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2019 Supreme(HP) 1514
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA
Tarlok Singh Chauhan, J.
The Liquidator, Hamirpur District Cooperative Marketing And Consumer Society, Limited - Appellant
Versus
State Of H. P. & Ors. - Respondents
CMP No. 6710 of 2018 in CWP No. 3 of 2006
Decided On : 19-06-2019
Mr. Sanjay Dutt Vasudeva, Advocate, for the Appellant; Mr. Vinod Thakur and Mr. Sudhir Bhatnagar, Addl. A.Gs. with Mr. Bhupinder Thakur, Dy.A.G. and Mr. Ram Lal Thakur, Asstt. A.G, for the Respondent
Headnote:
Priority of State Dues - Recovery of Sales Tax - Himachal Pradesh General Sales Tax Act, 1968 - Section 16(b), Builders Supply Corporation vs. Union of India AIR 1965 SC 1061, State Bank of Bikaner and Jaipur vs. National Iron and Steel Rolling Corporation (1995) 2 SCC 19, Dena Bank vs. Bhikhabhai Prabhudas Parekh & Co. (2000) 5 SCC 694, State of M.P. vs. State Bank of Indore (2002) 10 SCC 441, Central Bank of India vs. State of Kerala, (2009) 4 SCC 94, Bombay Stock Exchange vs. V.S. Kandalgaonkar and others, (2015) 2 SCC 1 - The court discussed the priority of State dues over other debts, citing relevant legal provisions and precedents, and concluded that the statutory first charge created in favor of the State under Section 16(b) of the Act prevails over any other charge, giving the State preferential right to recover its dues.
Fact of the Case:
The petitioner-Society challenged the proclamation of sale of its properties to recover sales tax arrears. The respondents, including the Collector and the KCC Bank, contested the application for release of the sale proceeds. The court considered the priority of State dues over other debts and the statutory provisions of the Himachal Pradesh General Sales Tax Act, 1968.
Finding of the Court:
The court found that the statutory first charge created in favor of the State under Section 16(b) of the Act prevails over any other charge, giving the State preferential right to recover its dues. The court also noted that non-statutory instructions providing priorities of claim must give way to the statutory provisions.
Issues: The main issue was the priority of State dues over other debts, particularly in the context of the sale proceeds of the petitioner-Society's properties.
Ratio Decidendi: The court relied on the statutory provisions of the Himachal Pradesh General Sales Tax Act, 1968, and cited precedents such as Builders Supply Corporation vs. Union of India, State Bank of Bikaner and Jaipur vs. National Iron and Steel Rolling Corporation, and Central Bank of India vs. State of Kerala to establish the priority of State dues over other debts.
Final Decision: The court held that the statutory first charge created in favor of the State under Section 16(b) of the Act prevails over any other charge, giving the State preferential right to recover its dues. The application was disposed of accordingly.
JUDGMENT
Tarlok Singh Chauhan, J. - The writ petition filed by the petitioner-Society was dismissed by this Court vide judgment dated 29.9.2009. As a matter of fact, the petitioner-Society had filed two writ petitions being CWP No.200/2005 and CWP No.3/2006. In CWP No. 200/2005, the petitioner-Society has challenged the proclamation of sale dated 16.2.2005, whereby its properties were sought to be put to auction to recover the amount of Rs. 17,74,029/-. This amount was payable to the respondents-State towards arrears of sales tax. In CWP No. 3/2006, the petitioner-Society had prayed that the respondents be directed to put the entire property of the Society in an open auction and then settle its disputes.
2. It appears that the properties of the Society were put to sale in CWP No. 200/2005 and therefore, the petitioner did not press the writ petition and as regards CWP No. 3/2006, the same as observed above, was ordered to be dismissed.
3. Since the sale proceeds realized out of the sale amounting to Rs. 31,25,000/- are lying deposited in the registry of this Court, therefore, the petitioner-Society has filed the instant application for release of the same.
4. Notice of the application was served upon the respondents and the same has been contested by respondent No.4, i.e. The Collector-cum-Assistant Excise and Taxation Commissioner, Hamirpur and respondent No.5, i.e. The Kangra Central Cooperative Bank Limited, Dharamshala (hereinafter referred as to the KCC Bank).
5. In reply filed on behalf of respondent No.4, it is averred that an amount of Rs. 17,74,029/- as additional demand and an amount of Rs. 18,88,055/- as interest worked out upto 30.6.2007 (total amount Rs. 36,62,084/-) is recoverable by respondent No.4 from the petitioner-Society. It is averred that under statutory provisions of Himachal Pradesh General Sales Tax Act, 1968, (hereinafter referred to as the "Act") which by way of a special and non obstante provision contained in Section 16-B overrides and creates a mandatory "first charge" on the property of the dealer and, therefore, respondent No.4 has preferential right to recover the amount towards sales tax.
6. On the other hand, respondent No.5-KCC Bank too has contested the application and has filed its reply that since the properties of the petitioner-Society stand mortgaged with the KCC Bank, therefore, it has first charge over the sale proceeds as interest amount of Rs. 47,43,554/- as on 24.1.1996 along with future interest @ 18% per annum from the date of award is payable as an outstanding repayment by the petitioner-Society to KCC Bank.
7. I have heard the learned counsel for the parties and have also gone through the documents placed on record.
8. Section 16(b) of the Act reads as under:-
"Notwithstanding anything to the contrary contained in any law for the time being in force, any amount of tax and penalty including interest, if any, payable by a dealer or any other person under this Act shall be a first charge on the property of the dealer or such other person."
9. The nature of priority given to the taxes payable to the State over other debts was considered by the Constitution Bench of Hon''ble Supreme Court in Builders Supply Corporation vs. Union of India AIR 1965 SC 1061, wherein it was observed as under:.
"(i) The common law doctrine of the priority of Crown debts had a wide sweep but the question in the present appeal was the narrow one whether the Union of India was entitled to claim that the recovery of the amount of tax due to it from a citizen must take precedence and priority over unsecured debts dues from the said citizen to his other private creditors. The weight of Authority in India was strongly in support of the priority of tax dues.
(ii) The common law doctrine on which the Union of India based its claim in the present proceedings had been applied and upheld in that part of India which was known as ''British India'' prior to the Constitution. The rules of common law relating to substant
