Arrears of tax due to the State can claim priority over unsecured debts, but the state's claim does not have priority over secured debts.

S.J. Mukhopadhaya, J.

1. The petitioner has challenged the auction notice Na. Ka. No.A3/626/01 dated 5th Feb.,

2007, issued by the respondent for auction sale of the land in question. While the petitioner has questioned the auction sale on the ground that the land has already been sold and transferred in his favour, the stand taken by the respondents is that the respondents having first charge over the property, they have the right to sell the property.

2. One Jay Flash Ceramics Ltd., (hereinafter referred to as the company), borrowed huge amounts from a consortium headed by the Indian Bank (hereinafter referred to as the Bank) in the year 1990 and mortgaged the property measuring 12.92 acres on 1st Aug., 1990 in Ongur village and Kambur village, Tindivanam, in favour of the Bank. The mortgage was created by the company along with its Directors giving personal guarantee. The company, having failed to discharge its liability, the bank proceeded against it for recovery of debt in O.A. No.1568/98 before the Debts Recovery Tribunal (hereinafter referred to as the Tribunal) under the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as the DRT Act) and the case was decreed in favour of the Bank on 30th Sept., 2004. Pursuant to the decree, a recovery certificate was issued in DRC No.191/04 and mortgaged properties were brought to sale by public auction notice dated 9th Nov., 2005. One, K.O.P. Enterprises carrying on business at Chennai, represented by its proprietor, P.K.Peer Mohammed, was the successful bidder in favour of whom a sale certificate vide Document No.537/06 dated 9th May, 2006, was issued, followed by mutation in his name. Later on, the said Peer Mohammed sold the land in favour of the petitioner vide Document No.279/07 dated 24th Jan., 2007, who also mutated the land in his name.

In regard to the same very land, the notice having been issued, the petitioner, a subsequent purchaser, has preferred the writ petition against the auction sale notice.

3. The case of the respondents is that the company was an assessee on the file of the Commercial Tax Officer, Porur Assessment Circle, Chennai. The assessee was eligible for interest free sales, which was deferred by eligibility certificate dated 5th Sept., 1993 under which the assessee was entitled to full benefit of sales tax deferral up to a ceiling limit of Rs.239.98 lakhs for the period 1st Feb., 1993 to 31st Jan., 2002. The schedule for repayment of deferred tax commenced from 1st Feb., 2002 ending with 31st Jan., 2011. The assessee availed the benefit to the extent of Rs.1,27,93,113/-. The registration certificate under the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as the GST Act) as well as the Central Sales Tax Act, 1956 (hereinafter referred to as the CST Act) were cancelled w.e.f. 1st April, 2000, due to non-renewal. As per clause 3 of the deferral agreement, in case of default in payment of deferred tax, the assessee undertakes that the movable and immovable properties of the company and that of the Directors shall be liable to be attached/proceeded towards realization of deferred tax instalments and the term movables shall include cash/shares/debentures/bank balance. As per clause 4 of the deferral agreement, the assessee shall not alienate, dispose, encumber the fixed assets nor shall it remove the fixed assets from the unit premises until deferred tax is fully repaid.

4. Further case of the respondent is that u/s 24 (1) of the GST Act, tax assessed shall be paid in such manner and in such instalment and within such time as may be specified in the notice not being less than 21 days from the date of service of notice. In the case of the assessee, assessment falling under sub-section (2) to Section 13 of GST Act shall be paid without any notice on demand. Any default of such payment, the whole of the amount outstanding on the date of default shall become immediately due and shall be charg