THE HON'BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION No.21136 of 2007 Dated:25.07.2011 Between: Tamilnad Mercantile Bank Ltd., And another. … Petition And The Commercial Tax Officer, Patnam Bazar, Guntur, Guntur District, And another. ... Responde THE HON'BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION No.21136 of 2007 ORDER: (Per Hon’ble Sri Justice V.V.S.Rao) Tamilnad Mercantile Bank Limited, and the Punjab National Bank, Gun have filed the instant writ petition aggrieved by the action of the first responden issuing proceedings bearing No.151/2005-B5, dated 03.09.2005, to the Recov Officer, Debts Recovery Tribunal, Hyderabad, to intimate the result of auction properties of the second respondent, duly reserving the amount towards tax arre as mentioned therein. The two petitioners, statedly, advanced loans to the second respondent for purpose of setting up an industrial unit. As primary security, the second respond created hypothecation charge on the plant and machinery and also on the sto goods, books etc. They also created equitable mortgage on all the properties of factory unit admeasuring Ac.1.86 cents situated in D.No.741/A of Ankireddypa Village, Guntur Rural Mandal, Guntur, by depositing the original title deeds with petitioners. The second respondent failed to repay the amounts due to petitioners. Petitioners, therefore, filed applications before the Debts Recov Tribunal, being O.A.Nos.71 and 72 of 2005, who appointed a Receiver to t possession of the properties of the second respondent. The said Receiver t possession of the properties, and issued notices for the sale of the assets of second respondent, but the same could not take place. Meanwhile, the respondent issued a notice dated 31.08.2005 claiming first charge on the s proceeds, and thereafter issued the impugned proceedings; they effected attachm on the properties of the second respondent claiming first charge over them un Section 16C of the Andhra Pradesh General Sales Tax Act, 1957 (APGST A They filed W.P.No.20384 of 2005 to declare the action of the banks, and Recovery Officer of the Debts Recovery Tribunal, in bringing to sale the propert the second respondent without considering the representation of the first respond as illegal, and to declare that, under the provisions of Section 16C of the APGST for recovery of the tax and any other amounts due under the said Act the respondent shall have first charge over the property of the second respondent. same was disposed of by this Court permitting the department to receive the dispu amount which was kept in fixed deposit as per the interim orders in the said petition, and to appropriate the balance amount to the respective loan accou towards their liability. Therefore, the petitioners have filed the instant writ petitio declare the impugned proceedings of the first respondent as illegal; as being sub to the mortgages created by the second respondent and that the attachmen subject to the mortgage rights created by the second respondent in favour of petitioners. The first respondent filed a counter affidavit. It is stated that the sec respondent, who is a dealer on the rolls of the first respondent, fell in arrears of t The first respondent contends that without questioning the order in W.P.No.2038 2005, the petitioners have filed the instant writ petition. The first respondent a relies on Section 16-C of the APGST Act as inserted by A.P.Amendment Act, 19 which is to the effect that for recovery of any amount of tax, penalty, interest paya by a dealer under the APGST Act, the Revenue shall have first charge on property of the dealer or person who is in arrears of sales tax. This Court heard the Counsel for the petitioner and the Special Counse Commercial Taxes. The Special Counsel brought to the notice of this Court decision of the Supreme Court in Central Bank of India v State of Kerala[1], the decision of the Division Bench of this Court in Andhra Pradesh State Finan Corporation v Government of Andhra Pradesh[2]. I n Andhra Pradesh State Financial Corporation Section 16-C of APGST Act was impeached as ultra vires. Following Central Bank of India, Court held that the first charge created by the State Sales Tax Act will have prim and will prevail over a decree obtained by a Bank, and that Section 16-C of APGST Act is valid and impeccable. Therefore, impugned proceedings canno faulted. The writ petition is devoid of any merit and is, accordingly, dismissed. Th shall be no order as to costs. _____________ (V.V.S. RAO ____________________________ (RAMESH RANGANATHAN 25.07.2011 vs [1] (2009) 4 SCC 94 [2] (2010) 51 APSTJ 117