Transfer of entire business attracts tax arrears and statutory first charge that follows the property into transferee's hands.

Where the entire ownership of a dealer's business is transferred, the transferee becomes liable for unpaid sales tax attributable to that business. A sale of industrial assets on an "as is where is" basis was treated as transfer of the whole business, so the auction purchaser stepped into the defaulting unit's position despite the absence of stock, goodwill, employees or continuing operations. The sales tax statute also created a first charge on the dealer's property for tax dues, and that charge followed the property into the purchaser's hands. Private contractual terms could not defeat the statutory charge, and the charge remained enforceable against the transferred assets.

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Issues: (i) Whether the auction purchaser was liable to pay the sales tax arrears of the defaulting unit on the ground that the entire ownership of the business had been transferred to it. (ii) Whether the Sales Tax Department's dues constituted a first charge on the transferred property and could be enforced against the auction purchaser notwithstanding the contractual terms between the Corporation and the purchaser.

Issue (i): Whether the auction purchaser was liable to pay the sales tax arrears of the defaulting unit on the ground that the entire ownership of the business had been transferred to it.

Analysis: Liability under section 9(1) of the Rajasthan Sales Tax Act, 1954 arises only when the ownership of the business of the dealer liable to tax is entirely transferred, and the unpaid dues must relate to that transferred business. On the facts, the assets of the industrial units, including land, building, plant and machinery and other business-related items, were sold through the State Financial Corporation on an "as is where is" basis. The Court held that the transaction amounted to transfer of the entire business, and the purchaser stepped into the shoes of the defaulting unit. The absence of stock-in-trade, goodwill, employees, or continuing business activity did not change the legal character of the transfer.

Conclusion: The auction purchaser was liable for the outstanding sales tax dues of the transferred business.

Issue (ii): Whether the Sales Tax Department's dues constituted a first charge on the transferred property and could be enforced against the auction purchaser notwithstanding the contractual terms between the Corporation and the purchaser.

Analysis: Section 11-AAAA of the Rajasthan Sales Tax Act, 1954 creates a first charge on the property of the dealer or other person in respect of tax, penalty, interest and other sums payable under the Act. That statutory charge attaches to the property itself and follows the property into the hands of the transferee. The contractual stipulations in the auction agreement between the Corporation and the purchaser could not override the statutory charge. The Court also held that the provisions of the State Financial Corporations Act, 1951 did not displace the first charge created by the sales tax statute.

Conclusion: The Sales Tax Department's dues had priority as a first charge and were enforceable against the transferred assets in the purchaser's hands.

Final Conclusion: The common challenge failed because the transferred assets represented the entire business of the defaulting units and the statutory first charge under the sales tax law prevailed over private contractual arrangements.

Ratio Decidendi: Where the entire ownership of a dealer's business is transferred, the transferee becomes liable for the unpaid tax relating to that business, and a statutory first charge on the property remains enforceable against the property in the hands of the transferee notwithstanding contrary contractual terms.

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