Canara Bank vs Assistant Commissioner (Commercial Taxes), Zone III, Madras and Another

Swamikkannu, J.—This petition is for the issue of a writ of mandamus directing the first respondent, the Assistant Commissioner

(Commercial Taxes), Zone III, Madras-1, to forbear from selling the properties of the second respondent herein in pursuance of the notice of sale

of movable property in Form No. 3, Reference No. 6281 of 1981-C dated 25th April, 1981.

It is, inter alia, contended in the affidavit filed in support of the writ petition and sworn to by the manager of the petitioner-bank, that the second

respondent-firm had been enjoying certain facilities from the petitioner-bank. On July 11, 1974, the second respondent was granted an open case

credit facility to the tune of Rs. 50,000 on hypothecation of its stock-in-trade, etc., in favour of the bank, thereby creating a charge over the said

goods in favour of the petitioner-bank. The said hypothecation is still in force. The second respondent had left certain arrears of sales tax due to

the Government for the assessment years 1978-79 to 1980-81. The first respondent issued a distraint order on December 8, 1980, demanding

immediate payment of a sum of Rs. 78,739 being the arrears of sales tax, surcharge and advance tax for the said assessment years due from the

second respondent-company. Non-payment of the said arrears by the second respondent resulted in the first respondent effecting attachment of

the movable properties of the second respondent which had earlier been by hypothecated by the second respondent in favour of the petitioner-

bank, as early as on July 11, 1974. On coming to know of the attachment of the hypothecated movables, the petitioner addressed the Deputy

Commercial Tax Officer, Sowcarpet Circle, to release the attachment as properties had been hypothecated to the bank earlier. Not only did the

officer not send any reply to the said letter,but the first respondent issued in Form No.3, a notice of sale of movable property on April 25, 1981.

According to the petitioner-bank, the first respondent is not entitled to sell the foods as the petitioner-bank has a first charge over the same by

virtue of the hypothecation in its favour.

In the counter-affidavit, the respondent averred that the second respondent-company is in arrears of sales tax, surcharge, additional tax and

Central sales tax to the tune of Rs. 82,453.36 for the three assessment years aforesaid and that in spite of several personal contacts for clearance

of the arrears, the second respondent was postponing payment on some pretext or other and when matters came to a crucial stage, the second

respondent moved the Government and obtained permission in G.O. Rt. No. 254 dared August 4, 1981, to pay 20 per cent of the arrears in the

first instances and the balance in subsequent instalments and even then, it failed to fulfil the several conditions of the Government order regarding

payment of the current dues regularly. The second respondent had not even paid the tax due to be paid in the month of February, 1981, due to be

paid on March 20, 1981. The Deputy Commercial Tax Officer, therefore, took steps to proceed against the second respondent for recovery of

arrears under the provisions of the Revenue Recovery Act by issuing notice in Form No. 1 for the entire arrears of tax and distrained the movables

that were available in the place of business of the second respondent and fixed the date of sale as May 28, 1981. It is this sale notice that is

impugned by the petitioner-bank in this writ petition by seeking a writ of mandamus directing the first respondent to forbear from proceeding with

the sale of the goods attached.

The point for consideration is whether there are any grounds for granting the prayer of the petitioner-bank.

The sale notice was issued on April 25, 1981, and the same is in accordance with the provisions of the Revenue Recovery Act. The

hypothecation in favour of the bank is not a secured debt which could be treated in preference to the Government dues that can be recovered as a

prior charge if the goods hypothecated are available for being proceeded against and attached for tax arrears.

On a careful and anxious consideration of the arguments advanced on either side, it is seen that there are no grounds for granting the relief

prayed for in the writ petition. There being no merit in the writ petition, the same is dismissed. Under the circumstances, there will be no order as to

costs.