Tax recovery priority under Section 26A defeats execution sales made during pending reassessment proceedings.

Section 26A of the KGST Act was treated as giving wide protection to the State's tax claim against transfers made during pending proceedings, including a court sale in execution. The Court reasoned that allowing a civil court execution sale to prevail would defeat the statutory safeguard, especially where reassessment proceedings and earlier recovery steps for tax arrears were already pending. On that basis, the execution sale and the later transfer to the petitioners were treated as void against the tax claim, and the State's right to recover arrears from the property was upheld.

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Issues: Whether a sale of the defaulter's property by a civil court in execution proceedings, made while reassessment proceedings under the KGST Act were pending, was void as against the State's sales tax claim under Section 26A, and whether the purchasers acquired title free from the tax liability.

Analysis: Section 26A invalidates any transfer or parting with possession by an assessee during the pendency of proceedings under the Act as against tax claims. The provision was treated as having a wide reach, and the Court held that there is no material distinction, for this purpose, between a transfer by the defaulter and a sale through court execution, because otherwise the statutory protection could be defeated through a civil decree and execution sale. The Court also noted that the property had earlier been subject to recovery steps for sales tax arrears and that the reassessment proceedings were pending when the execution sale took place.

Conclusion: The execution sale was covered by Section 26A and was void as against the tax claim. The subsequent sale in favour of the petitioners was also void, and the impugned orders were upheld.

Final Conclusion: The petitioners could not claim a title free from the defaulter's sales tax liability, and the State was entitled to proceed against the property for recovery of arrears.

Ratio Decidendi: A transfer of the defaulter's property made during the pendency of proceedings under the sales tax law, including a court sale in execution, is void against the tax claim and does not defeat the State's right to recover arrears as a first charge.

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