TMI Blog2009 (7) TMI 1154X X X X Extracts X X X X X X X X Extracts X X X X ..... 882 - MADRAS HIGH COURT] passed by the learned single Judge made in W.P. No. 18975 of 2007 and also the gazette Notification No. 01 dated January 5, 2007 and consequential order bearing No. NK.A3.2310/2002 dated March 16, 2007 so far as it relates to the land which was the secured assets of the bank and which has already been sold. W.P. allowed. - Writ Appeal No. 1360 of 2008 - - - Dated:- 16-7-2009 - MUKHOPADHAYA S.J. AND RAJA ELANGO , JJ. The judgment of the court was delivered by S.J. MUKHOPADHAY J. Indian Bank (for brevity Bank ), which is a secured creditor under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short the SARFAESI Act, 2002 ) has preferred this writ appeal against the judgment dated September 17, 2008(1) passed by the learned single judge in W.P. No. 18975 of 2007. The said writ petition was preferred by the bank against the Tamil Nadu Government Gazette No. 01 dated January 5, 2007 and consequential order bearing No. NK.A3.2310/2002 dated March 16, 2007, so far as it relates to the property situated at plot No. 97, SIDCO Industrial Estate, SIPCOT, Ranipet. By the aforesaid proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. While so, the first respondent/State issued the impugned proceedings dated March 16, 2007 informing that since the owner of the property, viz., the second respondent has committed default in payment of sales tax to the tune of Rs. 37,09,966, the provisions of section 24 of the Tamil Nadu General Sales Tax Act, 1959 (in short the TNGST Act ) have been invoked and requesting the bank to remit to the first respondent the defaulted sum of Rs. 37,09,966 from the sales proceeds, as contemplated under section 24(3) of the TNGST Act. Before the learned single judge, the bank took a plea that the State has no jurisdiction to invoke the provisions of section 24 of the TNGST Act, the property being mortgaged with the bank and having been auction sold under SARFAESI Act, 2002. On behalf of the State, it was contended that as per section 24(1) and (2) of the TNGST Act, in the event of default made by any dealer in respect of taxes assessed under the Act, the outstanding amount shall become immediately due and shall be a charge on the properties and any amount due under the Act shall have priority over all other claims over the property of the dealer. It was further submitted on behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laiming first charge in the Central Excise Act and the Customs Act, the claim of the Central Excise Department cannot have precedence over the claim of secured creditor, viz., the petitioner-Bank. (iv) In the absence of such specific provision in the Central Excise Act as well as in Customs Act, we hold that the claim of secured creditor will prevail over crown's debts.' In view of our above conclusion, the petitioner-UTI Bank, being a secured creditor is entitled to have preference over the claim of the Deputy Commissioner of Central Excise, first respondent herein. In the case of Union of India v. SICOM Ltd. [2009] 147 Comp Cas 531 (SC); [2009] 1 JT 87 (SC), the question that fell for consideration is whether realisation of excise duty will have priority over secured debts of Financial Corporation. In the said case, the Supreme Court held that crown debts mean debts due to the State or the king; debts which as a prerogative entitles the crown to claim priority before all other creditors, but the same must be held to mean unsecured creditor. In fact, the following observation was made by the court in the said case. (para 11, page 535 Comp Cas) 10. Generally, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te debts, which is an unsecured debt, but such doctrine of first charge/priority over the property cannot prevail over secured debts of a person. If the statute permits to have first charge/priority over the property having regard to the plain meaning of article 372 of the Constitution of India, then only the State can claim priority over an unsecured debt. The learned counsel appearing on behalf of the State relied upon the Division Bench decision in Punjab National Bank v. Commercial Tax Officer II [2009] 25 VST 167; [2006] 3 MLJ 919. In the said case, having noticed section 26(6) of the TNGST Act, it was held that section 26(6) creates a first charge on the property of the dealer and hence, the tax assessed under the Sales Tax Act will have priority over all other debts including a prior mortgage. Reliance was also placed on another Bench decision of this court in Central Bank of India v. State of Tamil Nadu [1999] 113 STC 145. In the said case also, the court held that under section 26(6) of the TNGST Act, sales tax due shall be charged on the dealer's property, having priority over all other claims against property of the dealer. Having gone through the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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