME Court] and State of Madhya Pradesh and another Versus State Bank of Indore and others [2001 (3) TMI 872 - SUPREME COURT OF INDIA] followed - The statutory first charge held by the State has been consistently upheld by the Courts - 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. The object of insertion of Section 16-C as explained in the Statement of Objects and Reasons of Act 9 of 1999 - the property attached under Revenue Recovery Act could not be disposed of as it was hypothecated to either financial institutions or to others - In order to have a definite claim on the property, it is now proposed that the liability under the Sales Tax Act shall be the first charge on the property - Similar provision is available in the Rajasthan Sales Tax Act and it was upheld by the Court - It is no doubt true that Section 17-A appears to have diluted the absolute precedence given to the arrears of tax under Section 16-C - the principles of statutory interpretation require that the Court in such circumstances must have regard to consequences and has to reject a construction that results in hardship, absurdity or anomaly or which leads to inconsistency in the system which the Statute purports to regulate. - Decided against the petitioner bank.
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