Secured asset purchasers are not successors in interest for sales tax dues unless the business itself is transferred.

A purchaser of secured assets was held not to become a successor in interest for Bombay Sales Tax Act liability merely by buying assets under SARFAESI; liability under section 19(4) arises only where the business, or ownership of the business, is transferred so that another person succeeds to it. The article also explains that the section 38C first charge on a dealer's property cannot be enforced against a transferee absent actual or legally sustainable constructive notice of the charge. Mere purchase from a secured creditor does not by itself establish notice or takeover of the dealer's tax liability.

---

---

Issues: (i) Whether the Sales Tax authorities could fasten liability on the purchaser of secured assets and attach the purchaser's properties under the Bombay Sales Tax Act, 1959 on the footing that the purchaser was a successor in interest of the defaulting dealer; (ii) Whether the statutory first charge under section 38C of the Bombay Sales Tax Act, 1959 could be enforced against the purchaser in the absence of actual or constructive notice of the charge.

Issue (i): Whether the Sales Tax authorities could fasten liability on the purchaser of secured assets and attach the purchaser's properties under the Bombay Sales Tax Act, 1959 on the footing that the purchaser was a successor in interest of the defaulting dealer.

Analysis: Liability under section 19(4) arises only where the dealer transfers or disposes of the business in whole or in part, or effects a change in ownership, so that another person succeeds to the business. The material showed only sale of secured assets under the SARFAESI framework, not transfer of the business as a going concern. Mere acquisition of assets, even if described in the sale documents as subject to encumbrances, does not by itself make the purchaser a successor in interest or create joint and several liability for the dealer's tax dues.

Conclusion: The purchaser was not a successor in interest and the attachment could not be sustained on that basis.

Issue (ii): Whether the statutory first charge under section 38C of the Bombay Sales Tax Act, 1959 could be enforced against the purchaser in the absence of actual or constructive notice of the charge.

Analysis: Section 38C creates a first charge on the property of the dealer or other liable person, but enforcement against a transferee depends on the transferee's notice of the charge. On the facts, the purchaser was not shown to have actual notice, and constructive notice could not be presumed merely because the assets were purchased through a secured creditor's sale. The prior decisions relied upon by the Revenue did not assist because they concerned transfer of an entire undertaking or different statutory settings. Since the business was not transferred as a going concern and the purchaser did not take over the dealer's liability, the charge could not be enforced against the purchaser's property.

Conclusion: The statutory charge could not be enforced against the purchaser and the attachment was unsustainable.

Final Conclusion: The attachment order against the purchaser's properties was quashed, while the authorities were left free to proceed against the defaulting dealer in accordance with law.

Ratio Decidendi: A purchaser of only secured assets is not liable for the transferor's sales tax dues unless the business is transferred as a going concern or the transferee is otherwise shown to have taken over the dealer's liability, and a statutory charge cannot be enforced against such purchaser without legally sustainable notice.

---