Transferee liability for sales tax arrears is limited to transferred assets, and recovery needs prior notice and opportunity to show cause.
Recovery of sales tax arrears from a transferee of a firm is confined to the value of the assets received by transfer, and coercive action cannot lawfully extend beyond that limit. Prior service of a demand notice is required so the transferee can identify the transferred assets and show cause why they should not be proceeded against. As no such notice had been served after the transfer, the recovery proceedings were not properly initiated and could not continue in their present form until the statutory procedure was followed.
Issues: Whether arrears of sales tax due from a transferor-firm could be recovered from the transferee beyond the value of the assets received by transfer, and whether coercive recovery under section 24(2)(b) could proceed without first serving a demand notice on the transferee.
Analysis: The proviso to section 27 limits recovery from a transferee to the value of the assets obtained by transfer. Any coercive step under section 24(2)(b) must therefore remain within that limit, and recovery against property not received by transfer would be unlawful. Since no demand notice had been served on the petitioner after the transfer, she had no proper opportunity to show what assets of the erstwhile firm had been transferred to her or why those assets should not be proceeded against. The recovery action was therefore not properly initiated.
Conclusion: The proceedings for recovery against the petitioner could not proceed in their present form and were liable to be interdicted until a proper demand notice was served and she was called upon to specify the transferred assets and show cause.
Final Conclusion: The petition succeeded, and the department was restrained from continuing recovery proceedings until it first issued a demand notice to the transferee and followed the procedure required by the Act.
Ratio Decidendi: Recovery of tax arrears from a transferee is confined to the value of the assets transferred, and coercive recovery cannot validly proceed against a transferee without prior notice and opportunity to identify the transferred assets.
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