Court dismisses petition challenging tax notice for property purchase, directs civil court action within 30 days.

I. Jeyarajan Versus The Commercial Tax Officer

I. Jeyarajan Versus The Commercial Tax Officer - [2021] 89 G S.T.R. 171 (Mad) Issues:
Challenge to impugned notice for tax payment based on property purchase without notice of charge under TNGST Act, 1959.

Analysis:
The petitioner challenged a notice demanding payment of tax arrears of Rs. 1,24,93,648 within 15 days, related to a property purchased from a partner of a defaulting dealer. The petitioner claimed to be a bona fide purchaser without notice of the charge created in favor of the Commercial Tax Officer. The respondent argued that the petitioner had an alternate remedy to challenge the notice and that the charge against the property was created under the TNGST Act, 1959. The court noted that Section 24-A of the Act allows a purchaser to defend by proving the purchase was for adequate consideration and without notice of the tax arrears.

The court highlighted that the Commercial Tax Department failed to register the charge as required by law, allowing the partner of the defaulting dealer to sell the property to the petitioner. The petitioner asserted that the purchase was made after thorough verification, free from encumbrances, for Rs. 40 lakhs. The court criticized the Department's negligence in issuing the notice almost four years after the property purchase when the dealer was in arrears since 2010.

It was emphasized that the determination of whether the purchase was made in good faith or to defeat the respondent's interest required a detailed trial in a civil court. The court clarified that the burden of proof under Section 24-A could only be established in a civil court through a suit for declaration. Consequently, the court dismissed the writ petition, granting the petitioner liberty to approach a civil court within 30 days to perfect their title. The respondent was restrained from proceeding with distraint or revenue recovery for six months if the petitioner filed a suit within the prescribed period.

The court directed the respondent to file a caveat in the jurisdictional court to contest the suit promptly and instructed the petitioner to include their vendor in the proceedings. The petitioner could apply for an extension of the protection granted by the court, subject to the trial court's decision. Failure to file a suit within the specified period would allow the Commercial Tax Department to proceed with the revenue recovery proceedings. The writ petition was disposed of with no costs, and the connected Miscellaneous Petition was closed.