TMI Blog2014 (6) TMI 688X X X X Extracts X X X X X X X X Extracts X X X X ..... a specific query to learned counsel for the petitioner as to whether he was aware of any State Sales Tax Act where such priory provision was not incorporated, but the learned counsel was not able to give any such example of a State Act nor is such an example incorporated even in the subsequent written synopsis filed by the petitioner. Charge stands created if meaning is to be given to the words "collection" and "enforcement" found in various provisions, more specifically section 9(1) and 9(3) of the CST Act read with the relevant provisions of section 9(2) of the CST Act, coupled with the right of appropriation conferred in the States though the tax may be collected by the Central Government. Thus, the priority given under section 50 of the RST Act to the recovery of local sales tax will apply with equal force to the recovery of Central sales tax qua inter-State trade or commerce. - Decided against assessee. - W.P. (C) No. 337 of 2011 - - - Dated:- 3-6-2011 - SANJAY KISHAN KAUL AND RAJIV SHAKDHER, JJ. The judgment of the court was delivered by SANJAY KISHAN KAUL J. The petitioner seeks to raise a question of law as to whether by virtue of the deeming provisions con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enforce payment of any tax under general sales tax law of the appropriate State shall, on behalf of the Government of India, assess, re-assess, collect and enforce payment of tax, including any interest or penalty, payable by a dealer under this Act as if the tax or interest or penalty payable by such a dealer under this Act is a tax or interest or penalty payable under general sales tax law of the State; and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State; and the provisions of such law, including provisions relating to returns, provisional assessment, advance payment of tax, registration of the transferee of any business, imposition of the tax liability of a person carrying on business on the transferee of, or successor to, such business, transfer of liability of any firm or Hindu undivided family to pay tax in the event of the dissolution of such firm or partition of such family, recovery of tax from third parties, appeals, reviews, revisions, references, refunds, rebates, penalties, charging or payment of interest, compounding of offences and treatment of documents furnished by a dealer as confidential, shall ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the enactment and the language employed therein. This is the sole discussion in the impugned judgment. The submission of learned counsel for the petitioner before us was that in the absence of any specific provision in the CST Act, creating such priority of claim for the amount payable under that Act, the vested legal right of a secured creditor, who always has a priority of claim on a mortgaged debt, would prevail. The CST Act did not contain any specific provision akin to section 50 of the RST Act and section 9(2) of the CST Act was claimed to be not specific to create liability under the CST Act to be first charge on the property of the dealer. This sub-section, it was submitted, merely contained provisions for levy and collection of tax and penalty and could not be read to be in pari materia with provisions of section 50 of the RST Act. It was the submission of learned counsel for the petitioner that section 9(2) of the CST Act had a limited scope. It empowered the State authorities to have all the powers for purposes of assessment, re-assessment, collection and enforcement of payment of tax payable by the dealer under the CST Act. On the other hand, the RST Act contains sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f India and continues to be in force. Section 46 of the Income-tax Act, 1922 was held to merely provide for the recovery of arrears of tax due from an assessee as it were an arrear of land revenue and thus the provision was held not to convert arrears of tax into arrears of land revenue to indicate that after receiving the certificate from the Income-tax office, the Collector has to proceed to recover the arrears as if the arrears were arrears of land revenue. This section did not displace the application of the doctrine of the priority of crown debts. The learned counsel also referred to the judgment of the Supreme Court in Dena Bank v. Bhikhabhai Prabhudas Parekh Co. [2000] 120 STC 610 (SC); [2001] 247 ITR 165 (SC); [2000] 5 SCC 694, once again dealing with the doctrine of priority of State debt. It was held that section 158(1) of the Karnataka Land Revenue Act, 1964 not only gives statutory recognition to the doctrine of the State s preferential right to recovery of debts, but extends its applicability even to private secured debts forming the subject-matter of mortgages, judgment-decrees, execution and attachment orders, etc. Section 190 of the Karnataka Land Revenue Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as to imposition of tax on the sale or purchase of goods. (1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place (a)outside the State; or (b) in the course of the import of the goods into, or export of the goods out of, the territory of India. (2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1). (3) Any law of a State shall, in so for as it imposes, or authorises the imposition of, (a) a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or