Tax first charge and garnishee recovery cannot be enforced against a bona fide auction purchaser without statutory preconditions.

A tax first charge attaches only to the property of the person liable for tax at the relevant time, so a bona fide auction purchaser who acquired the property before the assessment orders could not be made answerable for the dealer's later tax arrears. Garnishee recovery likewise applies only where a third party owes money to, or holds money for, the dealer, and the statutory notice and hearing requirements must be satisfied before coercive action. As the purchaser owed nothing to the dealer and the procedural preconditions were not met, recovery action against the purchaser and the banker was not sustainable.

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Issues: (i) Whether an auction purchaser of the dealer's property could be made liable to discharge the dealer's tax arrears under the first charge provision; (ii) whether notice and order issued under the garnishee provision could validly be invoked against the purchaser and the purchaser's banker.

Issue (i): Whether an auction purchaser of the dealer's property could be made liable to discharge the dealer's tax arrears under the first charge provision.

Analysis: The statutory first charge on property operates only against the property of the person liable to pay tax, interest or penalty. The property in question had been brought to sale and purchased before the assessment orders creating the tax demand were passed, and the purchaser acquired it through a bank auction on an "as is where is" basis without any subsisting encumbrance shown on the record at the relevant time. Once the sale certificate was issued, the property ceased to belong to the dealer, so the tax department could not fasten the dealer's later tax liability on the purchaser's title.

Conclusion: The auction purchaser was not liable to discharge the dealer's tax arrears, and the attempt to treat the property as subject to the dealer's tax charge was unsustainable.

Issue (ii): Whether notice and order issued under the garnishee provision could validly be invoked against the purchaser and the purchaser's banker.

Analysis: The garnishee provision applies only where money is due or may become due from a third person to the dealer, or where such third person holds monies for or on account of the dealer. That precondition was absent because the purchaser did not owe any amount to the dealer and did not hold monies on the dealer's behalf. The statutory mechanism also required service of notice on the dealer and, upon objection, an inquiry with a reasonable opportunity of hearing before any coercive order could be passed. Those requirements were not satisfied.

Conclusion: The notice to the purchaser and the order directed to the banker under the garnishee provision were invalid and liable to be quashed.

Final Conclusion: The statutory recovery measures were held to be without authority of law against a bona fide auction purchaser, and the impugned demand and banker-directed recovery order could not stand.

Ratio Decidendi: A tax first charge attaches only to the property of the person liable for the tax at the relevant time, and garnishee recovery can be invoked only against a person who owes, or holds, monies for the dealer in compliance with the statutory preconditions.

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