Bona fide auction purchaser protection bars recovery of dealer tax arrears absent a statutory charge.

An auction purchaser of property sold by TIIC for valuable consideration was held not liable for the defaulting dealer's sales tax arrears because no statutory charge over the property was shown and the purchaser was bona fide without notice. In such circumstances, the property in the purchaser's hands could not be proceeded against for recovery of the dealer's tax dues. The demand notice issued to the purchaser was therefore unsustainable, and recovery was left to be pursued only against the defaulting dealer.

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Issues: Whether the auction purchaser could be proceeded against for sales tax arrears of the defaulting dealer and whether the demand notice issued to him was sustainable.

Analysis: The property was sold by TIIC in public auction and the petitioner purchased it for valuable consideration. No charge over the property for the alleged sales tax arrears was shown to exist. The Court relied on the principle that, in the absence of a statutory charge and where the purchaser is bona fide and without notice, the property in the hands of the purchaser cannot be proceeded against for recovery of the dealer's tax arrears. On those facts, the impugned demand could not be sustained.

Conclusion: The notice was unsustainable and the petitioner was not liable to be proceeded against for the arrears of the defaulting dealer.

Final Conclusion: The writ petition succeeded, the impugned demand was quashed, and the Department was left at liberty to proceed only against the defaulting dealer.

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