Bona fide purchaser protection defeated enforcement of sales tax arrears against a buyer without notice of the vendor's liability.

A demand notice for a vendor's sales tax arrears could not be enforced against the purchaser because the purchase was for valuable consideration and without notice of any tax liability or charge. Section 24-A of the Tamil Nadu General Sales Tax Act, 1959 voids transfers only where made to defraud the revenue, while its proviso protects bona fide transfers made for adequate consideration without notice of pending proceedings or liability. Section 100 of the Transfer of Property Act, 1882 similarly protects property transferred for consideration without notice of the charge. As the purchaser had made due enquiries and no material showed knowledge of arrears or fraudulent intent, the notice was set aside.

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Issues: Whether a demand notice issued to a purchaser for sales tax arrears of the vendor could be sustained when the purchaser had acquired the property for valuable consideration without notice of the tax liability or charge.

Analysis: Section 24-A of the Tamilnadu General Sales Tax Act, 1959 voids a transfer or charge only when it is made to defraud the revenue, but its proviso protects a transfer made for adequate consideration and without notice of the pending proceedings or tax liability. Section 100 of the Transfer of Property Act, 1882 similarly protects property transferred for consideration without notice of the charge. The records showed that the purchaser had made due enquiries, obtained assurances regarding absence of encumbrances, and no material was produced to show knowledge of the vendor's sales tax arrears or any fraudulent intent in the purchase.

Conclusion: The demand notice could not be enforced against the purchaser and was liable to be set aside.

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