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Issues: (i) Whether the sales tax department could validly claim priority over the secured creditor and fasten its dues on the property sold in auction under the SARFAESI regime; (ii) Whether a charge or attachment for tax dues could be entered and certified in the revenue record against the auction purchaser.
Issue (i): Whether the sales tax department could validly claim priority over the secured creditor and fasten its dues on the property sold in auction under the SARFAESI regime.
Analysis: The property had been mortgaged to the bank before the tax recovery steps were pursued, and the auction purchaser had acquired the asset through a registered sale certificate on a free-from-encumbrances basis. The department's dues were not crystallised by a completed assessment before the auction, and the record showed that the department did not take effective steps against the original debtor in time. The purchaser, being a bona fide auction purchaser, could not be saddled with past dues of the defaulting company merely because the department asserted a charge after the auction.
Conclusion: The claim of priority against the auction purchaser failed, and the tax dues could not be enforced against the property purchased in auction; the department was left free to recover its dues from the original debtor or other available assets.
Issue (ii): Whether a charge or attachment for tax dues could be entered and certified in the revenue record against the auction purchaser.
Analysis: Section 135(c) of the Gujarat Land Revenue Code permits mutation for specified rights such as succession, survivorship, inheritance, purchase, mortgage, gift or lease, while its Explanation excludes a mere charge not amounting to a mortgage. On that scheme, a tax charge of the kind asserted by the department could not be posted as a revenue entry against the purchaser. The attachment entry was therefore without authority and could not survive once the sale certificate had been issued and possession handed over.
Conclusion: The mutation and attachment entries in favour of the tax department were invalid and liable to be quashed, and the petitioner was entitled to mutation of its name.
Final Conclusion: The petition succeeded, the impugned revenue entries were set aside, and the purchaser's title and possession acquired under the auction sale were protected, while the department's recovery rights against the original debtor remained unaffected.
Ratio Decidendi: A statutory tax charge cannot be enforced against a bona fide auction purchaser of secured assets where the property is sold free from encumbrances, and a mere charge not amounting to a mortgage cannot be mutated in the revenue record under the land revenue law.
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