commerce, or (b) a tax on the sale or purchase of goods, being a tax of the nature referred to in sub-clause (b), sub-clause (c) or sub-clause (d) of clause (29A) of article 366, be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify. A reading of the aforesaid shows that article 269 of the Constitution of India provides for taxes on the sales or purchase of goods to be le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of inter-State trade or commerce or outside a State or in the course of import into or export from India, to provide for the levy, collection and distribution of taxes on sales of goods in the course of inter-State trade or commerce and to declare certain goods to be of special importance in inter-State trade or commerce and specify the restrictions and conditions to which State laws imposing taxes on the sale or purchase of such goods of special importance shall be subject. It was submitted that section 3 of the CST Act defines inter-State trade or commerce while section 4 of the CST Act deals with when a sale or purchase of goods is stated to take place outside a State. The constitutional mandate is further fulfilled by section 9(3) of the CST Act which assigns the proceeds collected under that Act to the State. Section 9(3) of the CST Act reads as under: 9. Levy and collection of tax and penalties. . . . (3) The proceeds in any financial year of any tax, including any penalty, levied and collected under this Act in any State (other than a Union Territory) on behalf of the Government of India shall be assigned to that State and shall be retained by it; and the proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount or extent of his turnover. Section 4(1) of the RST Act provides for both the State sales tax and the Central sales tax payable by a dealer under the RST Act to be a single point in the series of sales by successive dealers. Section 50 of the RST Act gives the right of first charge to the tax to be collected under the RST Act. It was thus contended that the Central Sales Tax thus also becomes a tax under the RST Act and section 50 of the RST Act is applicable to the collection of Central sales tax within the State of Rajasthan. The learned counsel for the respondent referred to the judgment in Central Bank of India v. State of Kerala [2009] 21 VST 505 (SC); [2009] 4 SCC 94 where a similar provision in the Bombay and Kerala Sales Tax Acts were examined in the context of recovery of debts under the Recovery of Debts due to Banks and Financial Institutions Act, 1993 ( RDDBFI Act , for short). It was held that where a secured creditor seeks to recover debts under the RDDBFI Act, precedence has to be given to dues owed to a State when there is a statutory provision creating first charge in favour of the State over the property of the assessee. The RDDBFI Act being a subsequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner, who has agreed to accept the principle of crown debt insofar as the liability vis-a-vis the State sales tax is concerned. What is sought to be disputed is only the liability towards the component of Central sales tax imposed under the CST Act on account of absence of any provision of such priority being specifically stipulated in the CST Act. We are in agreement with the submission of the learned counsel for the respondent that in order to appreciate whether such a liability under the CST Act would be treated as a first charge or not, the principles under which the sales tax is imposed in a State and under the CST Act taking into consideration the constitutional scheme has to be appreciated. It can really not be in doubt that articles 269 and 286 of the Constitution of India make it abundantly clear that the origin of Central sales tax is the inter-State trade or commerce. It is with the object of facilitating a single economic unit across the country and to avoid any differential and competitive sales taxes that Central sales tax is imposed on inter State sale transactions. However, unlike other impositions of Central Government which may go to the Consolidated Fund of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on sale of goods in the course of inter-State trade or commerce), we have no doubt that not only assessment and reassessment but also mode of recovery and the principle of priority of claim as incorporated under section 50 of the RST Act would be available for collection of Central sales tax within the State of Rajasthan in view of the provisions of section 9(2) of the CST Act. The judgments cited at the Bar and referred to aforesaid, in fact, incorporate this general principle of not only crown debt but the collection of Central sales tax for the benefit of State and thus the provisions of the State Act being available for such enforcement. The Central Bank of India v. State of Kerala s case [2009] 21 VST 505 (SC); [2009] 4 SCC 94, however, only refers to the priority of sales tax debt under the local Sales Tax Act over a secured creditor. This aspect was reinforced in State Bank of Bikaner Jaipur v. National Iron Steel Rolling Corporation s case [1995] 96 STC 612 (SC); [1995] 2 SCC 19, once again giving precedence to a charge created by operation of law over a charge by way of an existing mortgage. The judgments cited by learned counsel for the petitioner in Builders Suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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