Statutory charge on tax defaulter's property permits recovery, but bona fide subsequent purchasers remain protected without a subsisting charge.

A tax demand, once raised after default, can create a statutory charge on the defaulter's property and support recovery as arrears of land revenue under the Kerala General Sales Tax Act and the Revenue Recovery Act. Transfers made by the defaulter, or by close relatives holding property derived from him, may be proceeded against where the materials show an attempt to defeat recovery, and a presumption of such intent may arise in transfers to near relatives. However, recovery cannot be extended to subsequent purchasers who acquired title before any attachment or equivalent legal restraint, where no statutory charge or provision voiding their transfer against the Government exists.

---

---

Issues: (i) whether properties transferred by the sales tax defaulter or his close relatives could be proceeded against for recovery of arrears when demand had already been raised and the statute created a charge and permitted recovery as arrears of land revenue; (ii) whether subsequent purchasers from the defaulter's relatives could be proceeded against in the absence of a statutory charge or a provision rendering their transfers void and not binding on the Government.

Issue (i): Whether properties transferred by the sales tax defaulter or his close relatives could be proceeded against for recovery of arrears when demand had already been raised and the statute created a charge and permitted recovery as arrears of land revenue.

Analysis: The statutory scheme under Section 23 of the Kerala General Sales Tax Act, 1963 created a charge on the property of the person liable to pay tax once default occurred after service of demand, and Section 23(2) permitted recovery as arrears of land revenue. Sections 26A and 26B of the Kerala General Sales Tax Act, 1963, though introduced later, strengthened the position by treating transfers during pending proceedings as void and by making tax a first charge on the dealer's property. Independently of those later provisions, the court held that the material showed demand notices and assessment steps had already been taken before the transfers by the defaulter in 1990, so the transfers were hit by the statutory charge and by Section 44(1) and Section 44(2) of the Kerala Revenue Recovery Act. In the case of transfers to near relatives, Section 44(3) also raised a presumption of intent to defeat recovery unless rebutted.

Conclusion: The revenue authorities were entitled to proceed against the properties transferred by the defaulter and the properties derived therefrom in the hands of his wife and children; the writ petitions challenging such action failed.

Issue (ii): Whether subsequent purchasers from the defaulter's relatives could be proceeded against in the absence of a statutory charge or a provision rendering their transfers void and not binding on the Government.

Analysis: The appellants in the writ appeal had purchased property not directly from the defaulter but from assignees of the defaulter's wife and children. The court held that, although the revenue authorities could proceed against the properties in the hands of the defaulter, his wife and children if the transfers were fraudulent, the record did not show any statutory provision creating a charge on the property in the hands of these subsequent purchasers or declaring their transfers void and not binding on the Government. The appellants had purchased before any attachment or proceedings against their properties were initiated, and the revenue authorities could not invoke Section 44 of the Kerala Revenue Recovery Act against them on those facts.

Conclusion: The proceedings against the subsequent purchasers were not sustainable, and the writ appeal was allowed to that extent.

Final Conclusion: The court upheld recovery against properties transferred by the defaulter and his immediate transferees, but protected the rights of subsequent purchasers who had acquired title before any statutory attachment or equivalent legal impediment had arisen.

Ratio Decidendi: Once tax demand has been raised and the statute creates a charge on the defaulter's property, transfers made to defeat recovery may be proceeded against by the revenue authorities, but such recovery cannot be extended to bona fide subsequent purchasers in the absence of a subsisting statutory charge or a provision rendering their title void against the Government.

---