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2020 (12) TMI 693 - HC - VAT and Sales TaxPriority of debt - secured creditor or state taxes?, which is prior - Attachment of property - recovery of sales tax dues payable by Respondent - Section 32 of the Maharashtra Value Added Tax Act, 2002 (MVAT Act) and proceedings under the Maharashtra Land Revenue Code - HELD THAT:- Petitioner is a secured creditor as it has a debt / receivable due to it which has been secured by mortgage - From a plain and conjoint reading of Section 31-B of the RDB Act and Section 25-E of the SARFAESI Act it is clear that by virtue of the non-obstante language contained therein, the rights of secured creditors to realise secured debts by sale of assets over which security interest is created, shall have priority over Government dues including revenues, taxes, cesses and rates due to the Central/State Government or to the Local Authority. Respondent No.2 had claimed first charge on the said property, inter alia, stating that it had initiated recovery proceedings under Sections 33 and 34 of the MVAT Act on 10th March 2016 whereas attachment under Section 32 of the MVAT Act was vide letter dated 28th March, 2018 to the Petitioner. Petitioner had initiated proceedings under the provisions of the RDB Act. It has also taken steps as noted above to enforce the security interest in the said property vide notice dated 27th November 2017 under Section 13(2) of the SARFAESI Act prior to the notice dated 28th March 2018 of Respondent No.2. The facts in the case at hand being similar to the facts in the case of ASREC (INDIA) LIMITED, A COMPANY VERSUS THE STATE OF MAHARASHTRA, THE OFFICE OF THE SALES TAX AND THE OFFICIAL LIQUIDATOR OF THE HIGH COURT OF BOMBAY AS THE OFFICIAL LIQUIDATOR OF M/S. CRYSTAL MIRAGE PVT. LTD. [2019 (12) TMI 633 - BOMBAY HIGH COURT] that decision would squarely be applicable to the facts of this case that if any Central statute creates priority of a charge in favour of a secured creditor, the same will rank above the charge in favour of a State for a tax due under the value added tax of the State. Therefore, in our view what becomes relevant in the facts of this case is the issue of priority of charge on the said assets of secured debt over tax dues and not whether the charge is first or not in time. Non-registered mortgage - HELD THAT:- Even if the Petitioner’s mortgage was not registered under Section 26-D of the SARFAESI Act, the alleged non registration, would not affect the legal position on the issue of priority. The mortgage of the secured creditor viz. the Petitioner Bank gets prior charge over the charge of the Respondents for tax/VAT dues - Petition allowed - decided in favor of petitioner.
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