2024 (8) TMI 383 - HC - GST

Land Purchase Under Scrutiny: GST Act Section 81 Validates Communication, Mandates Proof of Genuine Transaction Within 30 Days

S. Geetha Versus The State Tax Officer, M/s. Om Namashivaya Paper and Boards

HC upheld GST Act Section 81 communication regarding land purchase. Court mandated petitioner file a suit within 30 days to prove bona fide purchase, ... Challenge to communication issued under Section 81 of the respective GST Act, 2017 - impugned order of attachment and notices are in gross violation of principles of natural justice - no notice was issued to the petitioner before the attachment was made - HELD THAT:- This Writ Petition is disposed of without notice on the private respondents and counter of the official respondent, as no adverse orders are proposed to be passed at this stage. Under Section 81 of the respective GST enactment, there is an embargo on the assessee, who is in default from transferring or alienating the assets with a view to defeat the interest of the Government Revenue. The proviso carves out an exception. It is similar to the provisions that prevailed under the erstwhile provisions under the TNVAT Act, 2006 as also TNGST Act, 1959. The petitioner has to establish the bona fide in the manner known to law. Mere reliance to encumbrance certificate is not sufficient - Further, the sale consideration of Rs. 3,96,600/- (Rs. 2,41,600/- and Rs. 1,55,000/-) for an extent of 1.25 acres of land appears to be far too low. It is therefore for the petitioner to file a suit to establish that the petitioner was a bona fide purchaser in accordance with the proviso to Section 81 of the respective GST enactment. The first respondent shall keep all the recovery proceedings in abeyance for a period of three months - Petition disposed off. Issues:Challenge to communication under Section 81 of GST Act, 2017 regarding land purchase, violation of natural justice, petitioner's bona fide purchase claim, embargo on asset transfer under Section 81, determination of bona fide purchase, low sale consideration, need for filing a suit to establish bona fide purchase, stay on recovery proceedings, timeline for filing suit, consequences of failure to file suit.Analysis:The petitioner challenged a communication issued under Section 81 of the GST Act, 2017 regarding the purchase of land. The petitioner bought two parcels of land but faced issues as the partnership firm and partners were in arrears of a significant sum. The petitioner claimed that the attachment order and notices were against natural justice, arguing being a bona fide purchaser with no encumbrances at the time of purchase. The Additional Government Pleader contended that the sale was hit by Section 81, requiring the petitioner to prove bona fide purchase, which couldn't be determined summarily under Article 226.The court noted the embargo under Section 81 preventing defaulting assessees from transferring assets to evade government revenue interests. The petitioner needed to establish bona fide purchase according to the law, not solely relying on an encumbrance certificate. Additionally, the sale consideration was deemed low, prompting the petitioner to file a suit to prove bona fide purchase as per the Section's proviso. The court refrained from interfering with the attachment order, emphasizing the need for the petitioner to file a suit within 30 days to establish bona fide purchase.To prevent escalation, recovery proceedings were put on hold for three months, contingent on the petitioner filing the required suit within the stipulated timeline. Failure to do so would allow the first respondent to proceed as per the law. The judgment concluded by disposing of the writ petition with no costs, directing the petitioner to take necessary legal action within the specified period to resolve the issue effectively.