First charge on transferred property defeats transferee protection, but only for tax dues already payable at transfer.

Section 27(1) of the Andhra Pradesh Value Added Tax Act was treated as an express exception to the transferee's protection under Section 100 of the Transfer of Property Act: a transferee for value without notice could not resist the revenue's charge unless the defaulting dealer proved absence of intent to defraud revenue. The statutory charge, however, was confined to tax and other sums already payable on the date of transfer, so later-arising liabilities could not be enforced against the transferred property. Applying strict interpretation of fiscal statutes, ambiguity was resolved in favour of the assessee, limiting the revenue's recovery remedy to pre-transfer arrears.

---

---

Issues: (i) whether Section 27(1) of the Andhra Pradesh Value Added Tax Act, 2005 excludes the protection ordinarily available to a transferee for consideration without notice under Section 100 of the Transfer of Property Act, 1882; (ii) whether the revenue could recover tax arrears that became payable after the transfer of the property; (iii) whether the construction of the taxing provision should, in case of ambiguity, favour the assessee.

Issue (i): whether Section 27(1) of the Andhra Pradesh Value Added Tax Act, 2005 excludes the protection ordinarily available to a transferee for consideration without notice under Section 100 of the Transfer of Property Act, 1882.

Analysis: The statutory scheme creates a first charge on the dealer's property for tax and other sums payable. Section 27(1) was read as shifting the initial burden to the defaulting dealer to establish that the transfer was not with intent to defraud revenue. In that context, the provision was held to operate as an express exception to the general rule in Section 100 of the Transfer of Property Act, 1882, so that a transferee cannot claim immunity merely by asserting purchase for value without notice unless the dealer discharges the statutory burden.

Conclusion: Section 27(1) does exclude the ordinary protection under Section 100 of the Transfer of Property Act, 1882 unless the defaulting dealer proves absence of intent to defraud revenue.

Issue (ii): whether the revenue could recover tax arrears that became payable after the transfer of the property.

Analysis: The charge under Section 26 attaches to tax and other sums payable by the dealer, and the court held that the statutory charge cannot be extended to amounts that were not payable by the dealer on the date of transfer. The respondents were therefore not entitled to proceed against the transferred property for liabilities that arose only after the transfer.

Conclusion: Recovery from the transferred property was not permissible for tax dues arising after the date of transfer.

Issue (iii): whether the construction of the taxing provision should, in case of ambiguity, favour the assessee.

Analysis: Applying the settled rule of strict interpretation of fiscal statutes, the court held that where two reasonable constructions are possible, the one favourable to the taxpayer must be adopted. This principle reinforced the limited scope of recovery after transfer and prevented enlargement of the revenue's remedy by implication.

Conclusion: The interpretation favourable to the assessee was applied.

Final Conclusion: The writ petition succeeded to the extent that the revenue could proceed only for arrears due up to the date of transfer and not for later liabilities, while the transfer was otherwise treated as void against the unrecovered pre-transfer tax dues because the defaulting dealer failed to discharge the statutory burden.

Ratio Decidendi: A statutory provision creating a first charge and making a transfer void unless the dealer proves absence of intent to defraud revenue overrides the general protection available to a transferee without notice, but only to the extent of liabilities already chargeable at the date of transfer; ambiguous fiscal provisions must be construed in favour of the assessee.

---