Void transfers to defeat tax recovery upheld as ineffective against revenue, and the anti-evasion provision was sustained.

Transfers made during pending sales tax proceedings and structured to defeat recovery were treated as void against the State's tax claim, allowing revenue authorities to proceed against the properties. Section 26A of the Kerala General Sales Tax Act, 1963, which nullifies charges or transfers made during or after tax proceedings to protect recovery, was upheld as constitutionally valid. The provision was held to fall within the State Legislature's competence under Entry 54 of List II read with Article 246 and was not an unconstitutional restriction on trade, as it operates only to safeguard public revenue.

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Issues: (i) whether transfers made by the defaulter in favour of his wife during pendency of sales tax proceedings were void and liable to be ignored for recovery of tax dues; (ii) whether section 26A of the Kerala General Sales Tax Act, 1963 was constitutionally valid.

Issue (i): whether transfers made by the defaulter in favour of his wife during pendency of sales tax proceedings were void and liable to be ignored for recovery of tax dues.

Analysis: The transfer deeds were executed after initiation of assessment and penalty proceedings and were found to be devices intended to defeat the claim of the sales tax authorities. Section 26A of the Kerala General Sales Tax Act, 1963 declares as void, against tax claims, any charge or transfer made during pendency of proceedings or after completion thereof. The Court also noticed that the Kerala Revenue Recovery Act, 1963 contains provisions enabling recovery against transfers made with intent to defeat or delay public revenue, and held that the facts brought the case within that protective framework.

Conclusion: The transfers were void as against the tax claim and the revenue authorities were entitled to proceed against the properties.

Issue (ii): whether section 26A of the Kerala General Sales Tax Act, 1963 was constitutionally valid.

Analysis: Section 26A was upheld as a measure enacted by the State Legislature to prevent assessees from defeating tax recovery by creating charges or transferring assets. The provision was held to fall within the State's legislative competence under Entry 54 of List II of the Seventh Schedule read with Article 246 of the Constitution of India, and it was further held not to impose any unconstitutional restriction on trade but only to protect public revenue.

Conclusion: Section 26A was held to be constitutionally valid.

Final Conclusion: The challenge to the recovery proceedings failed, the transfers were treated as ineffective against the tax dues, and the writ petition was dismissed.

Ratio Decidendi: A transfer made during pending tax proceedings with intent to defeat recovery is void against the State's tax claim, and a statutory provision enacted to nullify such evasive transfers is within the State's legislative competence.

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