Revenue charge on transferred property fails when defaulter retains no interest, and alleged void transfer needs civil court declaration.

A revenue charge over transferred property could not be sustained where the purchaser acquired the asset before attachment, the defaulting dealer no longer had any right, title or interest in it, and the underlying assessment had already been set aside and remanded. The discussion also explains that, where the department alleges a transfer was made to defeat revenue recovery, it cannot treat the transfer as void in collateral proceedings against the purchaser; it must first seek a civil court declaration that the transfer is void. On that basis, the attachment and charge were described as unsustainable and relief as available to the purchasers.

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Issues: (i) Whether the charge and attachment created over the petitioners' property for the erstwhile owner's value added tax dues could be sustained when the property had been purchased before the attachment and the underlying assessment order had been set aside and remanded. (ii) Whether, where the department alleges that the transfer was made to defraud revenue, it can itself treat the transfer as void and proceed against the purchaser, or must seek a declaration from the civil court.

Issue (i): Whether the charge and attachment created over the petitioners' property for the erstwhile owner's value added tax dues could be sustained when the property had been purchased before the attachment and the underlying assessment order had been set aside and remanded.

Analysis: The property was purchased before the attachment was made and no charge existed at the time of transfer. Section 48 of the Gujarat Value Added Tax Act, 2003 contemplates a first charge only on the property of the dealer or other person liable for tax, interest or penalty. The petitioners were not the persons liable for the dues, and the property had already ceased to belong to the defaulting dealer when the attachment order was passed. The attachment was also based on an assessment order that had been set aside in appeal and remanded, so the foundation for the attachment no longer survived. The powers under section 155 of the Gujarat Land Revenue Code could extend only to the right, title and interest of the defaulter, which the transferor no longer had in the subject property.

Conclusion: The attachment and charge on the petitioners' property could not be sustained.

Issue (ii): Whether, where the department alleges that the transfer was made to defraud revenue, it can itself treat the transfer as void and proceed against the purchaser, or must seek a declaration from the civil court.

Analysis: Section 47 of the Gujarat Value Added Tax Act, 2003, which deals with transfers made to defraud revenue, is in substance pari materia with the provision considered by the Supreme Court in the cited authority. The governing principle is that the recovery authority cannot itself declare the transfer void in collateral proceedings against the purchaser. If the department contends that the sale was effected with intent to defraud revenue, the appropriate course is to institute civil proceedings to have the transfer declared void. The same approach was held applicable to section 47 of the Gujarat Value Added Tax Act, 2003.

Conclusion: The department had to approach the civil court for a declaration that the transfer was void and could not proceed against the petitioners on that basis.

Final Conclusion: The impugned attachment and charge were unsustainable, and the petitioners were entitled to relief.

Ratio Decidendi: A revenue charge or attachment cannot be sustained against property already transferred to a purchaser when the defaulter has no subsisting right, title or interest in it, and a transfer alleged to have been made to defraud revenue can be avoided only by obtaining a civil court declaration under the applicable void-transfer provision.

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