Vested property free from encumbrances bars transferee liability for prior sales tax dues under a general recovery provision

A Government company that acquired vested coal mines under a special vesting statute was not liable for the previous owners' sales tax dues under section 19 of the Orissa Sales Tax Act. The court noted that the coal mines vested free from encumbrances, and the special enactment preserved pre-vesting liabilities only against the original owner or other liable person, not against the Central Government or the Government company. Because the petitioner was not a transferee for recovery of those prior dues within the meaning of section 19, the recovery proceedings were unsustainable and were set aside.

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Issues: Whether the petitioner-company, as successor in relation to vested coal mines, was liable under section 19 of the Orissa Sales Tax Act for sales tax dues attributable to the previous owners.

Analysis: The coal mines had vested in the Central Government and thereafter in the Government company free from all encumbrances under the Coal Mines (Taking Over of Management) Act, 1973. That enactment declared that liabilities relating to any period prior to the appointed day remained enforceable only against the owner or other liable person and not against the Central Government or the Government company, and it also gave the Act overriding effect over inconsistent laws. Section 19 of the Orissa Sales Tax Act fastens liability on a transferee only when the ownership of the business of a dealer liable to tax is entirely transferred. In view of the statutory vesting scheme and the express exclusion of pre-vesting liabilities against the Government company, the petitioner could not be treated as a transferee for the purpose of recovering the earlier owners' sales tax dues.

Conclusion: The petitioner was not liable under section 19 of the Orissa Sales Tax Act for the sales tax dues of the previous coal mine owners.

Final Conclusion: The recovery proceedings against the petitioner for dues of the former owners were unsustainable and were set aside, with restraint against further similar action.

Ratio Decidendi: Where a special statute vests property in the Government or a Government company free from encumbrances and expressly preserves pre-vesting liabilities only against the original owner, a general transferee-liability provision in another fiscal statute cannot be used to recover those prior dues from the transferee.

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