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TMI Blog2017 (5) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act, 1956. The dealer committed default in payment of tax to the total tune of Rs. 10,51,175/- in respect of the assessment years 1995-96, 1996-97 and 1997-98. The dealer was also a defaulter, in respect of the financial facilities extended to them by the petitioner herein jointly with the Andhra Pradesh State Financial Corporation. Therefore, by invoking the powers under sections 29 and 30 of the State Financial Corporations Act, the petitioner herein brought the properties of the dealer to sale by public auction and realized part of their dues. But in the meantime, by Amendment Act No.9/1999, which came into effect from 06.04.1999, Section 16C was inserted in the A.P. General Sales Tax Act, 1957, creating a first charge on the property of a dealer, if any amount of tax, penalty, interest and any other sum was payable by such dealer. The creation of such charge under Section 16C was notwithstanding anything to the contrary contained in any law for the time being in force. 4. Challenging the vires of Section 16C, a batch of writ petitions came to be filed on the file of this Court. One such writ petition was by the A.P. State Financial Corporation in W.P.No.21865 of 1999. Whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gage over the properties of the defaulting dealer, the petitioner in the present writ petition did not approach the High Court either challenging Section 16C of the A.P. GST Act, 1957 or for any other relief. It was only A.P. State Financial Corporation, which approached this Court challenging the vires of Section 16C. 6. It appears that after the dismissal of the writ petition filed by A.P. State Financial Corporation, the petitioner herein issued notice for the sale of the properties of the defaulter, by initiating proceedings under Sections 29 and 30 of the State Financial Corporations Act. The properties were eventually sold in an auction conducted in August, 2003. It appears that out of the total dues payable by the defaulting dealer to the tune of Rs. 833.72 lakhs to the petitioner herein as well as to the A.P. State Financial Corporation, only an amount of about Rs. 144 lakhs was recovered. After such recovery, the Commercial Tax Officer sought to attach the account of the petitioner for recovering the dues of the defaulting dealer, forcing the petitioner to come up with the present writ petition. 7. Before proceeding further, we should also bring on record one fact, viz., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tute a good and sufficient discharge of the liability of such person to the extent of the amount referred to in the receipt. (4) Any person discharging any liability to the defaulter after receipt of the notice referred to in this section, shall be personally liable to the authority prescribed to the extent of the liability discharged or to the extent of the liability of the defaulter for the amount due under the Act, whichever is less. (5) Where any person to whom a notice under this section is sent proves to the satisfaction of the authority prescribed that the sum demanded or any part thereof is not due by him to the defaulter or that he does not hold any money for or on account of the dealer, then nothing contained in this Section shall be deemed to require such person to pay the sum demanded or any part thereof, to the authority prescribed. (6) Where any person to whom a notice under sub-section(1) is sent, fails to pay to the authority prescribed the sum demanded or any part thereof as required in the said notice, such sum shall be recoverable from such person as if it were an arrear of land revenue due from him. (7) The provisions of this section shall be without prejudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 1999 filed by the A.P. State Financial Corporation and that therefore the petitioner was not bound by any order suffered by the State Financial Corporation. Drawing our attention to the sale notices, it is contended by Mr. Ravindra Kumar, learned counsel for the petitioner that the properties of the borrower were brought to sale independently by the petitioner issuing advertisements in their own name, inviting offers, conducting the auction and thereafter executing the sale deed. 13. We have carefully considered the above submissions. It is true that the advertisement for the sale of the properties were issued only by the A.P. Industrial Development Corporation Limited, which is the petitioner herein. It is also true that the petitioner was not a party to the writ petition filed by the A.P. State Finance Corporation. But it is on record that pursuant to the auction conducted by the writ petitioner, a sale deed was executed on 29.01.2004. This sale deed was jointly executed by the petitioner herein and the A.P. State Finance Corporation. Therefore today the petitioner cannot totally wash their hands off as though they had nothing to do with the writ petition filed by the A.P. Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... converted in form, into cash. Therefore, the charge that will get attached to the property will get attached to the cash equivalent of the property. If the effect of the charge under Section 16C is understood in this fashion, it will be clear that the Commercial Taxes Department has a charge over the sale proceeds of those properties now lying in the hands of the petitioner herein. Therefore, the Department has a right to recover the dues from the petitioner, not by treating the petitioner as a garnishee, who owes money to the defaulting dealer, but by addressing its attachment to the sale proceeds. It is well settled that quoting a wrong provision of law will not take away the substantial right of a party. Therefore, if the reliance placed by the 2nd respondent on Section 29(1) is overlooked, it will be clear that the Commercial Taxes Department has a right to lay its hands on the sale proceeds of the property over which a first charge was created by the statue. Therefore, the present action of the 2nd respondent has to be understood, not as a garnishee order under Section 29(1) of the A.P. VAT Act, 2005, but as the enforcement of the charge under Section 16C of the A.P. GST Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and validity of the orders of assessment. 22. That takes us to the last question as to the extent which the 2nd respondent can enforce the charge, on the sale proceeds of the properties of the defaulting dealer now available with the petitioner. This question is of significance, in view of the fact that to begin with the claim made by the 2nd respondent upon the petitioner was only to the extent of Rs. 10,51,175/-. This is seen from a letter written by the 2nd respondent to the petitioner in D.989/2001, dated 28.02.2002. Even Form No.IV issued on 10.07.2002 under Section 25, demanding payment of the amount before ordering attachment, was only for the said amount of Rs. 10,51,175/-. But today, the 2nd respondent has claimed an amount of more than Rs. 40 lakhs, on the ground that interest has accumulated with the aforesaid amount. In other words, the 2nd respondent has calculated interest at the rate statutorily prescribed under Section 16 of the A.P. GST Act, 1957. Therefore, the question that arises for consideration is whether the 2nd respondent is entitled to recover, from the sale proceeds now available with the petitioner, the total amount of tax together with interest and pe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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