Statutory charge for sales tax arrears survives transfer and binds the property in transferees' hands

A sales tax statute may create a statutory charge over a dealer's property for assessed arrears, giving tax dues priority over later claims and binding subsequent transferees. Where assessment was completed before transfer, the charge attached to the property and the department could proceed against the property even in the hands of a later purchaser. A later purchase, including by a claimed bona fide transferee without notice, did not defeat the statutory charge or make the attachment illegal merely because the assessee no longer owned the property when attachment was effected.

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Issues: (i) whether arrears of sales tax created a statutory charge on the dealer's property so as to bind subsequent transferees and justify recovery from the attached property; (ii) whether the plaintiff was entitled to have the attachment set aside and to restrain sale of the property on the ground that the property had ceased to belong to the assessee before attachment.

Issue (i): whether arrears of sales tax created a statutory charge on the dealer's property so as to bind subsequent transferees and justify recovery from the attached property.

Analysis: Section 24(2) of the Tamil Nadu General Sales Tax Act, 1959 gives priority to tax assessed or payable by a dealer over all other claims against the dealer's property, and Section 26(6) declares unpaid amounts to be a charge on the properties of the person liable. On the facts, the final assessment had been made before the assessee transferred the property, and the statutory charge attached to the property notwithstanding later transfers. The transferee took the property subject to that charge, and the department could proceed against the property in the hands of the transferee for recovery of the arrears.

Conclusion: the sales tax arrears created an enforceable statutory charge binding the transferred property, and the property remained liable for recovery.

Issue (ii): whether the plaintiff was entitled to have the attachment set aside and to restrain sale of the property on the ground that the property had ceased to belong to the assessee before attachment.

Analysis: Once the statutory charge under the sales tax law attached, the plaintiff's later purchase did not defeat the department's right to recover the dues from the property. The contention that the plaintiff was a bona fide purchaser without notice did not displace the statutory charge, and the civil court could not ignore the tax authority's claim by treating ownership as decisive after the charge had arisen. The attachment was therefore not illegal merely because the assessee was no longer the registered owner when attachment was effected.

Conclusion: the plaintiff was not entitled to have the attachment set aside or to obtain an injunction against sale.

Final Conclusion: the decree of the lower appellate court was set aside and the dismissal of the suit was restored, leaving the revenue authorities free to proceed against the property for recovery of the tax dues.

Ratio Decidendi: where a sales tax statute creates a statutory charge on a dealer's property for assessed arrears, subsequent transfers do not defeat the charge and the property remains recoverable from transferees in the hands of whom it is found.

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