2016 (8) TMI 802 - HC - VAT and Sales Tax

Court quashes sales tax attachment, protects purchasers' rights, emphasizes bona fide transactions

Mr. Ansari Versus Commercial Tax Officer, Sub-Registrar

Mr. Ansari Versus Commercial Tax Officer, Sub-Registrar - [2016] 95 VST 308 (Mad) Issues involved:1. Validity of attachment notice issued by the first respondent for sales tax due.2. Rights of a purchaser for valuable consideration in a property subject to attachment.3. Interpretation of legal precedents regarding attachment of properties for tax arrears.Analysis:1. The petitioner sought to quash an attachment notice by the first respondent for sales tax due of a company. The petitioner, as a purchaser for valuable consideration, argued against suffering due to the impugned attachment. The property in question was initially owned by a company that defaulted on a loan, leading to its sale to a third party. The petitioner later purchased the property from this third party. The court noted that the first respondent's action in creating an encumbrance on the property in 2006, after the petitioner's purchase, was unjustifiable.2. The property had been subject to mortgage with bankers, who sold it through a legal process to the petitioner's vendor. The court emphasized that as long as the certificate of sale remained valid and unaltered, the first respondent had no legal basis to claim a lien over the property. Citing a previous case, the court highlighted that purchasers for value without notice of tax arrears or charges on the property should not be held liable for the defaulting company's obligations. The court's decision was influenced by legal principles protecting bona fide purchasers from unforeseen encumbrances.3. Legal precedents were crucial in shaping the court's decision. Referring to specific cases where similar issues arose, the court reiterated the importance of protecting the rights of purchasers who acted in good faith and without prior knowledge of any encumbrances on the property. The court's analysis of past judgments emphasized the need to uphold the rights of purchasers who were not informed or aware of any charges or tax arrears related to the property they acquired. Based on these precedents, the court allowed the writ petition, quashed the attachment, and directed the concerned authority to remove the entry of attachment from the property records within a specified timeframe.In conclusion, the judgment focused on safeguarding the rights of purchasers who acquired properties in good faith, without prior notice of any encumbrances or tax liabilities. The court's decision underscored the importance of legal precedents in determining the validity of property attachments and ensuring fairness in such legal proceedings.