Statutory charge on auctioned property continued despite secured creditor priority and disclosed tax encumbrance.

A pre-existing Sales Tax Department attachment on the secured asset was never set aside, so the State's statutory charge continued to bind the property despite the auction. The secured creditor's priority affected only distribution of sale proceeds and did not extinguish the charge. Because the auction notice, bid confirmation letter and sale certificate disclosed the tax encumbrance and sold the asset on an "as is where is" basis, the purchasers had actual and constructive notice. The auction purchasers therefore could not claim the property free from the charge and had to clear the outstanding MVAT dues to secure clear title.

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Issues: Whether the auction purchasers acquired the secured asset free from the Sales Tax Department's charge and, if not, whether they were liable to discharge the outstanding MVAT dues attached to the property.

Analysis: The property had been attached by the Sales Tax Department before the auction, and that attachment was never set aside. The secured creditor's priority as a secured creditor did not extinguish the State's statutory charge; it only meant that the secured creditor could appropriate sale proceeds in priority. The auction notice and bid confirmation letter expressly disclosed the outstanding tax encumbrance and stated that the property was sold on an "as is where is", "as is what is" and "whatever there is" basis. The sale certificate also did not show that the property was sold free from encumbrances. In these circumstances, the purchasers had actual and constructive notice of the charge, and the statutory liability continued to attach to the property notwithstanding the sale.

Conclusion: The auction purchasers were not entitled to treat the property as free from the Sales Tax Department's charge, and they remained liable to clear the outstanding MVAT dues to obtain a clear title.

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