Neon Laboratories Vs Deputy Commissioner of Sales Tax (Bombay High Court)
The Bombay High Court heard a writ petition filed by an auction purchaser challenging the refusal of the Sub-Registrar to register a sale certificate dated 14 March 2019 issued by a secured creditor bank. The petitioner also challenged the encumbrance recorded in the revenue records (7/12 extract) pursuant to an attachment order dated 10 January 2019 issued for recovery of sales tax dues.
The petitioner submitted that the issue of priority between secured creditors and sales tax authorities had already been conclusively decided by the Full Bench of the Bombay High Court in Jalgaon Janta Sahakari Bank Ltd. & Anr. vs. Joint Commissioner of Sales Tax & Anr., which held that dues of a secured creditor under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) take priority over sales tax dues. It was contended that since the petitioner had purchased the property in an auction conducted under the SARFAESI Act and had been issued a sale certificate, there was no legal impediment to registration of the sale certificate or continuation of the encumbrance arising from the attachment order.
The State authorities relied upon the amendment to Section 37 of the Maharashtra Value Added Tax Act, 2002 (MVAT Act), contending that, due to its retrospective operation from 2005, the Full Bench decision no longer benefited the petitioner or the secured creditor. The authorities further submitted that they had approached the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) in 2018 for registration of their charge, but the request could not be processed because notification under Section 26B(4) of the SARFAESI Act had not been issued.
