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2013 (11) TMI 511 - HC - VAT and Sales TaxSales Tax - Recovery of tax - Banks and financial institutions - Recovery of debts - Priority as between sales tax dues and dues owed to banks and financial institutions - KGST Act, 1963 - Section 26B - Whether Section 26B, creates the first charge, and gives an overriding effect over other laws - Held that:- the argument that involuntary transfers are not covered by Section 26A of the KGST Act, will not hold good. As far as the applicability of the principles governing precedence to the first charge for the tax dues are concerned, going by the decisions of the Apex Court a statutory first charge has been created by Section 26B of the KGST Act which will prevail over the mortgage created in favour of the Bank The creation of such a charge by operation of law amounts to statutory recognition of priority over private debts including mortgage, The non obstante clause in a statutory provision like the one in Section 26B will override all other laws in force which definitely will include Section 100 of the Transfer of Property Act. The absence of a provision for enforcing a charge in the KGST Act will not whittle down the effect of Section 26B of the Act. This is especially since by virtue of the operation of law the State will have prior charge over the properties in question which will prevail over all rights created by the Bank - Appellants are not entitled to succeed in the appeals. The argument whether there should be a separate provision for enforcement of the first charge raised by the learned Senior Counsel for the appellants, cannot hold good especially in the light of the non-obstante clause in Section 26B of the KGST Act and in the light of the view taken in State Bank of Bikaner & Jaipur's case {1994 (12) TMI 72 - SUPREME Court} that "when a first charge is created by operation of law over any property, that charge will have precedence over an existing mortgage", which is reiterated in Central Bank of India's case {2009 (2) TMI 451 - SUPREME COURT OF INDIA} has upheld the Division Bench decision in later cases regarding the effect of Section 26B of the KGST Act - Decided against assessee.
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