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Issues: (i) Whether transfers made by the assessee during the pendency of proceedings under section 26A of the Kerala General Sales Tax Act, 1963 are void against claims for tax arrears even without a completed assessment or prior demand, and whether the transferees can resist the statutory consequence by pleading bona fide purchase for value. (ii) Whether notices directing persons in occupation of attached properties to vacate the houses were sustainable in the absence of proceedings under sections 37 and 38 of the Kerala Revenue Recovery Act, 1968.
Issue (i): Whether transfers made by the assessee during the pendency of proceedings under section 26A of the Kerala General Sales Tax Act, 1963 are void against claims for tax arrears even without a completed assessment or prior demand, and whether the transferees can resist the statutory consequence by pleading bona fide purchase for value.
Analysis: Section 26A renders a transfer by an assessee void as against any claim in respect of tax or other sums payable under the Act if the transfer is made during the pendency of proceedings under the Act or after their completion. The provision is attracted once proceedings are pending; completion of assessment or issuance of a demand is not a prerequisite. The expression covers proceedings already initiated by the department, including inspection and consequential assessment steps. The statute also makes the transfer void against the revenue claim irrespective of the consideration paid or the transferee's good faith, so a plea of bona fide purchase for value does not defeat the statutory bar.
Conclusion: The transfers in favour of the petitioners were hit by section 26A and were void against the revenue claim; the challenge to Exhibit P2 failed.
Issue (ii): Whether notices directing persons in occupation of attached properties to vacate the houses were sustainable in the absence of proceedings under sections 37 and 38 of the Kerala Revenue Recovery Act, 1968.
Analysis: In a revenue recovery sale, attachment of property does not by itself require prior eviction of persons in possession. The statutory scheme proceeds from attachment to sale, confirmation, registration of the purchaser, and delivery of possession in the manner provided by the Act. Powers under sections 37 and 38 are distinct management powers and were not invoked in the present case. Since the impugned notices were directed against persons other than the petitioners and sought eviction without resort to the proper statutory route, they could not be enforced against the petitioners.
Conclusion: The notices were not sustainable against the petitioners and were kept in abeyance.
Final Conclusion: The writ appeal succeeded only on the challenge to the eviction notices, while the finding that the transfers were void under section 26A of the Kerala General Sales Tax Act, 1963 was upheld.
Ratio Decidendi: A transfer by an assessee made during the pendency of proceedings under the sales tax law is void against the State's tax claim without the need for a completed assessment or prior demand, and a transferee cannot defeat section 26A by asserting bona fide purchase; separate eviction of occupants of attached property requires recourse to the statutory procedure.
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