Void transfer during tax proceedings cannot defeat revenue recovery, though limited equitable relief may be granted to a subsequent purchaser.

A transfer made by an assessee during the pendency of sales tax proceedings was treated as void against the revenue's claim under section 26A of the Kerala General Sales Tax Act, 1963, so the property could still be proceeded against for recovery of arrears. A subsequent purchaser could not acquire a better title than the transferor's, and the plea of bona fide purchase was rejected. However, because the purchaser had put up an industry on the property, the Court granted limited equitable relief by permitting valuation of the land, excluding buildings and machinery, and directing that attachment be lifted if that market value was paid, while recovery against the defaulter and other properties could continue for the balance dues.

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Issues: (i) Whether a transfer of property by a defaulter during the pendency of sales tax proceedings could be ignored and the property proceeded against for recovery under section 26A of the Kerala General Sales Tax Act, 1963; (ii) whether the petitioner, as a subsequent purchaser, was entitled to retain the property or obtain relief by payment of market value.

Issue (i): Whether a transfer of property by a defaulter during the pendency of sales tax proceedings could be ignored and the property proceeded against for recovery under section 26A of the Kerala General Sales Tax Act, 1963.

Analysis: Section 26A makes any charge created or transfer made by an assessee during the pendency of proceedings under the Act void as against a claim for tax or other sums payable under the Act. The transfer by the defaulter to his wife was made while assessment proceedings were pending, and the subsequent sale to the petitioner could not confer a better title than that held by the transferee. The statutory protection for revenue recovery therefore operated against the property notwithstanding the later transfer.

Conclusion: The transfer was void as against the tax claim, and the property was liable to be proceeded against for recovery of arrears.

Issue (ii): Whether the petitioner, as a subsequent purchaser, was entitled to retain the property or obtain relief by payment of market value.

Analysis: Although the petitioner's plea of bona fide purchase was rejected, the Court granted limited equitable relief because the petitioner had put up an industry on the property. The authority was directed to inspect the property, assess the present market value excluding building and machinery, and if that value was offered, to lift the attachment, while leaving the revenue free to proceed against the defaulter and other properties for the balance dues.

Conclusion: The petitioner was not entitled to an outright release of the property, but was granted a limited opportunity to clear the market value and obtain lifting of attachment.

Final Conclusion: The statutory challenge failed on merits, but the petitioner received only limited equitable protection against immediate recovery action.

Ratio Decidendi: A transfer made by an assessee during the pendency of proceedings under section 26A of the Kerala General Sales Tax Act, 1963 is void against the revenue's claim, and a subsequent transferee cannot acquire an unencumbered title to defeat tax recovery.

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